Stocks Close Mixed; Europe Haunts Market

NEW YORK (TheStreet) -- U.S. stocks finished the first trading week of 2012 with solid gains, even though equities failed to rally amid Friday's better-than-expected jobs data as concerns around Europe's sovereign debt troubles kept investor optimism in check.

The Dow Jones Industrial Average settled down 56 points, or 0.5%, at 12,360 after hitting a session low of 12,333. Despite the losses, the blue chips index posted a more than 1% gain for the holiday-shortened week.

The S&P 500 dropped 3 points, or 0.3%, to 1,278, putting the index 1.6% ahead for the week. The Nasdaq tacked on 4 points, or 0.2%, to 2,674 on Friday, and posted a 2.7% gain for the week.

Financial stocks were weak, with Bank of America (BAC) pulling down the blue chips index. About two-thirds of the Dow's 30 components closed in the red. Microsoft (MSFT), McDonald's (MCD) and Walt Disney (DIS) led the gainers.

Stock futures jumped briefly after the federal government said that the unemployment rate fell to 8.5% in December, it's lowest level since February 2009, from a revised 8.7% in November. Meanwhile, the country added 200,000 jobs in December, with companies creating 212,000 jobs. Both figures beat forecasts from Thomson Reuters calling for 150,000 total new jobs and 165,000 private sector jobs.

While the government's report showed a modest improvement from prior months, economists were quick to point out its shortcomings.

One concern is that the 42,000 jobs gained in the couriers and messenger sector may be upwardly skewed because of seasonal factors. Also, economists say that weekly jobless claims need to fall further and that monthly payroll increases need to consistently come in north of the 250,000 mark to bring down the unemployment rate.

As hiring picks up, those who gave up looking for jobs may start again, adding to risks that unemployment will actually rise in coming months. The consensus seemed to be that the U.S. jobs market is recovering slowly, but that monthly payrolls warrant further scrutiny going forward.

Despite Europe being a wild card for the markets, Adrian Day, portfolio manager of Adrian Day Asset Management, said he remained upbeat for further rallying in the U.S. "There doesn't necessarily need to be good news, just an end to continued bad news from Europe," he said. "At some point, you get sellers exhaustion and people coming in to scoop up bargains. We're getting close to that."

Investors are keeping a close eye on bond auctions in Italy and Spain next week. Renewed worries about Greece's debt struggles, potential downgrades of core eurozone economies, the ability of eurozone banks to raise capital and worsening problems in Hungary have all resurfaced in the new year.

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European stocks finished mixed. Putting a damper on sentiment was data from the European Commission in Brussels that showed consumer confidence in the eurozone falling to its lowest level in more than two years. Germany's DAX closed down 0.56% while London's FTSE edged up 0.39%. Japan's Nikkei Average settled 1.16% lower, and Hong Kong's Hang Seng was down 1.17%.

In corporate news, Alcoa's (AA) global smelting capacity will be reduced by 12% after the company said it would close an aluminum smelter in Tennessee and some operations at a Texas facility. Alcoa said it would record fourth-quarter restructuring charges of $155 million to $165 million. The aluminum maker is scheduled to release fourth-quarter earnings on Monday. Alcoa was fell 2.1% to $9.16.

In other news, Bank of America may face a large charge if UniCredit's ¿7.5 billion rights issue fails, according to The Wall Street Journal. Bank of America and Mediobanca of Italy, the two main underwriters in the sale, agreed to buy 10% of the offering should it fail completely, the Journal reported, citing anonymous sources. Bank of America slid 2.1% to $6.18.

After Thursday's close, RF Micro Devices (RFMD) warned of a revenue shortfall in its fiscal third quarter. The company now said it sees revenue of $225 million for the period ended in December, 10% below the current average estimate of analysts polled by Thomson Reuters for revenue of $250.2 million. It blamed weaker-than-expected sales of 2G components to China-based customers for entry-level handsets, among other factors. RF Micro plunged 19.5% to $4.54.

Ford (F) announced plans to open a new research lab in Silicon Valley early this year. The lab, which the company said will aid Ford's "expansion beyond the traditional automaker mindset to drive innovation for a better mobility experience," will be the company's first dedicated research and development office on the West Coast. The Dearborn, Michigan-based company didn't say how many people it plans to hire, but hinted that it would be a smaller operation. The shares rose 1% to $11.71.

Citigroup (C) ceased talks to sell its OneMain consumer-lending subsidiary after failing to reach an agreement with a group of potential buyers, according to the Wall Street Journal. The lender and potential buyers Centerbridge Capital Partners, Leucadia National and Berkshire Hathaway agreed to end negotiations, but may open them again once the credit markets improve, the newspaper said, citing anonymous sources. Citigroup shares gained 0.1% to $28.55.

February oil futures fell 25 cents to $101.56 a barrel, while February gold futures lost $3.30 to $1,616.80 an ounce.

The dollar index was up 0.4%. The benchmark 10-year Treasury was up 11/32, diluting the yield to 1.960%.

-- Written by Chao Deng and Kaitlyn Kiernan in New York.