Stocks Finish Modestly Higher Despite Weak Jobs Report - U.S. Commentary

(RTTNews) - Stocks saw only slim moves to close out the week on Friday, as subdued reaction to monthly employment figures kept the major averages near the unchanged mark. The major averages were able to recover from a pullback at the opening bell and managed to close modestly higher.

The initial weakness came on the heels of the release of a report from the Labor Department showing that employment fell by more than expected in the month of October, with the continued decline in jobs pushing the unemployment rate up to a new twenty-six year high above 10 percent.

Non-farm payroll employment fell by 190,000 jobs in October following a revised decrease of 219,000 jobs in September. Economists had expected a decrease of about 175,000 jobs compared to the loss of 263,000 jobs originally reported for the previous month.

With the continued drop in jobs, the unemployment rate jumped to 10.2 percent in October from an unrevised 9.8 percent in September. The unemployment rate had been expected to show a more modest increase to 9.9 percent.

In related news, President Barack Obama signed a bill extending unemployment coverage for 14 weeks across the country and adding an additional six weeks for areas with the highest unemployment. The bill also extends and expands the first-time homebuyer tax credit.

Separately, the Commerce Department released its report on wholesale inventories in the month of September, showing that inventories fell by a little less than economists had been anticipating. The report also showed a continued increase in wholesale sales.

Also on the economic front today, the Federal Reserve said that total consumer credit fell by $14.8 billion or 7.2 percent in September to $2.456 trillion, indicating tightening for the eighth straight month. Economists had been expecting a decrease of about $10 billion.

The major averages moved to the upside going into the close, ending the day modestly above the unchanged line. The Dow closed up 17.46 points or 0.2 percent at 10,023.42, the Nasdaq advanced 7.12 points or 0.3 percent to 2,112.44 and the S&P 500 rose 2.67 points or 0.3 percent to 1,069.30.

Despite some shaky sessions this week, the major averages all finished considerably higher, with the Dow and the S&P 500 advancing by 3.2 percent and the Nasdaq climbing by 3.3 percent.

Sector News

Airline and gold stocks saw some of the day's best performances, with the NYSE Arca Airlines Index and the NYSE Arca Gold Bugs Index advancing by 4.4 percent and 2.1 percent, respectively. With the gains, the indices continued to recover from their lowest levels in roughly two months.

The gains by airline stocks came amid a decrease in the price of oil, while gold stocks rallied due to a jump in the price of the precious metal, which set a record intraday high.

Retail stocks also saw a strong outing, with the S&P Retail Index advancing by 1.7 percent, offsetting some of the losses seen in late October. Within the sector, Whole Foods Market (WFMI | Quote | Chart | News | PowerRating) rose 4.2 percent after ending the previous session at a three-month closing low.

Railroad, health insurance and biotechnology stocks also rose by notable margins, while commercial real estate and electronic storage stocks saw steep losses. The Morgan Stanley REIT Index and the NYSE Arca Disk Drive Index fell by 1.6 percent and 1.5 percent, respectively.

Healthcare provider, oil and oil service stocks are also fell, helping to limit the upside for the major averages.

Dow Components

General Electric (GE | Quote | Chart | News | PowerRating) was the Dow's leading gainer, shooting up by 6.4 percent on the day. With the gain, the stock continued to recover from Wednesday's two-month closing low.

The gain by GE came after Oppenheimer upgraded the diversified conglomerate to Outperform from Perform. The broker also raised its target price on the stock to $18 from $17, citing the firm's likelihood to generate substantial revenues from the sale of some of its businesses.

Travelers (TRV | Quote | Chart | News | PowerRating) and Home Depot (HD | Quote | Chart | News | PowerRating) also gained ground on the day, further offsetting recent losses, while Procter & Gamble (PG | Quote | Chart | News | PowerRating) and McDonald's (MCD | Quote | Chart | News | PowerRating) closed the day at fresh highs.

Procter & Gamble advanced by 0.9 percent, ending the session at its highest closing price in ten months, while fast food giant McDonald's set a ten-month closing high with a 0.4 percent gain.

On the other hand, Disney (DIS | Quote | Chart | News | PowerRating) and American Express (AXP | Quote | Chart | News | PowerRating) turned in two of the Dow's worst performances, sliding by 1.5 percent and 1.4 percent, respectively. Disney remained in a range, while American Express pulled back off the one-year closing high set on Thursday.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region closed higher on Friday. Japan's benchmark Nikkei 225 Index rose by 0.7 percent, while Hong Kong's Hang Seng Index advanced 1.6 percent.

Meanwhile, the major European markets saw little change on the day, with the U.K.'s FTSE 100 and the German DAX Index edging up by 0.3 percent and 0.1 percent, respectively, while the French CAC 40 Index slid by less than a tenth of a percent.

In the bond markets, treasuries rose by moderate margins. Subsequently, the yield on the benchmark ten-year, which moves opposite of its price, closed at 3.503 percent, posting a loss of 3.0 basis points on the session.

Looking Ahead

Looking ahead to next week, the focus of the markets may shift to comments from Fed officials as well as data on jobless claims, international trade and consumer sentiment in an otherwise light week on the economic front.

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