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Mixed Jobs Report Leads To Another Mixed Close On Wall Street - U.S. Commentary

wallstreet4 103112 10Jan14

With traders digesting the closely watched monthly jobs report, stocks fluctuated over the course of the trading day on Friday. The major averages eventually closed mixed for the third consecutive session.

The Dow ended the day modestly lower, while the broader Nasdaq and S&P 500 moved to the upside. While the Dow edged down 7.71 points or 0.1 percent to 16,437.05, the Nasdaq climbed 18.47 points or 0.4 percent to 4,174.66 and the S&P 500 rose 4.24 points or 0.2 percent to 1,842.37.

The major averages also turned in a mixed performance for the week. The Dow dipped 0.2 percent, while the Nasdaq jumped 1 percent and the S&P 500 advanced 0.6 percent.

The lack of direction shown by stocks on Friday came following the release of a report from the Labor Department showing that U.S. employment rose by much less than expected in the month of December.

The report said non-farm payroll employment edged up by 74,000 jobs in December compared to economist estimates for an increase of about 200,000 jobs.

The job growth in December reflects a substantial slowdown from the upwardly revised increase of 241,000 jobs in November.

Bad weather during the month likely contributed to the weaker than expected job growth, as the Labor Department said 273,000 people were not able to work because of the weather, the most since 1977.

At the same time, the Labor Department said the U.S. unemployment rate dropped to 6.7 percent in December from 7.0 percent in November. The drop pulled the unemployment rate down to its lowest level since October of 2008.

While the drop in the unemployment rate came as a surprise to economists, the decline was largely due to a decrease in the size of the labor force as some unemployed people gave up looking for work.

The mixed data generated some uncertainty about the outlook for the Federal Reserve's future monetary policy decisions.

The weaker than expected job growth led to speculation that the Fed will hold off on its plan to continue scaling back its asset purchases, while the central bank has also indicated that it will consider raising interest rates when the unemployment rate drops below 6.5 percent.

Meanwhile, notable losses by UnitedHealth (UNH) and Chevron (CVX) weighed on the Dow, with the insurance and oil giants falling by 1.8 percent and 1.9 percent, respectively.

Sector News

Despite the lack of direction shown by the broader markets, gold stocks saw substantial strength throughout the trading day. The NYSE Arca Gold Bugs Index surged up by 3 percent after trending lower over the past few sessions.

The strength among gold stocks came amid a notable increase by the price of the precious metal, with gold for February delivery jumping $17.50 to $1,246.90 an ounce.

Trucking stocks also moved sharply higher, driving the Dow Jones Trucking Index up by 2.3 percent to a record closing high. Con-way (CNW) helped lead the sector higher, advancing by 5.3 percent.

Biotechnology, airline, and utilities stocks also saw considerable strength on the day, while modest weakness was visible among banking stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan's Nikkei 225 Index rose by 0.2 percent, while China's Shanghai Composite Index dropped by 0.7 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the U.K.'s FTSE 100 Index advanced by 0.7 percent, the German DAX Index and the French CAC 40 Index both ended the day up by 0.6 percent.

In the bond market, treasuries moved sharply higher on the heels of the monthly jobs report. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled by 10.3 basis points to 2.86 percent.

Looking Ahead

Earnings season will start to pick up steam next week, with JP Morgan (JPM), Bank of America (BAC), Citigroup (C), Goldman Sachs (GS), UnitedHealth (UNH), Intel (INTC), and General Electric (GE) among the companies due to report their quarterly results.

Traders will also be presented with a slew of U.S. economic data, including reports on retail sales, housing starts and industrial production.

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