U.S. stocks rose on Friday as results of bank stress tests fueled hopes that the worst is over for the financial sector, and news of fewer-than-expected April job cuts suggested the economic slump is moderating. The Dow Jones industrial average gained 142.02 points, or 1.69 %, to 8,551.87. The Standard & Poor’s 500 Index rose 18.89 points, or 2.08 %, to 926.28. The Nasdaq Composite Index climbed 19.98 points, or 1.16 %, to 1,736.22.

It was the street’s second consecutive winning week, as the Dow closed last week up 362.24, or 4.4 %, at 8,574.65. The S&P 500 index rose 51.71, or 5.9 %, to 929.23. The Nasdaq gained 19.80, or 1.2 %, to 1,739.00.

Payrolls in the U.S. shrank in April by the least in six months as the worst recession in half a century started to ease. U.S. employers cut 539,000 jobs in April, the fewest since October; however, the Labor Department said the unemployment rate soared to 8.9 %, the highest since September 1983, from 8.5 % in March.

Morning Outlook

Stocks overseas turned negative Monday as investors gave pause to the global rally. In Asia, Japan recouped losses to close higher, with the Nikkei up 19.15 points, or 0.2 %, to 9,451.98. After rising for 6 consecutive sessions, the Shanghai Composite dropped 1.8 % to 2,579.78; while Hong Kong’s Hang Seng which advanced 2% early, ended off 301.92 points, or 1.7 %, to 17,087.95. In Europe, Britain’s benchmark FTSE 100 index fell 0.9 % to 4,421.15, Germany’s DAX 30 lost 1.0 % to 4,866.90 and France’s CAC 40 was 1.4 % lower at 3,264.81.

U.S. index futures and commodities retreated on speculation that prices have risen too fast as the global recession curbs earnings and Chinese demand for raw materials. The S&P is now trading at 15.1 times earnings, which is its highest level since October. Dow Jones industrial average futures declined 76, or 0.89 %, to 8,440. Standard & Poor’s 500 index futures fell 10.00, or 1.08 %, to 914.70, while Nasdaq 100 index futures tumbled 21.75, or 1.57 %, to 1,367.75.

On the Corporate Front

Fannie Mae issued a grave warning about its future on Friday, saying it needs $19 billion in additional government aid as job losses grow and risky loans made during the housing boom go bad at an unnerving pace. Fannie Mae posted a quarterly loss of $23.2 billion, or $4.09 per share. That compares with a loss of $2.5 billion, or $2.57 a share, in the year-ago period. The company stated that with even more government aid, it may not be sufficient to stay in a solvent condition.