Wall St climbs to record high on US jobs news

Specialist Jay Woods at his post that shows five years of the Dow Jones industrial average, on the floor of the NYSE. The Dow closed above 17,000 for the first time last week, but dropped overnight.. Photo / AP

Wall Street climbed to record highs overnight, with the Dow closing above 17,000 for the first time, after a stronger-than-expected employment report bolstered optimism that the recovery in the world's largest economy is on track.

In a trading session shortened ahead of the July 4th holiday, the Dow Jones Industrial Average rallied 0.54 per cent, while the Standard & Poor's 500 Index added 0.55 per cent, and the Nasdaq Composite Index advanced 0.63 per cent. Both the Dow and the S&P 500 finished at record closing highs. US markets are closed on Friday for Independence Day.

Gains in shares of Goldman Sachs and Caterpillar, up 1.5 per cent and 1.4 per cent respectively, led the increase in the Dow.

The US economy added 288,000 jobs in June, after a 224,000 increase in May that was bigger than previously estimated. The unemployment rate dropped to 6.1 per cent, the lowest since September 2008.

"The report was very good and a real sign the economy is starting to take off," David Kelly, chief global strategist at JP Morgan Funds in New York, told Reuters. "That said, it isn't an unmixed positive for the market because it suggests the Fed will consider raising rates in the first quarter."

Indeed, US Treasuries fell, pushing yields on the two-year note three basis points higher to 0.51 per cent, as an accelerating economy lowers the appeal of fixed-income assets and raises the spectre of an increase in interest rates.

In further evidence of US economic strength, a separate report showed the Institute for Supply Management's non-manufacturing index was 56 in June, just below the 56.3 reading in May.

"The path to higher rates, which we expect in the near term, is going to remain a challenging one just because rates are going to remain low in Europe for a long time and our interest-rate differentials are already pretty wide," William O'Donnell, head US government-bond strategist at Royal Bank of Scotland's RBS Securities unit in Stamford, Connecticut, told Bloomberg News.

The European Central Bank kept its benchmark interest rate at 0.15 per cent on Thursday, adding that it is unlikely to be raised any time soon as the euro-zone economy struggles to kick into higher gear.

"The key ECB interest rates will remain at present levels for an extended period of time in view of the current outlook for inflation," ECB President Mario Draghi said at a press conference after the meeting. "The risks surrounding the economic outlook for the euro area remain on the downside."

In Europe, the Stoxx 600 Index ended the day with a 0.9 per cent increase from the previous close. The UK's FTSE 100 advanced 0.7 per cent, France's CAC 40 gained 1 per cent, while Germany's DAX rose 1.2 per cent.