updated 11/8/2004 8:50:07 AM ET 2004-11-08T13:50:07

Wall Street capped a stellar week by extending its rally for a ninth straight session Friday, as a better-than-expected employment report boosted stocks and gave investors hope that the economy is strengthening.

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The week’s gains were among the strongest of the year for the stock market, with the Dow Jones industrial average seeing its best week since early 2003.

The 337,000 jobs created in October were nearly double what Wall Street expected. The strength of the Labor Department figures, which also included upward revisions of the August and September figures, allowed investors to overlook an unexpected jump in the unemployment rate to 5.5 percent, up from 5.4 percent in September.

However, some investors feared that the increase in wages flowing into the economy could trigger inflation. That prompted a sell-off on the bond market, with the yield on 10-year notes reaching 4.18 percent. Investors grew increasingly certain that the Federal Reserve would raise interest rates in both its November and December meetings to combat the inflationary pressure.

“You absolutely have to have Fed action both months now,” said Doug Sandler, chief equity strategist at Wachovia Securities. “The saving grace for the economy this year has been no inflation, and a big component of that is wages. When there are more wages, inflation becomes a factor. We haven’t seen it yet, but it becomes a concern that the Fed will have to face.”

The Dow Jones industrial average rose 72.78 points, or 0.7 percent, to 10,387.54 — its highest closing level since June 30. The broader Standard & Poor’s 500-stock index rose 4.50 points, or 0.4 percent, to 1,166.17, hitting a fresh high for 2004. And the Nasdaq composite index rose 15.31 points, or 0.8 percent, to 2,038.94 — it’s best close since June 30.

Since Oct. 25, the Dow has risen in eight out of nine sessions, while the S&P 500 and Nasdaq composite have enjoyed nine straight days of gains, buoyed by lower oil prices and President Bush’s election victory. For the week, the Dow gained 3.6 percent — its best week since March 25, 2003 — while the S&P rose 3.2 percent and the Nasdaq climbed 3.2 percent.

The monthly payroll report is considered to be a key barometer of economic growth, and had been lagging for months as the economy’s summer “soft patch” lingered into the third quarter. Now, with payrolls on the rise and the uncertainty of the presidential elections over with, investors who had been staying out of the market appeared to be clamoring to get back in.

Some analysts downplayed the question of inflation.

“I don’t way to say it’s clear sailing to the end of the year, but the seas look pretty calm,” said Robert MacIntosh, chief economist for Eaton Vance Corp. “For now, we’re not seeing wages become an inflationary issue, and the Fed should be able to manage that.” Video: Latest market news

Investors were further pleased by crude oil futures, which — for now — appear to have stabilized below $50 per barrel. A barrel of light crude for December delivery was quoted at $49.61, up 79 cents, on the New York Mercantile Exchange.

Even the technology sector, which had risen at a much slower rate during this rally, saw good news from semiconductor maker nVidia Corp. The maker of graphics chipsets saw its profits quadruple in the third quarter as the company enjoyed brisk sales of its latest desktop computer chips. Shares of nVidia, which surpassed Wall Street profit expectations by 6 cents per share, surged $2.23, or 14.5 percent, to $17.64.

Credit card issuer MBNA Corp. rose 62 cents to $27.49 as it began distributing its new American Express-branded credit cards, the result of a legal battle that American Express Co. won over Visa USA Inc. and MasterCard International Inc. American Express was up 17 cents at $55.12.

Spanish-language television network Univision tumbled $4.01, or 12.2 percent, to $28.79 despite posting third-quarter results that beat analysts’ estimates by a penny per share. The company credited increased viewership and advertising sales for its gains, but investors were disappointed with the company’s lowered fourth-quarter outlook.

Hartford Financial Services Group Inc. said tax benefits and increased premiums helped the insurance company offset hurricane losses, pushing its profits up 44 percent from a year ago. The company outstripped Wall Street forecasts by 16 cents per share. Hartford Financial jumped $1.33 to $61.74.

Sears Roebuck & Co. surged $8.70, or 23.4 percent, to $45.88, its highest levels since March, after Vornado Realty Trust said it had acquired 4.3 percent of the Hoffman Estates, Ill.-based retailer’s shares.

Overseas markets fed off of Wall Street’s ongoing rally, as Japan’s Nikkei average rose 1.06 percent for the session. In Europe, Britain’s FTSE 100 closed up 0.24 percent, France’s CAC-40 gained 0.49 percent, and Germany’s DAX index climbed 0.55 percent.

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