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TheStreet Open House

Stocks Improve After Jobs, Services-Sector Reports

NEW YORK ( TheStreet) -- The major U.S. stock averages ticked higher Friday after upbeat December jobs and services-sector growth reports.

The Dow Jones Industrial Average ended up 44 points, or 0.3%, at 13,435. The blue-chip index posted its biggest weekly point gain since December 2011. The index finished up 1.9% for the week.

Breadth was positive, with winners outnumbering losers 23 to seven. The top percentage blue-chip gainers included Walt Disney (DIS), JPMorgan (JPM), Alcoa (AA) and Bank of America (BAC).

Johnson & Johnson (JNJ) shares spiked 1.2% after being upgraded to "buy" from "neutral" at Deutsche Bank, which spoke of upside potential attributable to new drugs and product diversification.

Falling were Microsoft (MSFT), Intel (INTC) Merck (MRK) and McDonald's (MCD).

The S&P 500 added 7 points, or 0.5%, to 1,466 to post its highest close since 2007. The index finished up 2.5% for the week. The Nasdaq ended up 1 point to 3,102 as Apple (AAPL) shares slid 2.8% after The New York Times reported that congressional investigators are coming close to concluding an inquiry into the accounting practices of the tech giant and other technology companies that allocate revenue and intellectual property offshore to lower the taxes they pay in the U.S. The tech-heavy index added 2.7% for the week.

In the broad market, only the technology sector slipped, down 0.6%. The biggest percentage sector gainers were transportation, energy and financials.

Volumes rose to 3.41 billion shares on the Big Board and 1.74 billion shares on the Nasdaq. Advancers were outpacing decliners by a ratio of 3.3-to-1 on the New York Stock Exchange and 1.8-to-1 on the Nasdaq.

"In their own right the jobs data were, perhaps, a touch more positive than expected, especially with up revisions but also less strong than some believed could be possible given the ADP print of yesterday," Harvey Goldsmith, chief economist at Cantor Fitzgerald, said in a note. "The data, after a week of drama and surprise, were relatively undramatic showing a job market far from robust, but strong and stable enough to keep unemployment moving lower if the recovery remains on track which is the goal of Fed monetary policy."

The Bureau of Labor Statistics said Friday that nonfarm payrolls rose by 155,000 in December, down from an upwardly revised 161,000 in November. Economists, on average, were expecting nonfarm payrolls to increase by 150,000 in December.

Private nonfarm payrolls increased by 168,000 in December, down from an upwardly revised 171,000. An increase of 148,000 was estimated for December.

The jobless rate stayed at 7.8% after the prior month's figure was upwardly revised from 7.7% as the civilian labor force participation rate held steady at 63.6%. The unemployment rate was expected to come in at 7.7%.

The U-6 rate, which is the broadest measure of unemployment, held steady at 14.4%.

Average hourly earnings rose 0.3%, the same as the prior month's upwardly revised data. They were expected to have risen 0.2%.

The average workweek inched up to 34.5 hours from 34.4 hours. Hours worked were expected to stay at 34.4 hours.

In other economic news, the ISM services index registered 56.1 in December, 1.4 points higher than the 54.7 registered in November, showing continued growth at a slightly faster rate in the non-manufacturing sector. Much of this was driven by gains in employment. On average, economists were expecting a read of 54.2.

The employment index in the ISM non-manufacturing report increased by 6 points to 56.3, indicating growth in jobs for the fifth consecutive month at a significantly faster rate.

David Onyett-Jeffries, an economist at RBC, said that Friday's services-sector report, whose headline index has surprised to the upside in recent months, and the complementary ISM manufacturing report released earlier in the week point to the U.S. economy gaining momentum to the end of the year despite concerns over the potential effect of the so-called fiscal cliff.

"With U.S. policymakers reaching an agreement to avert income tax increases on the majority of U.S. workers, some of the uncertainty lingering over the economic outlook has been diminished," said Onyett-Jeffries. "This, combined with the highly accommodative monetary policy stance of the Fed, should pave the way for the U.S. economy to maintain its upward trajectory during the coming months."

The Commerce Department said Friday that factory orders were unchanged in November after rising 0.8% in October. They were predicted to rise 0.4%.

Major U.S. stock averages dipped Thursday following a downtrodden tone from the latest minutes of the Federal Open Market Committee, the policy-making wing of the Federal Reserve. The surprise news outweighed stronger-than-expected employment data for December and a number of upbeat monthly retail-sales reports.

Looking into the first quarter, Steve Billimack, Chicago advisory group managing partner and director at Hightower, said he expects volatility, as "intense political debate around the sequester and the debt limit are watched and evaluated for any real structural reform by the private sector, rating agencies and the markets."

"It was great to see a relief rally January 2nd after avoiding the worst case fiscal cliff scenarios. The rally also benefited from the late 2012 trend of broad-based global central bank stimulus," Billimack said. "While the Biden/McConnell compromise showed modest cooperation to extend tax cuts, the debate re-intensifies with the new Congress having to address the more difficult issues of both spending cuts and the debt limit."

Gold for February delivery plunged Friday by $25.70 to settle at $1,648.90 an ounce at the Comex division of the New York Mercantile Exchange, while February crude oil contracts tacked on 17 cents to close at $93.09 a barrel.

The benchmark 10-year Treasury increased 4/32 to raise the yield to 1.908%. The dollar was off 0.06%, according to the U.S. dollar index.

In corporate news, Sonic (SONC) said late Thursday that fiscal first-quarter profit rose 12% from a year earlier to $6.1 million, or 11 cents a share, on revenue of $126 million.

The results were roughly in line with Wall Street estimates. Shares tumbled 0.84%.

Progress Software (PRGS) posted fourth-quarter earnings on Thursday of $36 million, or 57 cents a share, on revenue of $91.3 million, compared with year-earlier profit of $12.2 million, or 19 cents a share, on revenue of $93.5 million.

Adjusted profit in the latest fourth quarter was 23 cents a share; analysts expected 34 cents a share.

Progress Software said it expects first-quarter revenue to be flat with the year-earlier quarter. Shares were up 5.4% after slumping in premarket trading.

Coinstar (CSTR) announced Thursday the unexpected retirement of CEO Paul Davis.

The owner of the Redbox movie-rental kiosks named Chief Financial Officer J. Scott Di Valerio as its new CEO. He will take over on March 31. Shares fell 3.8%.

Eli Lilly (LLY) shares rose 3.7% after the drug maker forecast fiscal 2013 earnings of $3.75 to $3.90 a share, surpassing the Wall Street prediction of $3.71.

Finish Line (FINL) shares shed 8.3% after the athletic shoes and apparel retailer booked breakeven earnings in the third quarter, which were below the average analyst estimate of 10 cents a share, as the company faced challenges including changes in footwear trends and cool reception to its new e-commerce site.

Fertilizer company Mosaic (MOS) said quarterly operating profit declined 30%, driven by lower phosphate volumes and prices and partially offset by lower raw material costs.

"International shipments ... were impacted by prolonged contract negotiations in India and China," said Jim Prokopanko, CEO of Mosaic, in a statement. "With the settled China contract driving improved sentiment, we believe strong agricultural fundamentals will lead to strengthening crop nutrient markets."

Shares increased 3.3%.

Google (GOOG) and the Federal Trade Commission announced Thursday a deal to end the federal agency's nearly two-year antitrust probe. The search engine leader has agreed to make voluntary changes to its current Internet search practices.

Google reportedly has agreed to allow advertisers to have more say over how their ads appear on the search results listings page. The Internet giant also agreed to limit the use of reviewers' "snippets" and other quotes gathered from rival providers.

Shares were up 2% on Friday.

Harvest Natural Resources (HNR) shares popped 11.3% after the company announced an oil discovery oil in a wildcat well in the offshore waters of Gabon, West Africa.

Avon (AVP) shares added 3.2% after the stock was boosted to buy from neutral at Bank of America.

-- Written by Andrea Tse and Joe Deaux in New York.



>To contact the writer of this article, click here: Andrea Tse.

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