With traders shrugging off another upbeat U.S. employment report amid continued concerns about the ongoing European debt crisis, stocks turned in a lackluster performance during trading on Friday. A lack of conviction among traders contributed to the choppy trading.
The major averages eventually ended the session mixed, with the tech-heavy Nasdaq edging up 4.36 points or 0.2 percent to 2,674.22, while the Dow fell 55.78 points or 0.5 percent to 12,359.92 and the S&P 500 slipped 3.25 points or 0.3 percent to 1,277.81.
Despite the mixed performance on the day, the major averages all moved higher for the holiday-shortened week due largely to the rally seen on Tuesday. The Nasdaq jumped by 2.7 percent, while the Dow and the S&P 500 rose by 1.2 percent and 1.6 percent, respectively.
The lack of direction shown throughout the trading session came despite the release of a report from the Labor Department showing that stronger than expected job growth in the month of December helped to push the unemployment rate down to its lowest level in almost three years.
The report showed that the U.S. economy added 200,000 jobs in December following a downwardly revised increase of 100,000 jobs in November. Economists had expected employment to increase by about 150,000 jobs.
Subsequently, the unemployment rate continued to tick downward, falling to 8.5 percent in December from a revised 8.7 percent in November. With the drop, the unemployment rate fell to its lowest level since coming in at 8.3 percent in February of 2009.
Peter Boockvar, equity strategist at Miller Tabak, said, "Bottom line, the best job gain since September brings the 2011 monthly average to 137,000, very ordinary in a recovery, but hopefully December begins a new higher level of trend.
Continued concerns about the financial situation in Europe overshadowed the upbeat U.S. jobs data, however, with selling pressure generated by news that Fitch Ratings downgraded Hungary to junk status.
Fitch attributed the downgrade to a further deterioration in the country's fiscal and external financing environment and growth outlook.
Adding to the concerns, European Central Bank said overnight deposits by European commercial banks reached a new record high of 455.3 billion euros.
Among individual stocks, Family Dollar (FDO) fell by 7.5 percent after the discount retailer reported first quarter earnings of $0.68 per share on revenues of $2.15 billion. Analysts had expected the company to earn $0.68 per share on revenues of $2.17 billion. The company reaffirmed its 2012 earnings guidance.
Alcoa (AA) also closed lower after saying it intends to cut its smelting capacity by 12 percent in order to lower its position on the global aluminum cost curve and improve its competitiveness. The aluminum giant said it expects fourth quarter restructuring charges of $155 million to $165 million.
In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan's Nikkei 225 Index and Hong Kong's Hang Seng Index both ended the day down by 1.2 percent, while Australia's All Ordinaries Index fell by 0.8 percent.
Meanwhile, the major European markets turned mixed over the course of the trading day. While the U.K.'s FTSE 100 Index rose by 0.5 percent, the French CAC 40 Index edged down by 0.2 percent and the German DAX Index dipped by 0.6 percent.
In the bond market, treasuries saw modest strength on the day despite the better than expected jobs data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.2 basis points to 1.961 percent.
While most of the major sectors showed only modest moves on the day, significant strength was visible among biotechnology stocks. Reflecting the strength in the biotech sector, the NYSE Arca Biotechnology Index surged up by 2.4 percent to a two-month closing high.
Dendreon (DNDN) helped to lead the biotech sector higher once again, advancing by 16.3 percent. Shares of Dendreon jumped by nearly 40 percent on Thursday after the company reported stronger than expected fourth quarter sales of its prostate cancer therapy Provenge.
Health insurance stocks also showed a strong move to the upside on the day, driving the Morgan Stanley Healthcare Payor Index up by 2.2 percent. Molina Healthcare (MOH) and Amerigroup (AGP) turned in two of the sector's best performances.
Computer hardware, healthcare provider, and networking stocks also saw notable strength, while gold stocks came under pressure. The NYSE Arca Gold Bugs Index fell by 1 percent, with the weakness in the sector coming amid a modest decrease by the price of gold.
Natural gas, steel, and utilities also moved to the downside on the day, offsetting the strength in the aforementioned sectors.
Traders are likely to keep a close eye on Europe next week, with the European Central Bank and the Bank of England both due to hold monetary policy meetings on Thursday.
U.S. reports on retail sales, weekly jobless claims, international trade, and consumer sentiment may also attract some attention.
On the earnings front, Alcoa is due to release its fourth quarter results after the close of trading next Monday, marking the unofficial start of earnings season.
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