MARKET SNAPSHOT: U.S. Stocks Edge Higher After Jobs Report

By Anora Mahmudova, MarketWatch

NEW YORK (MarketWatch) -- U.S. stocks edged higher on Friday and headed for weekly gains as investors digested worse-than-expected payrolls data showing the smallest gain in jobs in three years.

The S&P 500 index (SPX) began the day 3 points, or 0.2%, higher at 1,840.15 and was set to record its first weekly gain this year. Gains were led by the utilities sector, which was up 1.9%. Read MarketWatch's live blog of the stock-market day.

The Dow Jones Industrial Average (DJI) climbed 27 points, or 0.2%, to 16,463.98, putting it on course to finish the week nearly unchanged.

The Nasdaq Composite (RIXF) added 13 points, or 0.3%, to 4,168.75 and was set to gain for the week.

The U.S. economy added just 74,000 jobs in December to mark the smallest increase since the start of 2011, suggesting that the nation entered 2014 with less momentum than other economic indicators had signaled.

The unemployment rate fell to 6.7% from 7.0% to mark the lowest level since October 2008, the Labor Department said Friday. Yet the decline appeared to occur partly because more people dropped out of the labor force; some 347,000 Americans were no longer looking for work in December.

"When the nonfarm-payrolls report is worse than expected, the S&P 500 and nine out of ten sectors have averaged declines. Sectors that have typically held up the best are utilities, materials, and consumer staples. On the downside, if the jobs report is worse than expected, two sectors to avoid are technology and financials," wrote analysts at Bespoke Group.

Quincy Krosby, market strategist at Prudential Financial, noted that it remained to be seen how much significance investors will put into the jobs numbers over the course of Friday trading.

"If they think the labor market recovery is halted, then we will see selling in consumer discretionary and financial stocks while people will pile into defensive sectors," she said. "However, no one knows whether we are back to the environment where 'bad news is good news.'"

* Movers and shakers: Alcoa Inc. shares dropped sharply following the aluminum producer's announcement that it swung to a fourth-quarter loss. The firm also said Thursday that it had settled charges of corruption in Bahrain with a $384 million payout to the Securities and Exchange Commission and Department of Justice. Shares slid 6.1%.Abercrombie & Fitch's shares rallied 14% after the firm raised its full-year adjusted earnings projections. Gap Inc. gained 1.4% after saying it expects full-year earnings near the top of its projected range of $2.57 to $2.65. The firm also said same-store sales in December were flat, missing expectations of a 1.5% increase, according to a survey of analysts by Thomson Reuters. Sears Holdings Corp. disappointed the market with plunging same-store sales, sending its shares tumbling nearly 16% Friday. The company said it had a 7.4% decline in quarter-to-date holiday-season comparable sales. Five Below Inc. tanked 8% after updating its guidance for the three months ended January 4. The retailer said it now expects adjusted per share profit to be between 44 cents and 46 cents. In December, the firm said it expected adjusted profit of 49 cents to 51 cents.

* In other markets:European stock market gains eased after the U.S. jobs data. In Asia, stocks in Shanghai ended the day lower after data showed Chinese exports grew 4.3% on the year in December, slower than the 4.5% expected by economists. The dollar gave up gains after the employment report, but gold priced rose. Oil prices rebounded, helped by Chinese import data and weaker dollar.

More stories from MarketWatch:

U.S. posts smallest jobs gain in three years

Fed still on steady taper course despite weak job growth

Treasurys rally on disappointing jobs data

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