Resurgent job market expected to push Dow above 11,000

New York : The Dow industrials could hit 11,000 this week as investors bet the US labour market had a significant turnaround in March, showing the econ-omic recovery is in good shape.

The Dow and the S&P 500 stock indexes are at their highest in nearly 18 months and the expected repositioning before Wednesday's end of the quarter could provide further support. With the Dow closing above 10,850 on Friday, it would need to rise 1.4 per cent — or a tad less than 150 points — to reach 11,000.

But with benchmark US Treasury yields approaching 4 per cent, investors may prefer the relative safety of US debt instead of continuing to throw money at a stock market that has risen steeply for more than a year.

Economists expect data on Friday to show the economy created about 190,000 jobs in March, but stock investors will have to be brave enough to bet on that confirmation ahead of the data, since the market will be closed for the Good Friday holiday.

Wednesday's private-sector jobs data and Thursday's jobless claims could support those willing to step out on a limb.

Delayed reaction

"Obviously, the jobs number is the most important thing" this week, said Phil Orlando, chief equity market strategist at Federated Investors, in New York.

"You are going to get this delayed reaction [the following] Monday, unless the claims numbers are just so terrific, that you get some pre-buying ahead of Friday," he said.

Stocks closed higher for a fourth straight week, around levels not seen since September 2008, as recent uncertainty stemming from fiscal problems in some European countries and the health care overhaul receded.

A European Union agreement on a safety net for Greece restored investor confidence, but that net could prove small if fiscal burdens bog down other EU members like Portugal, whose debt rating was cut on Wednesday by Fitch.

"Clearly, there is the potential for there to be fiscal issues with other countries in Europe, but the Europeans have now set a precedent that they intend to backstop any negative fiscal situations," said Ken Farsalas, portfolio manager at Oberweis Asset Management in Lisle, Illinois.

Sentiment, nonetheless, remains downbeat. A stock market sell-off on Friday following news a South Korean naval ship had sunk suggests risk takers are ready to sell on any troublesome news.

Main indexes closed little changed on Friday.

For the week, the Dow Jones industrial average rose 1 per cent, while the Standard & Poor's 500 Index gained 0.6 per cent and the Nasdaq Composite Index advanced 0.9 per cent.

The yield on the benchmark 10-year US treasury bond brushed 4 per cent in the past week, foreshadowing a possible roadblock for stock bulls.

Three government debt auctions last week had "mediocre, at best" results and rising yields "at some point, become an obstacle for equities", said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.

Yielding 4 per cent and with the relative safety of US government debt, treasuries could entice investor money that would otherwise continue to pump into stocks.

Spending report

Investors will have plenty of data points to gauge that momentum in the coming holiday-shortened week.

The state of the consumer will be measured by February income and spending data tomorrow and March consumer confidence, on Tuesday.

Personal income is expected to rise 0.1 per cent, mirroring the previous month's rise, while the Conference Board's consumer confidence index is seen rising to 50, from 46 in February, according to economists polled by Reuters.

The S&P/Case-Shiller home prices index for January, due on Tuesday, is expected to show house prices fell 0.7 per cent year-over-year, a much slower pace than the 3.1 per cent recorded in December.

Construction spending in February, due on Thursday, is seen dropping 1 per cent.

On the laboor market front, next Friday's widely followed non-farm payrolls report is expected to show 190,000 jobs were created in March. The US unemployment rate is seen unchanged at 9.7 per cent.

Payrolls data follows the ADP National Employment Report on Wednesday, where economists hope to see the private sector created 40,000 jobs in March, as well as Thursday's report on initial claims of unemployment insurance, which are predicted to dip to 440,000 in the latest week from 442,000 in the previous one.