NEW YORK (Reuters) -The broader U.S. stock market edged higher on Friday, but still posted its worst week since May, as a rally in financial stocks helped reverse losses sparked by a government report showing the U.S. jobless rate rose to a five-year high.
Financial shares rebounded in afternoon trading, amid hopes the U.S. Treasury would take steps over the weekend to rescue mortgage finance companies Fannie Mae FNM.N and Freddie Mac FRE.N. After the closing bell, The Wall Street Journal reported the Treasury is close to finalizing a plan to backstop Fannie and Freddie.
Also helping financials, Lehman Brothers LEH.N rose 6.8 percent to $16.20 after sources familiar with the situation said Blackstone Group LP (BX.N) and Kohlberg Kravis Roberts & Co KKR.UL are each looking to buy parts of Lehman’s real estate and asset management units.
But the day had started on a sour note, with the Dow falling more than 100 points after news that the unemployment rate jumped to 6.1 percent added to worries about consumer spending and compounded fears of a worsening global economic slowdown. Those fears had battered stocks all week, leaving the S&P 500 with its worst five-day performance since May.
The Nasdaq lagged the other indexes on Friday and had its worst week since January, led lower by big-cap technology shares. Analysts say technology is among sectors most vulnerable to a global slowdown due to its exposure to overseas markets.
“We got the bad news on payrolls and the unemployment rate this morning, but given the fact we were down so much yesterday we’re seeing a bit of a reflex rally with investors wanting to take advantages of some of the bargains,” said Bucky Hellwig, senior vice president at Morgan Asset Management, in Birmingham, Alabama, adding there was optimism about the potential Lehman Brothers’ deal.
“There is also an anticipation that something may be done over the weekend with regard to some of the financial issues whether its the restructuring of Lehman Brothers or that the Treasury may do something with regard to the GSEs,” Hellwig said.
The Dow Jones industrial average .DJI rose 32.73 points, or 0.29 percent, to 11,220.96, but ended down 2.8 percent on the week.
The Standard & Poor's 500 Index .SPX climbed 5.48 points, or 0.44 percent, to 1,242.31, ending down 3.2 on the week.
The Nasdaq Composite Index .IXIC, meanwhile, slipped 3.16 points, or 0.14 percent, to 2,255.88, ending the week 4.7 percent lower.
The S&P’s subindex of financial shares .GSPF rose 3.2 percent.
On the Nasdaq, Qualcomm shares fell 1.8 percent to $47.67, while Apple declined 0.7 percent to $160.18.
SanDisk SNDK.O shares jumped 31.1 percent to $17.64 after Samsung Electronics Co Ltd (005930.KS), the world’s top maker of memory chips, said it may buy the flash memory maker in a deal that could reshape a struggling industry.
And cigarette company Altria Group Inc (MO.N) is in advanced talks to buy Skoal and Copenhagen smokeless tobacco maker UST Inc (UST.N), a source familiar with the discussions told Reuters. UST shares jumped 25.1 percent to $67.55.
The Labor Department said 84,000 jobs were lost in August, compared with the 75,000 economists had expected. June and July job losses were also revised up.
Trading was low on the New York Stock Exchange, with about 1.2 billion shares changing hands, below last year’s estimated daily average of roughly 1.9 billion, while on Nasdaq, about 2.26 billion shares traded, above last year’s daily average of 2.17 billion.
Advancing stocks outnumbered declining ones on the NYSE by 16 to 15, while on the Nasdaq decliners beat advancers by 15 to 13.
Editing by Leslie Adler