By Anora Mahmudova, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks turned lower in choppy
trade on Friday as investors digested worse-than-expected payrolls
data showing the smallest gain in jobs in three years.
The S&P 500 index (SPX) gave up earlier gains and was 3
points, or 0.2%, lower at 1,834.83, but was set to record its first
weekly gain this year. The utilities sector was the top gainer.
Read MarketWatch's live blog of the stock-market day.
The Dow Jones Industrial Average (DJI) dropped 39 points, or
0.2%, to 16,405.20, putting it on course to finish the week
slightly lower.
The Nasdaq Composite (RIXF) shed 9.3 points, or 0.2%, to
4,146.96 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.'"
* Comment: Chris Millard, investment specialist at J.P. Morgan
Private Bank, said that markets initially shrugged off the
disappointing jobs figures, judging them to be a blip while
seasonal factors played a role. "Markets have parsed through the
details now and decided the numbers are really bad even if you
factor in bad weather." Speaking about the Federal Reserve's
decision to scale back its bond buying, he added: "We don't think
this report will have any impact on the Fed; they will still reduce
bond purchases at a pace of $10 billion a month and will be done by
the end of the year. It will take a lot more meaningful data sets
to alter their decision. But ultimately, we do not expect the
actual tightening until 2015."
* Movers and shakers: Alcoa Inc. shares dropped 6% following the
aluminum producer said it swung to a fourth-quarter loss. The firm
also said Thursday it had settled charges of corruption in Bahrain
with a $384 million payout to the Securities and Exchange
Commission and Department of Justice. 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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