Stocks Pare Losses Ahead of Close
Stocks pared losses in the last minutes of Friday's session after trading lower much of the day as stronger-than-expected U.S. job gains in October failed to continue a rally that led stocks to two-year highs on Thursday.
The Dow Jones Industrial Average was down more than 20 points a day after all the major indexes reached two year highs.
Kraft and Merck led the blue-chip index lower, while JPMorgan and Alcoa rose.
The S&P 500 Index rose slightly and the Nasdaq slipped. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell to just above 18.
Financials led the key S&P 500 gainers while telecom and health care sectors declined.
Despite Friday's lackluster session, the markets were on pace to post strong results for the week: the Dow was up more than 2.5 percent, the Nasdaq was up more than 2.4 percent, and the S&P 500 was up more than 3 percent for the week.
The jobs number gave a boost to the dollar, as investors viewed the news as a surprising sign of real strength in the economy.
But the dollar's rise wasn't good news for stocks, which have been moving moving inversely to the U.S. currency. When the value of the dollar is low, interest rates are low, and dollar-denominated assets are cheaper to foreign buyers, a scenario that has pleased the markets.
Traders also were assessing how to judge the Fed's plans to pump more money in the economy now that jobs are coming back.
In a surprise, gold continued to rise, settling at new high for the yearof $1,397.30. Some market participants see the dollar's move higher as temporary, and remain uncertain as to the economy's true strength. And among other metals, silver hit a 30-year high to catch up with gold prices, while palladium rose to a fresh nine-year high.
Meanwhile, oil prices fell below $87 a barrel, slipping from a two-year high.
Financials outperformed other sectors amid speculation that the Fed will soon allow some healthy banks to increase dividend payments, people familiar with the decision said late Thursday.
Shares of Bank of America and Wells Fargo were up more than 4 percent. Citigroup and JPMorgan climbed more than 3 percent. The Keefe Bruyette Woods Bank Index rose more than 2 percent.
News that global shipments of personal computers continued to rise in third quarter failed to lift many computer makers on Friday. The market research firm iSuppli said shipments rose from the second quarter as well as from a year ago to 88.1 million units.
Nonetheless, Apple , IBM , HP and Dell were all lower.
Meanwhile, shares of Research in Motion fell more than 3 percent after news Dell plans to switch its 25,000 BlackBerry users to Dell's smartphone, the Venue Pro.
Shares of Massey Energy soared after news the coal producer received a takeover offer from Alpha Natural Resources, according to the Wall Street Journal.
More companies continued to reportearnings with mixed results. AIG shares slipped after the insurer reported losing more than $2 billion 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.
Toyotaraised its full-year outlookfor the second time after Japan's subsidies to stimulate demand helped almost double quarterly earnings.
Coventry Health advanced after the health insurer posted earnings that were much better than anticipated, as medical costs fell. The firm also raised its outlook, and said profits would rise 67 percent this year.
However, health care stocks were in the red across the board, including UnitedHealth and Cigna.
Pharmaceutical companies were lower as well after news that even a Republican sweep of the House is unlikely to stop health care legislation from being enacted. Pfizer and Novo Nordisk were lower.
Beazer Homes rose even after the homebuilder reported a surprising drop in third quarter earnings as the sluggish economy continued to drag down homes sales.
Kraft slumped a day after the Dow component reported a weak revenuefor the quarter.
Starbucks, meanwhile, raised its full-year forecastand reported a 86 percent jump in profit for the quarter. At least five brokerages raised their price target for the coffee-chain retailer and 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 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 slumped despite reporting earnings which more than tripled, as sales rose and margins improved. And Wedbush removed the video game maker from its "best ideas list."
Meanwhile, DISH Network rose slightly after reporting earnings and revenue that were better than expected. The pay-TV provider, however, said it lost customers for a second straight quarter.
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.
Warren Buffett's firm Berkshire Hathaway is slated to post earnings tonight after-the-bell.
The jobs news was the latest in a big week for the U.S. economy with Republicans winning control of the House of Representativesin 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, according to the Labor Department. Government payrolls slipped by 8,000 and 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.
The market's biggest concern now is the sluggish housing market and jobs, said Michael Gault, VP of the Investment Advisory Team at WeiserMazars, a wealth management firm.
While the October payroll report was good, it wasn't "ground shaking," Gault 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 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."
In the day's economic news, pending sales of previously owned U.S. homes fell unexpectedly in September, according to the National Association of Realtors. The Pending Home Sales Index, based on contracts signed in September, fell 1.8 percent to 80.9 from an upwardly revised 82.4 percent in August. Economists polled by Reuters had expected a 3 percent rise.
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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