Stocks finished with modest gains on Friday as investors wrapped up a losing week driven by lackluster corporate news and economic data.
The Dow Jones industrial average finished up by 22.90 points, or 0.27%, to 8,646.18. The tech-heavy Nasdaq composite gained 11.61 points, or 0.82%, to 1,422.36. The broader S&P 500-stock index tacked on 5.62 points, or 0.62%, to 912.16.
The markets received two rattling pieces of news Friday that suggest a change in fiscal policy is coming next year. A worse-than-expected report on the labor market indicates the economy is not rebounding as quickly as hoped. The jobs data provide "more signs the Fed may have to lower rates again, and more reason for a federal fiscal package," says David Wyss, chief economist at Standard & Poor's.
November non-farm payrolls fell by 40,000, bringing the unemployment rate up to 6%, from 5.7%. Economists at MMS International had expected a rebound of 65,000 following small back-to-back declines in September and October. Companies remain reluctant to hire more workers. The workweek was flat at 34.2 hours and average hourly earnings were up 0.3%.
And the resignation of two key U.S. economic advisers suggests that the Bush Administration has in mind a different course for fiscal policy next year. Secretary of the Treasury O'Neill resigned Friday morning. White House economic adviser Lawrence Lindsey also announced his resignation. Wall Street welcomed the news despite some short-term uncertainty over who will succeed them.
Next week, investors will be focused on the December meeting of the Federal Open Market Committee, the rate-setting arm of the Federal Reserve. The FOMC will meet on Tuesday to discuss and decide any changes to interest rate policy. Most economists expect the Fed to keep a neutral stance for the time being.
"The [latest jobs data] look like more of the same cost-cutting news and they do not represent a fresh reason for the Fed to get worried," says Dr. Sherry Cooper, chief economist at BMO Nesbitt Burns. "Thursday's minutes [of the Nov. 6 FOMC meeting] will be very interesting reading to see what the neutral bias set at the prior meeting was really about."
In economic data, an update to the producer price index, which is a key measure of inflation at the wholesale level, should show a stabilization in oil prices. Upswings in those prices recently have been concerning, so any moderation in price would be seen as positive.
Earnings news next week will come from Albertson's (ABS) Monday. Nokia (NOK) will provide a mid-quarter update Tuesday. Kimberly-Clarke (KMB)will hold a conference call Wednesday. Ciena (CIEN) and HJ Heinz (HNZ) will report earnings Thursday.
On Friday, government panel's denial of a loan package to help struggling UAL (UAL) has the parent company of United Airlines on the ropes as it prepares its contingency plan. Analysts expect that a United bankruptcy filing could come as soon as this weekend. Glenn Tilton, chief executive has said bankruptcy was a "more likely outcome" now and he also hinted that management would have a rocky ride ahead with union negotiations.
Investors Friday had plenty of company news to weigh. Dow member and fast-food operator McDonald's (MCD) was in the news again and was the biggest decliner on the blue-chip index, as at least 17 people were injured in an explosion at a restaurant in a train station in Bombay, India on Friday. On Thursday a suicide bombing at a McDonald's location killed three people in Indonesia.
In other technology news, Dow component IBM (IBM) said it would buy Rational Software (RATL) for about $2.1 billion in cash. The deal is meant to increases IBM's role in custom software. Separately, Salomon Smith Barney downgraded Big Blue based on the stock's valuation. IBM shares were under moderate pressure, falling 1.2%.
Meanwhile, the first day of public trading for shares of the Chicago Mercantile Exchange (CME) was successful, with shares fetching $39, up from the IPO price of $35.
U.S. Treasuries finished higher, with gains across the board, on the heels of worse-than-anticipated unemployment data. Shorter-dated instruments led gains. The dollar extended losses on the news of O'Neill's resignation, while the bond is perhaps showing some concern about the fiscal implications, says MMS.
European markets closed mostly lower. In London, the Financial Times-Stock Exchange 100 index finished down 18.90 points, or 0.47%, to 4,013.50, as economic reports showed manufacturing output in the U.K. fell 0.7% in October and housing prices surged at a 29% annual rate due to low interest rates. In Germany, the DAX lost 17.21 points, or 0.53%, to 3,207.53 on increasing worries over economic growth. In France, the CAC 40 Index finished up 27.73 points, or 0.88%, to 3,185.77.
Asia markets finished down. In Japan, the Nikkei 225 index finished down 54.31 points, or 0.61%, to close at 8,863.26. In Hong Kong, the benchmark Hang Seng index ended down 36.13 points, or 0.36%, to close at 9,973.75.