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Stocks Close Mixed On The Day But Higher For The Week - U.S. Commentary

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Stocks fluctuated over the course of the trading session on Friday before eventually ending the day mixed. Despite the choppy trading, the Dow and the S&P 500 reached their best closing levels in nearly two months.

The major averages finished the session on opposite sides of the unchanged line. While the Nasdaq fell 17.87 points or 0.3 percent to 7,263.87, the Dow rose 64.22 points or 0.3 percent to 25,063.89 and the S&P 500 inched up 2.43 points or 0.1 percent to 2,706.53.

Despite the mixed performance on the day, the major averages all moved sharply higher for the week. The Dow jumped by 1.3 percent, while the Nasdaq and the S&P 500 surged up by 1.4 percent and 1.6 percent, respectively.

The Dow benefited from strong gains by Merck (MRK), Exxon Mobil (XOM), and Chevron (CVX), which moved higher after reporting better than expected fourth quarter earnings.

On the other hand, a steep drop by Amazon (AMZN) weighed on the Nasdaq after the online retail giant reported fourth quarter results that exceeded analyst estimates but forecast weaker than expected first quarter revenues.

Traders were also digesting a report from the Labor Department showing much stronger than expected job growth in the month of January but also an uptick in the unemployment rate

The Labor Department said non-farm payroll employment surged up by 304,000 jobs in January compared to economist estimates for an increase of about 165,000 jobs.

However, the report also showed the spike in employment in the previous month was downwardly revised to 222,000 jobs from the initially reported 312,000 jobs.

Andrew Hunter, Senior U.S. Economist at Capital Economics, said the jump in employment in January still provides "further evidence that economic growth remains solid and that the government shutdown had little impact."

Traders largely shrugged off the unexpected increase in the unemployment rate to 4.0 percent, as the uptick reflected a rise in workers on temporary layoff as a result of the government shutdown.

A separate report from the Institute for Supply Management showed growth in the manufacturing sector unexpectedly reaccelerated in January after seeing a substantial slowdown in December.

The ISM said its purchasing managers index climbed to 56.6 in January from a revised 54.3 in December, with a reading above 50 indicating growth in the manufacturing sector.

Economists had expected the manufacturing index to edge down to 54.0 from 54.1 originally reported for the previous month.

Sector News

Oil service stocks showed a significant move to the upside over the course of the trading session, driving the Philadelphia Oil Service Index up by 1.6 percent.

The strength in the oil service sector came amid a sharp increase by the price of crude oil, with crude for March delivery jumping $1.47 to $55.26 a barrel.

Considerable strength also emerged among networking stocks, as reflected by the 1.6 percent advance by the NYSE Arca Networking Index. The index reached a nearly four-month closing high.

Semiconductor, brokerage, and housing stocks also saw notable strength, while substantial weakness was visible among retail and steel stocks.

Other Markets

In overseas trading, most stock markets across the Asia-Pacific region ended roughly flat on Friday, although China's Shanghai Composite Index jumped by 1.3 percent. Japan's Nikkei 225 Index inched up by 0.1 percent, while Hong Kong's Hang Seng Index slipped by less than a tenth of a percent.

Meanwhile, the major European markets all moved to the upside on the day. While the German DAX Index crept up by 0.1 percent, the French CAC 40 Index rose by 0.5 percent and the U.K.'s FTSE 100 Index advanced by 0.7 percent.

In the bond market, treasuries pulled back after trending higher over the past few sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5.6 basis points to 2.691 percent.

Looking Ahead

Earnings news will continue to attract attention next week, with Google parent Alphabet (GOOGL), Disney (DIS), Viacom (VIAB), Electronic Arts (EA), Snap (SNAP), MetLife (MET), Kellogg (K), Twitter (TWTR), and Yum! Brands (YUM) among a slew of companies due to report their quarterly results.

Traders are also likely to keep an eye on reports on factory orders, service sector activity, and labor productivity and costs as well as remarks by Federal Reserve Chairman Jerome Powell.

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