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Dow Gains 1.8% for Week; Financials Rally

The Dow logged a solid gain for the first week of 2010, despite a disappointing jobs report. Financials, materials and industrials led the pack.

The Dow Jones Industrial Average rose 11.33, or 0.1 percent, to close out Friday's session at 10,619.19. TheS&P 500 gained 0.3 percent. The Nasdaq advanced 0.7 percent.

But after touching a 15-month high on Monday, the Dow managed to gain 1.8 percent for the week. The S&P and Nasdaq were up over 2 percent. Financials were the biggest gaining sector this week, up 5.8 percent, followed by materials and industrials, which also rose more than 5 percent.

The CBOE volatility index, widely considered the best gauge of fear in the market, finished out the week at 18.13, its lowest level in more than a year.

Today's jobs report was a disappointment. There was widespread talk that this might be the first month in almost two years to see job growth, but the Labor Department said the economy actually shed 85,000 jobs in December. The unemployment rate held steady at 10 percent.

But the revision for November showed 4,000 jobs were added that month, compared with the initial estimate that 11,000 were lost. That was the first job growth in two years. October was revised downward, however, making the net change for October-November a 1,000-job loss.

"I think the employment numbers really gave us a reality check," David Spika, investment strategist at WHG Funds, said on CNBC this morning. "Now, the trend of the recovery is still in place but I think what this showed us is maybe the market got a little ahead of itself," he said.

Stocks can still go higher, Spika said. He thinks the best place to be is in large-cap, high-quality names.

Wholesale inventories rose by 1.5 percent in November, while sales rose by the most in 10 months.

UPS was one of the biggest gainers in today's session after the economic bellwether raised its fourth-quarter earnings forecastto 73 to 75 cents a share from the original 58 to 65 cents a share.

AIG was also at the front of the pack. Two prominent lawmakers are requesting testimony from Treasury Secretary Geithner to determine if the NY Fed acted improperly in urging AIG to limit disclosure of payments to banks after getting a $180 billion government bailout.

Winterizing Your Portfolio - A CNBC Special Report
Winterizing Your Portfolio - A CNBC Special Report

Best Buy said same-store sales rose 8.2 percentin December amid strong demand for notebook computers, TVs and mobile phones, and backed its fiscal 2010 forecast, which calls for earnings between $3 and $3.15 a share.

In the banking sector, Bank of America is expected to return its bonuses to near 2007 levels, the Wall Street Journal reported.

Citigroup cut its earnings outlooks for Goldman Sachs, JPMorgan Chase and Morgan Stanley.

And Goldman Sachs is being sued by a pension fundover its bonus plans.

But financials finished the week in the top spot as investors are betting on the sector in this phase of the recovery.

Earnings season unofficially kicks off next week, with Alcoa after the bell on Monday.

Last earnings season, the trend was companies beating on the bottom line. Todd Schoenberger of LandColt Trading said this quarter, the market is going to want to see some revenue growth — but may be disappointed.

"Companies need to show cash flow, and with double-digit unemployment, it's hard to imagine revenues being up for most of these reporting companies," Schoenberger said. "Personally, I think the markets are on shaky ground right now," he added.

Scheonberger likes the big oil names — ExxonMobil , ConocoPhillips and Chevron — and for an overseas play, the Nikkei.

Also next week are the Fed's beige-book report and the government report on retail sales. Plus, reports on consumer prices, Empire State manufacturing and consumer sentiment.

Send comments to cindy.perman@nbcuni.com.