By Dan Strumpf
Stocks declined on Friday, capping a rocky week for investors,
despite a stronger-than-expected jobs report that signaled
continued health in the U.S. economy.
Many traders focused on an unexpectedly weak reading on wage
growth, which somewhat offset the speedy clip at which employers
added new jobs last month. The data suggested the Federal Reserve
was likely to remain patient with any increase in interest rates,
widely expected later this year, investors said. Snowballing losses
in European markets also weighed down trading in the U.S., traders
said.
The Dow Jones Industrial Average fell 141 points, or 0.8%, to
17770 in afternoon trading, while the S&P 500 declined 14
points, or 0.7%, to 2048. The Nasdaq Composite Index dropped 23
points, or 0.5%, to 4713.
The yield on the benchmark 10-year Treasury note fell to 1.955%
Friday compared with 2.016% Thursday. Bond yields fall as prices
rise.
The Labor Department said the U.S. added 252,000 jobs in
December, surpassing the 240,000 gain forecast by economists in a
Wall Street Journal survey. The unemployment rate fell to 5.6%, its
lowest level since June 2008. Employers added 2.95 million jobs
last year, the highest level since 1999.
However, the report also said average hourly earnings in
December fell from the prior month and were up just 1.7% from a
year ago. The weak wage growth underscored how individual workers
remained under stress despite the extent of the U.S. economic
recovery.
U.S. stocks were also knocked lower by steepening losses in
European markets, after news that Spain's Banco Santander SA would
raise $8.88 billion in capital prompted a selloff in banking
stocks. The Stoxx Europe 600 index closed 1.3% lower on Friday,
capping a volatile week.
"The really strong labor report highlights the continued
progress economically in the U.S., but you still have this
lingering concern about Europe," said Joe Spinelli, head of
Americas single-stock trading at Deutsche Bank.
Friday's losses affected nearly all corners of the stock market.
Financial companies posted the biggest declines, with S&P 500
financial firms off 1.2% in afternoon trading. Industrial companies
shed 1.1%.
Investors were focused on what the labor report means for the
timing of any interest-rate increase by the FedThe sizable number
of jobs added last month means the Fed is likely to be comfortable
raising rates later this year, though weak wage growth might give
the central bank some pause.
Despite the rebounding U.S. economy, investors are kicking off
2015 with a laundry list of worries, from anemic economic growth in
Europe and Japan to renewed political tumult in Greece and the
impact of tumbling oil prices. Those concerns have many investors
bracing more limited gains and wider swings in stocks this year
following an 11.4% increase in the S&P 500 in 2014.
Investors got a taste of higher volatility this week. The
S&P 500 tumbled 2.7% during the first three sessions of the
year, marking the worst start to a new year since 2008. Then, a 3%
rally carried the broad-market benchmark back into positive
territory for the year through Thursday. With Friday's loss, the
S&P 500 is down 0.3% for 2015 while the Dow is down 0.6%.
"It feels to us like it will be a solid year for equity returns,
but we think there is a very high wall of worry that the market is
going to have to climb," said Michael Fredericks, portfolio manager
of the $10-billion BlackRock Multi-Asset Income Fund. Among his
concerns: the tumble in oil prices, high stock valuations and the
high chance of a rate increase by the Federal Reserve this
year.
Mr. Fredericks, whose fund invests in both stocks and bonds,
said he pared his equity exposure going into the year. "I think
there's a lot to worry about," he said.
Fed-funds futures, used by investors and traders to place bets
on central bank policy, showed such bettors see a 16% likelihood of
a rate increase at the Fed's June meeting, compared with 20% right
before the jobs report. The odds were up from 3.9% a month ago.
Some traders attributed Friday's declines to little more than
taking of profit following the two-session rally earlier in the
week. Friday's report alone wasn't enough to change investors'
timeline for when the Fed will raise rates, said Brian Fenske, head
of sales trading at brokerage ITG.
"We've had a very sharp rally in the last few days," Mr. Fenske
said. "You just got a big economic data point that the market is
still digesting...People are still pretty comfortable with their
forecast for when the Fed will raise rates."
Crude-oil futures pared their early steep losses, helping energy
stocks to recover. Benchmark crude on the New York Mercantile
Exchange was recently down 0.6% to $48.51 a barrel.
The dollar tumbled against the yen and the euro, reversing
gains. In early afternoon trading, the dollar was down 1% against
the yen. The euro climbed 0.4% to $1.1833, rising from its lowest
level against the U.S. currency in nine years.
Gold prices rose 0.9% to $1218.90 an ounce.
Among individual stocks, Bed Bath & Beyond Inc. reported a
5% decline in third-quarter profit. Sales fell below the Wall
Street consensus. Shares declined 6.8%.
Nelson Peltz's Trian Fund Management LP has launched a proxy
fight against DuPont Co. to add four directors to the company's
board. DuPont shares fell 1.5%.
Saumya Vaishampayan and
Min Zeng
contributed to this article
Write to Dan Strumpf at daniel.strumpf@wsj.com
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