U.S. Stocks on Track for Weekly Gains

By Corrie Driebusch 

U.S. stocks were little changed Friday as data showed a strong pace of job creation in January and a pickup in workers' wages.

Treasury bonds and gold prices sank while the dollar rose against major currencies, as investors bet the stronger-than-expected data would keep the Federal Reserve on course to raise interest rates later this year. The signs of sustained U.S. growth reduced demand for assets seen as havens.

The Dow Jones Industrial Average slipped 23 points, or 0.1%, to 17862. The S&P 500 slipped a fraction to 2062, while the Nasdaq Composite lost 7.5 points, or 0.2%, to 4758.

"The story today is the market has had a great week, and it's OK to blow off a little steam," said Jason Weisberg, managing director at Seaport Securities Corp.

Even with Friday's slight declines, the Dow is on track to rise 4.1% this week, which would mark its biggest weekly gain since December 2011. That's a sharp reversal from January, when both the Dow and the S&P 500 notched their biggest monthly declines in a year as investors struggled with concerns about how slowing global growth, a stronger dollar and lower oil prices will impact corporate profits.

The market's muted reaction to Friday's positive employment also bodes well for the markets, some money managers and strategists said.

"Until recently this sort of good news might have been interpreted as bad news because of its implications for the Fed," said Erik Davidson, chief investment officer for Wells Fargo Private Bank, which manages $190 billion.

In the past, a positive report on job creation and wage inflation sent equities lower as investors feared that it could prompt the U.S. central bank to accelerate plans to tighten monetary policy. Now, Mr. Davidson said, "the punch bowl is going away, but the market is saying, 'We can throw our own party, we can buy our own beer, we don't need the Fed's punch bowl anymore.'"

U.S. nonfarm payrolls rose by a seasonally adjusted 257,000 jobs in January, the Labor Department said Friday. That topped economists' forecasts of 237,000 jobs. The government also said job creation was far stronger in prior months than previously estimated.

Average hourly wages were up 12 cents, to $24.75. The unemployment rate, calculated from a separate survey of households, climbed to 5.7% in January, up from December's 5.6%.

Some investors were cheered by the uptick in wage growth, which could trigger consumer spending and boost corporate profits.

"Between the low pump prices and higher wages, I'm hopeful that some of that will find its way to our nations' cash registers," said Jack Ablin, chief investment officer at BMO Private Bank.

The strong data boosted bets that the Fed would raise interest rates as soon as June. Fed funds futures, used to place bets on central-bank policy, showed Friday that investors and traders see a 24% likelihood of a rate increase at the June Fed meeting, according to data from CME Group Inc. The odds were 15% right before the jobs report. The odds were 17% a month ago.

Shares of banks rallied on Friday.

"As short-term interest rates go up, it'll help financials the most," said Joseph Spinelli, head of single-stock trading for the Americas at Deutsche Bank. Higher interest rates can allow banks to earn more income from lending.

J.P. Morgan Chase & Co. and Goldman Sachs Group Inc. were two of the top performing Dow components on Friday, gaining 2.5% and 1.4%, respectively. Financial companies in the S&P 500 index added 1.1%.

Investors sold positions in utilities companies. Utility stocks have been top performers in recent years because of their steady dividend payments, which in a low interest-rate environment are sought after by investors.

Shares of utilities companies in the S&P 500 fell 3% Friday, making it the worst-performing sector of the day and the only sector in the red for the week.

Treasurys sold off. Yields on the 10-year bond hit 1.938%, compared with 1.811% right before the jobs report. Bond prices fall as their yields rise.

Gold for April delivery, the most-active futures contract, fell to $1,235.80 a troy ounce, from $1,260.90 before the data.

The dollar jumped against the Japanese currency to Yen119.14 from Yen117.22 ahead of the jobs numbers, up 0.8% for the day. The euro dropped to $1.1318, from $1.1448 beforehand.

"People are embracing the fact that the U.S. is continuing to grow and there's no more flight-to-quality assets needed," said Adam Klopfenstein, a senior market strategist with Archer Financial Services in Chicago.

Oil prices maintained early gains. U.S. oil for March delivery recently rose to $52.02 a barrel on the New York Mercantile Exchange.

In corporate news, Twitter Inc. said Thursday its loss narrowed to $125.4 million from $511.5 million a year earlier, as revenue nearly doubled to $479 millionShares jumped 17%.

Verizon Communications Inc. said Thursday it would sell local wireline operations in California, Florida and Texas to Frontier Communications Corp. for about $10.5 billion. Verizon shares added 3.6%, while those of Frontier rose 1.3%.

Harris Corp. agreed to buy Exelis Inc. in a cash-and-stock deal valued at roughly $4.4 billion. Harris shares rose 8.4% and Exelis shares jumped 35%.

European stocks fell Friday, weighed down by the standoff between Greece and its creditors. Greece's new government is seeking to ease conditions on its bailout program. On Thursday, Germany dismissed Greece's request for bridge funding that would give it three months to negotiate new bailout terms.

Germany's DAX fell 0.5% and France's CAC 40 lost 0.3%.

Tatyana Shumsky and Saumya Vaishampayan contributed to this article.

Write to Corrie Driebusch at [e-mail]

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