Stocks were mixed and the dollar rose a day after the markets surged to two-year highs, as investors absorbed the meaning of a surprising surge in payrolls in the wake of the Federal Reserve plans to pump more money into the economy.
The Dow Jones Industrial Average fell about 15 points, after bouncing between positive and negative territory most of the session, a day after all the major indexes reached two year highs.
Kraftand Microsoft led the blue chips lower, while Bank of Americaand JPMorgan rose.
The S&P 500 Index gained, while the Nasdaq fell. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell to below 18.
Among key S&P 500 sectors, financials, industrials and consumerdiscretionary stocks advanced, while health care declined.
The jobs news was the latest in a big week for the U.S. economy with Republicans winning control of the House of Representatives in Tuesday's elections and the Federal Reserve announcing it would buy $600 billion in additional bonds on Wednesday.
Payrolls rose by 151,000in October, up from a decline of 41,000 the month before, thanks to a surge of 159,000 in private sector employment, the Labor Department reported Friday. Government payrolls slipped by 8,000. The unemployment rate remained steady at 9.6 percent.
Economists had expected a 60,000 rise in nonfarm payrolls, and a 75,000 gain in private employment.
A rise in the dollar after the news may have tempered gains in the futures market, as stocks have been moving inversely to the dollar in recent weeks. In a surprise, gold continued to rise, reaching $1,398. Some market participants see the dollar's move higher as temporary, and remain uncertain as to the economy's true strength.
At this point, it's too early to "draw too much of a conclusion as to where the dollar is moving relative to stocks," said Michael Gault, VP of the Investment Advisory Team at WeiserMazars, a wealth management firm.
The market's bigger concern is the sluggish housing market and jobs, Gault said, and while the October payroll report was good, it wasn't "groundshaking."
The Fed's efforts to stimulate the economy with purchases of long-term securities, a program known as 'quantitative easing' will help improve housing and jobs, and consistent improvement in each is what will really drive the market, he added.
"We need to see month-over-month consistent improvement (in jobs)," he added. "This is the best nonfarm payroll number we’ve gotten since April. We need to see more consistency in improvement in that regard."
Todd M. Schoenberger, managing director, LandColt Trading, was more upbeat about Friday's number.
"Now that we have the influential quantitative easingpackage in place, the country should expect a continued thaw of the frozen labor iceberg throughout the rest of the year and deep into 2011," Schoenberger said. "The 'wealth effect' is clearly improving and should signal positives for consumer discretionary budgets, especially leading into the holiday shopping season."
More companies reported earnings Friday. Toyota raised its full-year outlook for the second time after Japan's subsidies to stimulate demand helped almost double quarterly earnings.
American International Group slumped after the insurer reported losing more than $2 billion in the third quarter because of charges and losses from asset sales. AIG also reported it expects to close its recapitalization plan to reduce the government's stake in the company to just about 92 percent.
Unlike most health-care stocks, Coventry Health soared on Friday. The health insurer posted third-quarter earnings that were much better than Wall Street anticipated, as medical costs fell. Coventry raised its outlook, and said profits would rise 67 percent this year. Rivals Humana and WellCare Health Plans also rose, although UnitedHealth Groupand Cigna fell.
Pharmaceutical companies were lower as well after news that even a Republican sweep of the House is unlikley to stop health care legislation from being enacted. Pfizer and Novo Nordisk fell.
Kraft shares slumped a day after reporting weak revenue for the third quarter, and said it may lose business selling Starbucks coffee.
Starbucks, meanwhile, raised its forecast for the full year and reported a 86 percent jump in profit for the fiscal fourth quarter. At least five brokerages raised their price target for the coffee-chain retailer, including Credit Suisse, which boosted its target to $38 a share from $34. S&P Equity Research raised its rating on the stock to "hold" from "sell."
Shares of Fluor soared to the top of the S&P 500 after the engineering and construction firm reported a jump in revenue and despite a loss due to cost increases related to a U.K. wind farm project and a legal battle over a joint venture. Stifel Nicolaus and Credit Suisse raised their price targets for the stock.
Activision's shares slumped despite reporting third quarter earnings more than tripled, which was more than expected, as sales rose and margins improved. Wedbush removed the video game maker of "Call of Duty" from its "best ideas list."
Meanwhile, DISH Network's shares rose slightly after reporting earnings and revenue that were better than expected. The pay-TV provider, however, lost customers for a second straight quarter.
Beazer Homes fell after reporting a surprising drop in third quarter earnings as the sluggish economy continued to drag down homes sales.
Royal Bank of Scotland reported earnings, saying it sees a challenging fourth quarter ahead, while HSBC said profits so far this year were "well ahead" of 2009 levels, but traders said the update from the bank had not impressed the market. European bank stocks were lower.
On Tap Next Week:
MONDAY: Employment trends index, St. Louis Fed pres Bullard speaks, Dallas Fed pres Fisher speaks, Fed governor Warsh speaks, 3-yr note auction.
TUESDAY: NFIB small biz optimism index, Wholesale trade, 10-yr note auction, SCOTUS hears AT&T class action case.
WEDNESDAY: Weekly mortgage apps, Jobless claims, International trade, Import & export prices, Oil inventories, CFTC hearing on Dodd-Frank, 30-yr bond auction, Earnings from GM, Macy’s and Cisco.
THURDSAY: Veterans Day – Bond market closed, stocks and futures markets open, G20 mtg. begins, Earnings from Kohl’s, Disney and Nvidia.
FRIDAY: APEC CEO summit, Consumer sentiment, Earnings from DR Horton and JCPenney
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