A surprise weaker-than-expected US jobs report left investors wary about betting big on equities; thus leading the benchmarks to end on a mixed note. While the Dow ended in the red, S&P 500 and Nasdaq managed some gains, aided by certain defensive stocks. The drop in the blue-chip index was also consistent with weekly numbers, as only the S&P 500 and Nasdaq closed the week in the green. Financials stocks were among the major losers.
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The Dow Jones Industrial Average dropped 0.05% to close Friday’s trading session at 16,437.05. The Standard & Poor 500 gained a modest 0.2% to end at 1,842.37. The tech-laden Nasdaq Composite Index was up 0.4% to finish at 4,174.66. The CBOE Volatility Index (VIX) dropped 5.8% to 12.14. Composite volume on the New York Stock Exchange (NYSE) was 3.3 billion. The advancers well outpaced the decliners on the NYSE, as for 70% stocks that gained, 28% ended in the negative zone.
Termed by some analysts as an ‘anomaly’, the lower-than-expected nonfarm payroll data was indeed surprising as it came after the jobs situation has shown consistent improvement over a decent period. On Friday, the U.S. Bureau of Labor Statistics reported that nonfarm payroll employment moved up 74,000 in December. This was significantly below the consensus estimate of a gain of 192,000. In fact, the 74K gain was the smallest improvement since Jan 2011. However, the report stated that unemployment rate has dropped to 6.7% in December from 7%.
These dismal numbers come close on the heels of positive jobs data reported in the same week. On Wednesday, markets received positive jobs data as Automatic Data Processing (NASDAQ:ADP) reported an addition of 238,000 private jobs in December. This outpaced the consensus estimate of an addition of 200,000 jobs. This report was followed by the decline in the claim numbers. The number of Americans filing for unemployment benefits declined 15,000 to 330,000.
The Fed had set certain economic targets before it could decide on tapering the bond buyback program. Employment data was being closely examined and an improvement in the labor market situation was one of the reasons behind the taper call the central bank took last month. The surprising dismal tone in employment numbers have made some onlookers speculate about the pace of Fed’s tapering.
The earnings season is underway and investors will have an eye on the corporate numbers. So far, 5% of the S&P 500 companies have released their earnings performance, of which 50% has outperformed profit estimates. However, among the latest reports and forecasts, Alcoa Inc (NYSE:AA), Chevron Corporation (NYSE:CVX) and Sears Holdings Corp (NASDAQ:SHLD) each had something dismal to share and their shares dropped 5.4%, 1.9% and 13.8%, respectively. While Alcoa fell short of profit estimates, Chevron’s earnings were forecasted to be damaged by lower energy output. Sears revealed it had suffered a fourth-quarter loss.
Among the positives, defensive stocks were decent gainers and also drove some of the benchmarks higher. Stocks such as Raytheon Company (NYSE:RTN), Lockheed Martin Corporation (NYSE:LMT), Northrop Grumman Corporation (NYSE:NOC) and Alliant Techsystems Inc. (NYSE:ATK) gained 0.7%, 0.5%, 0.6% and 8.5%, respectively.
Financial stocks on the other hand ended on the losing side. Financial Select Sector SPDR (XLF – ETF report) dropped 0.2% and stocks including JPMorgan Chase & Co. (NYSE:JPM) (0.5%), Wells Fargo & Co (NYSE:WFC) (0.5%), Citigroup Inc (NYSE:C) (0.9%), Morgan Stanley (NYSE:MS) (0.8%) and Bank of America Corp (NYSE:BAC) (0.4%) declined 0.5%, 0.5%, 0.9%, 0.8% and 0.4%, respectively.