Nasdaq, S&P 500 Set Record Highs, Dow Just Below 20,000 - U.S. Commentary

(RTTNews) - After initially showing a lack of direction, stocks moved mostly higher over the course of the trading session on Friday. The upward move lifted the Nasdaq and the S&P 500 to new record closing highs, while the Dow closed just shy of the 20,000 level.

The Dow flirted with 20,000 throughout the afternoon but was unable to break through the key psychological level. The blue chip index still closed up 64.51 points or 0.3 percent at 19,963.80, while the Nasdaq climbed 33.12 points or 0.6 percent to 5,521.06 and the S&P 500 rose 7.98 points or 0.4 percent to 2,276.98.

With the gains on the day, the major averages closed higher for the first week of the new year. While the Dow jumped by 1 percent, the Nasdaq and the S&P 500 surged up by 2.6 percent and 1.7 percent, respectively.

The strength that emerged on Wall Street came following the release of the Labor Department's closely watched monthly employment report for December.

While the report showed weaker than expected job growth during the month, it also showed a significant acceleration in the pace of wage growth.

The Labor Department said non-farm payroll employment climbed by 156,000 jobs in December, while economists had expected an increase of about 175,000 jobs.

The increase in employment in November was upwardly revised to 204,000, but the increase in employment in October was downwardly revised to 135,000, reflecting a net addition of 19,000 jobs.

The report also said the unemployment rate inched up to 4.7 percent in December from 4.6 percent in November, matching economist estimates.

The uptick in the employment rate came after it fell to its lowest level since hitting a matching rate in August of 2007 in the previous month.

Additionally, the Labor Department said the annual rate of growth in average hourly employee earnings accelerated to 2.9 percent from 2.5 percent, reaching the fastest rate of growth since June of 2009.

Rob Carnell, Chief International Economist at ING Commercial Banking, suggested the notably faster rate of wage growth raises the possibility of an interest rate hike by the Federal Reserve in March.

"In short, this report underlines that the U.S. labor market is tight and getting tighter," Carnell said. "The Fed will not want to hang about before tightening again."

The jobs report largely overshadowed separate reports showing a wider trade deficit and a pullback in factory orders in the month of November.

Sector News

Biotechnology stocks showed a strong move to the upside on the day, driving the NYSE Arca Biotechnology Index up by 1.6 percent. With the gain, the index reached its best closing level in well over a month.

Within the biotech sector, Pernix Therapeutics (PTX), Zafgen (ZFGN), and Arrowhead Pharmaceuticals (ARWR) posted standout gains.

Significant also emerged among railroad stocks, as reflected by the 1.3 percent gain posted by the Dow Jones Railroads Index. Railcar manufacturer Greenbrier (GBX) led the sector higher despite reporting weaker than expected first quarter earnings.

brokerage, oil service, and internet stocks also saw notable strength on the day, contributing to the upward move by the broader markets.

Meanwhile, substantial weakness was visible among gold stocks. The NYSE Arca Gold Bugs Index plunged by 3.8 percent, pulling back off a nearly two-month closing high.

The pullback by gold stocks came as the price of gold for February delivery slid $7.90 to $1,173.40 an ounce after surging up $16 to $1,181.30 an ounce in the previous session.

Steel and housing stocks also moved to the downside, with the NYSE Arca Steel Index and the Philadelphia Housing Sector Index falling by 2.3 percent and 1.5 percent, respectively.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan's Nikkei 225 Index fell by 0.3 percent, while Hong Kong's Hang Seng Index rose by 0.2 percent.

Meanwhile, the major European markets all moved modestly higher on the day. While the German DAX Index inched up by 0.1 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index both edged up by 0.1 percent.

In the bond market, treasuries gave back ground after moving notably higher in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed by 5 basis points to 2.418 percent.

Looking Ahead

After a relatively quiet start to the week, the economic calendar picks up next Friday with the release of reports on producer prices and retail sales.

Additionally, financial giants Bank of America (BAC), JPMorgan Chase (JPM), and Wells Fargo (WFC) are due to report their quarterly results next Friday.

After the close of trading next Thursday, Federal Reserve Chair Janet Yellen is scheduled to host a town hall meeting with educators in Washington, D.C.