Volatile Week Ends With Stocks Soaring
Stocks ended a wild and volatile week with all three major averages moving sharply higher in Friday trading. The Dow completely erased this week’s pullback and even managed to close at an all-time high. Friday’s broad rally again saw rotation into recent laggards like utilities, cyclicals, drugs, and healthcare.
The Nasdaq bounced back from its Friday intra-day lows that had taken the average down more than 480 points from its Monday morning high of 4192.19. Stocks surged all the way into the closing bell, suggesting that perhaps the “January Effect†money was finally coming into the market.
According to preliminary numbers, the Dow rose 269.30 to 11522.56, the Nasdaq gained 155.45 to 3882.58, and the S&P 500 added 38.01 to 1441.46.
A relatively non-threatening December employment report set the stage for Friday’s comeback. The employment report showed that 315,000 new jobs were created in December which was ahead of the 237,000 that were expected. While the strong jobs growth may appear inflationary, the market breathed a sigh of relief at the 0.4% increase in average hourly wages which was only 0.1% above the expected number.
Additionally, the unemployment rate remain unchanged at 4.1%, and that further indicated that wage inflation pressures may not yet be a threat to the economy.
Groups posting the biggest gains Friday included Internets [$GIN.X>$GIN.X], up 4.6%, biotechs [$BTK.X>$BTK.X], up 6.7%, drugs [$DRG.X>$DRG.X], up 6.9%, and health care [$HCX.X>$HCX.X], up 7.7%.
While most groups performed well Friday, the few weak spots included forest and paper products [$FPP.X>$FPP.X] and gold and silver [$XAU.X>XAU.X] which were down less than 1%.
Drug stocks posted big gains as money continued to rotate into recent weak groups. Pfizer [PFE>PFE], Schering Plough [SGP>SGP], Merck [MRK>MRK], and Bristol Myers Squibb [BMY>BMY] all finished up more than 6% for the day.
Dow leaders included Merck [MRK>MRK], Proctor & Gamble [PG>PG], Coca-Cola [KO>KO], Walmart [WMT>WMT], and Honeywell [HON>HON]. Each posted gains of more than 5%. Weak components in the Dow included IBM [IBM>IBM] and Eastman Kodak [EK>EK].
Internets and techs roared back Friday after suffering huge sell-offs during the week. Yahoo [YHOO>YHOO], Red Hat [RHAT>RHAT], DoubleClick [DCLK>DCLK], Broadcom [BRCM>BRCM], and JDS Uniphase [JDSU>JDSU] all gained more than 30 points each.
Traders now look ahead to next week wondering if Friday’s rally was a head fake ahead of February’s Fed meeting, or whether vast amounts of sidelined Y2K and 401-k money will pour into the market and take it to new highs.