By Mark Cotton, MarketWatch
Jan 6, 2006
U.S. stocks edged higher Friday after the number of jobs created in
December fell short of expectations, strengthening hopes the Federal
Reserve can end its policy of raising interest rates sooner rather than
later.
The Dow Jones Industrial Average was off an early high for the session of
10,946.28. It was last up 13 points at 10,894.
The Nasdaq Composite Index climbed 8 points to 2,285, putting the
tech-rich index at a fresh 4 1/2-year high.
The S&P 500 Index was up 4 points at 1,277.
U.S. job growth slowed in December to 108,000 even as the unemployment
rate fell to a cyclical low of 4.9%, the Labor Department reported.
Economists polled by MarketWatch had been looking for a gain of 205,000
and a jobless rate of 5%.
Helping offset the shortfall in December, net job growth in November was
revised higher to 305,000 from 215,000 previously.
"If the number had been too strong, people would translate into the fact
that the Fed would have to raise rates over a longer period of time," said
Owen Fitzpatrick, head of U.S. equity group at Deutsche Bank.
"It's a relief that the employment market is not overheating as the Fed,
if you look back over the years, has been very sensitive to any type of
inflation coming out of wages.
Stocks have kicked off 2006 with a solid rally. The Dow, so far, is up
1.5%, the Nasdaq has climbed 3.2% while the S&P has gained 2%.
On the broader market for equities, advancers outpaced decliners by more
than two to one on the New York Stock Exchange, and by 15 to 9 on the
Nasdaq.
By sector, technology was strong with Internet, computer hardware,
semiconductors and software stocks all rallying.
Energy and oil services stocks also gained, helped by a rise in crude-oil
prices.
On the downside, airlines struggled. Housing stocks were also lower.
Volume was 248 million on the Big Board, and 364 million on the Nasdaq.
The jobs data filtered through the financial markets.
On the bond market, long-term Treasurys inially gained, then turned lower
after the report. The 10-year benchmark note was last down 2/32 at 101
3/32, with its yield at 4.37%.
The dollar weakened against the euro and the Japanese yen, as the data
fueled expectations the Fed's cycle of interest-rate hikes would come to
an end sooner rather than later.
At last check, the euro was up 0.3% at 1.2145 against the dollar. The
greenback, meanwhile, tumbled 1.1% to 114.78.
Gold futures resumed their upward path after snapping an eight-session
winning streak. Gold for February delivery was last up $6.40 at $534.20 an
ounce.
Crude and natural-gas futures traded higher, recovering some of their
prior-session declines sparked by data showing the nation better-supplied
with oil and its products than analysts had expected.
Crude for February delivery was up 76 cents at $63.60 in New York trading.
Natural gas was up 28.10 cents, or 3% at $9.780 per million British
thermal units, after a 7% loss on Thursday.
Dow stocks in focus
IBM shares surged 1.5% to $83.72 after the company said it would be
freezing its U.S. pension plan in 2008. The move marks yet another nail in
the coffin of defined benefit plans. On Thursday, Big Blue's shares rose
55 cents to $82.50.
Shares in Microsoft Corp. slipped 27 cents to $26.72 after Credit Suisse
First Boston downgraded the computer software giant to neutral from
outperform, on valuation grounds.
"Microsoft could still serve as a nice hedge against near-term volatility
in the market, however we find other software stocks as offering greater
long-term growth potential," the broker said.
Other stock standouts
In the Internet space, Yahoo Inc. shares rose 4.1% to $43.24 after Goldman
Sachs raised its earnings estimates due to expectations of higher search
and branded revenue growth.
Goldman also became the latest broker to issue a positive note on Google
Inc. It raised its price target on the Internet search company to $500
from $400 based to reflect higher earnings expectations. Earlier in the
week, Piper Jaffray lifted its price target on the company, while Bear
Stearns upgraded the company. In pre-market trade, Google shares were up
$4.25 at $455.50.
Elsewhere, shares in Starbucks Corp. dipped 2 cents to $31.59 even as the
coffee chain reported a 7% rise in December sales from stores open at
least a year, known as same-store sales. The sales figure was at the upper
end of the coffee chain's targeted range.
"The may be viewed as disappointing by the market given increased
expectations over the past week, but overall it is a solid number," said
Bear Stearns in a note to clients.
This MarketWatch news update is provided to you courtesy of Thomson
Financial.
This is Thomson Financial's Market Commentary, which is issued three times
daily; Pre-Open ( 9:00 a.m.), Post-Open (10:15 a.m.), and Close (5:00
p.m.). The information herein is believed to be true and accurate. We
take no responsibility for inaccurate information and reserve the right to
update our reports. If you have any questions please e-mail James Sang at
james.sang@tfn.com or call 646.822.6233. For more information about
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http://www.irchannel.com.
SOURCE Thomson Financial Corporate Group
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