Stocks finished the first week of the New Year on a down note as strong jobs data made investors worry that a faster-growing economy and possible rise in inflation will reduce the chances of a Fed rate cut.
The December jobs report sent the major indexes lower on Friday from the opening bell. Traders viewed the report, which showed nonfarm payrolls soared by 167,000 last month, as a sign the Fed will not move to cut rates any time soon because of the economy's strength. Traders have been betting on a rate cut later this year.
"Until we get inflation under control, there will be a period of consolidation," Barry Hyman, Equity Market Strategist at EKN Financial Services, told cnbc.com. "We expect to see a trading range in the first quarter which will see some corrective action."
Commodities and technology were among the losers, while the energy sector made a rebound after oil turned higher.
The Dow Jones Industrial Average was lower from the start of trading and at one point registered a triple-digit decline. The Nasdaq and the S&P 500 were also down.
For the week, however, the major averages were little-changed. The Dow was down just over 65 points for the week, or just 0.5%, while the Nasdaq was up nearly 19 points, or 0.8% and the S&P was down nearly nine points, or 0.6%.
Utilities and telecom shares were the biggest decliners, followed by materials companies and information technology. The technology sector came under pressure after Motorola's fourth-quarter profit and sales warning. The shortfall could be the results of a price war between Motorola and Nokia, analysts said.
Intel also helped to drag down the technology sector after Credit Suisse downgraded the stock to underperform from neutral. Several other tech stocks were downgraded Friday.
Treasury prices also fell on the December jobs report, sending yields higher. The dollar was higher against the euro, the yen and the British pound.
Oil mounted a recovery as positive economic data countered forecasts for warmer-than-normal weather in the United States. After flirting with the technical level of $55 much of the day, oil moved back up above $56 a barrel.
That still left crude down 7.8% for the week, the biggest drop in nearly two years.
Shares of Dow component Exxon Mobil moved higher with oil, pulling up the S&P energy sector. The sector, under water much of the day, was nearly 1% higher and the only S&P sector to show a gain.
Commodity Markets Sell Off
Commodities were weaker across the board with copper declining and gold dropping to a two-month low. The RJ CRB Index fell to nearly a two-year low and stocks sensitive to commodity prices declined around the globe.
For the week, gold was down 4.8%, while copper tumbled 11.6%.
Analysts will turn their attention to corporate profits next week as earnings reports begin to pile in. Alcoa and Genentech will be among the stocks to watch as they release results.
"I think the growth rate will see a year-to-year slow down in growth," said Hyman. "The growth rate may be below 10%, which could be a concern for the market since we've gotten used to double-digit growth. I'm not concerned about earnings causing a correction, but I am concerned about consumer spending and the risks to the downside for economic growth."
Europe Closes Lower
European markets ended the day lower, pressured by the U.S. jobs report as well as declines in the energy and tech sectors.
London's FTSE 100 , the Frankfurt DAX and the Paris CAC-40 ended the day lower. Major oil companies like Royal Dutch Shell and BP fell on the dip in crude prices. Nokia and Ericsson were lower after Motorola's warning.
Tokyo Hit by Profit-Taking
Japan, South Korea and Australia all closed lower Friday as profit-taking set in around the region after the year-end rally enjoyed by markets in previous sessions.
The Nikkei 225 Average was down sharply, retreating from an eight-month closing high in the previous session as investors took profits in recent gainers such as Honda Motor, steel stocks and others that booked aggressive gains during a year-end rally.
The Australia's S&P/ASX 200 closed lower with ailing commodity prices dragging global miner BHP Billiton down.