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A triple-digit rally on the Dow vanished Friday afternoon as the best jobs report in nearly two years sent the U.S. dollar soaring and punished gold and basic materials stocks.
Today’s Markets
As of 2:39 p.m. EST, the Dow Jones Industrial Average fell 5.29 points, or 0.05%, to 10360.63, the S&P 500 added 1.46 points, or 0.13%, to 1101.38 and the Nasdaq Composite advanced 9.93 points, or 0.46%, to 2183.10.The FOX 50 added 1.67 points, or 0.20%, to 816.83.
Earlier in the session all three major indexes soared to fresh 2009 highs as Wall Street's hopes for a recovery in the labor markets were bolstered by the best monthly jobs report in nearly two years and an unexpected drop in the unemployment rate. But the markets' bullishness was limited as the U.S. dollar spiked on the good economic news, which raised the chances the Federal Reserve could soon boost interest rates sooner rather than later, helping the greenback.
“I think there’s going to be increased concerns about when the Fed is going to raise rates. Just the specter of that is what’s crushing everything commodity-related,” said Michael James, senior equities trader at Wedbush Morgan Securities.
The earlier triple-digit rally came after the Dow plunged nearly 100 points in the minutes on Thursday amid jitters over the jobs report.
“What a difference a day makes right? That last half hour last night was pretty disgusting,” NYSE trader Ted Weisberg of Seaport Securities told FOX Business. “One number can basically change the market so dramatically -- it kind of makes you a little nervous.”
Most Dow stocks were still on the rise, led by Intel (INTC), JPMorgan Chase (JPM) and American Express (AXP), which fell sharply at Thursday's close. However, Alcoa (AA) slumped more than 2% on the dollar and DuPont (DD) sank almost 6% after saying it will delay the launch of new corn seed technology.
The Nasdaq Composite stronger gains than the broader markets as tech stocks like Expedia (EXPD) and Cisco (CSCO) rallied on the upbeat economic news.
“I think the jobs numbers are spectacular. It was a huge upside surprise. It blew everybody away,” said Art Hogan, chief market strategist at Jefferies & Co. “This is the first time (in a while) we have a market celebrating something that is fundamentally good as opposed to a speculative inflation hedge.”
Friday’s rally was stunted by the U.S. dollar, which jumped 1.1% to one-month highs against a basket of currencies on rate hike hopes. The futures markets now sees a 100% chance of a rate boost by August. Hurt by the greenback, gold suffered its steepest percentage decline since Dec. 2008, losing $48.60 a troy ounce, or 3.99% to $1168.80. Basic materials stocks were the biggest drags on the markets as shares of Hecla Mining (HL) plunged 5% and Gold Fields (GFI) lost 6%.
Energy stocks such as Schlumberger (SLB) and Massey Energy (MEE) were also weak as crude oil, mired in a three-day slump, succumbed to the dollar. Crude tumbled 91 cents a barrel to $75.55 -- its lowest close since Oct. 14.
Wall Street reacted emphatically earlier in the day when the Labor Department said the U.S. lost 11,000 jobs in November -- the fewest since the recession began in December 2007. Also, the government said average hourly earnings and the average workweek grew and also revised its estimates for the prior two months to reflect 159,000 more jobs.
At the same time, the government said the unemployment rate unexpectedly fell to 10% after striking a 26-year high of 10.2% last month. November saw job growth in terms of temporary employment, education, health and the federal government.
The figures were leaps and bounds better than the loss of 130,000 jobs and a 10.2% unemployment rate that economists had forecasted.
"This is a positive indicator and might be a sign of things to come," said John Lonski, chief U.S. economist at Moody's.
While manufacturing, housing and other sectors of the economy have grown in recent months as the recession ended, the labor picture has been stubbornly sluggish. The White House, which held a jobs summit on Thursday, said it is "actively" discussing using excess TARP cash to finance a new jobs bill.
As if the bulls needed any more fuel, the Commerce Department said U.S. factory orders rose 0.6% in October, surprising analysts who had predicted orders would be unchanged.
Friday’s jobs report had the bulls predicting more gains to close out the rest of the year.
“You’re going to have to come up with a pretty interesting negative catalyst to stop the momentum between now and the end of the year.”
Corporate Movers
Take-Two Interactive (TTWO) lost almost one-third of its market cap after the video game publisher surprised Wall Street by saying it expects to post a non-GAAP loss of 40 cents to 60 cents in 2010. Analysts had projected a profit of 64 cents. Blaming the performance of its Major League Baseball titles, Take-Two said it sees a non-GAAP loss of 5 to 10 cents per share in the fourth quarter, which would widely miss the Street’s view of 33 cents.
Yum Brands (YUM) said it plans to grow EPS by 10% in 2010 but the parent of KFS warned its same-store sales will likely fall 3% this quarter amid a “difficult consumer environment.” The company sees U.S. same-store sales dropping 8% this quarter and 4% in 2009.
Big Lots (BIG) posted a better-than-expected non-GAAP profit of 27 cents a share and a 1.3% increase in revenue to $1.04 billion. Analysts had projected EPS of 18 cents and revenue of $1.02 billion. The closeout retailer also boosted its EPS guidance for the current quarter to $1.09 to $1.14.
Global Markets
European markets rallied around the U.S. labor news. The U.K's FTSE 100 rose 0.18% to 5322.36, Germany's DAX gained 0.82% to 5817.65 and France's CAC 40 rallied 1.25% to 3846.62.
Overnight Asian stocks closed mixed as Japan's Nikkei 225 climbed 0.45% to 10022.59 but Hong Kong's Hang Seng lost 0.25% to 22498.15.
Stocks decline in early morning tradingWall Street’s Comeback Comes Up Short
