Stocks fought through a volatile session on Friday to finish with modest gains after concerns about financials eased late in the session. The markets opened the session in positive territory after the Labor Department released a strong jobs report for October. The report said that 166,000 jobs were created in October, easily beating analysts' estimates of an increase of 80,000. "Today's report was better than expected and was characterized as good enough to signal a 'resilient labor market' that will keep the economy out of recession despite the housing slump," said Chris Low of FTN Financial. "We expect the Fed will see it the same way." The optimistic sentiment did not last long, however, as reports surfaced that Merrill Lynch (MER) may have to write-down billions more in loans and has possibly been hiding some losses from its balance sheets. Later in the session, the averages were able to move off of their lows and climb back into positive territory, largely on strength within the technology sector. The Nasdaq posted the largest percentage gain, rising 15.55 points, or 0.56 percent, to end the session at 2,810.38. The Dow was able to overcome an early 100 points loss to finish up 27.23 points, or 0.20 percent, closing at 13,595.10, while the S&P 500 gained 1.21 points, or 0.08 percent, to end the day at 1,509.65. Dow Components The Dow experienced a volatile day of trading, erasing an early triple digit loss to end the session with a modest gain. Leading the Dow higher was strength within Caterpillar (CAT). Caterpillar rose 2 percent, erasing a sharp loss seen in the previous session. The gain came after the company announced the formation of a new division, the Electronics & Connected Worksite Division. United Technologies (UTX) also saw buying interest, benefiting from a new helicopter contract with CHC Helicopter Corp. Shares of the company rose 1.2 percent. 3M Corp. (MMM) also helped lead the Dow into positive territory, rising 1.1 percent. The company's stock was able to rebound from a near 5 month low set on Thursday. Other Dow components the closed higher include Alcoa (AA), Hewlett Packard (HPQ), Boeing (BA), and Proctor & Gamble (PG). On the other hand, financial stocks put forth the Dow's worst performances by far, with J.P. Morgan (JPM) slipping to a 52-week intraday low with a 2.6 percent decline. Citigroup (C) was another large decliner within the average, falling 2 percent. The stock was able to recoup much of its early losses, as investors took hope in reports that the company would hold an emergency board meeting over the weekend. Merck (MRK) also saw substantial selling pressure despite being upgraded this morning by TradingMarkets.com. Shares of the pharmaceutical giant declined 2.3 percent. Other Dow components that posted noteworthy losses include Pfizer (PFE), Home Depot (HD), Verizon (VZ), General Motors (GM), and Exxon Mobil (XOM). Sector News With gold moving to a 27 year high on Friday, gold related stocks turned in some of the market's best performances, pushing the Amex Gold Index to a record closing high with a 4 percent gain. Oil service stocks also posted large gains, with a record price of oil helping the stocks reverse sharp losses seen in the previous session. The strength led the Philadelphia Oil Service Index to a 2.6 percent gain. Technology stocks were one of the few areas that saw strength throughout the session, with disk drive stocks leading the upward move. Within the disk drive sector, Western Digital (WDC) saw the greatest strength after the company was upgraded this morning by Caris & Company Computer hardware stocks also experienced buying interest, sending the Amex Computer Hardware Index to a 2 percent gain. Among hardware stocks, Palm (PALM) saw the largest rise, reversing two straight sessions of losses. Other sectors that ended the session with notable gains include the wireless, oil, natural gas, defense, and networking sectors. On the other hand, financial stocks depressed the market's gains throughout the session, led by weakness in the brokerage sector. The Amex Securities Broker/Dealer Index fell 2.5 percent, extending a sharp decline seen in Thursday's session. Within the brokerage sector, Merrill Lynch turned in the worst performance after the Wall Street Journal reported that the company engaged in deals with hedge funds to delay the recording of losses. The news comes after the company reported sharply lower than expected third-quarter losses last week. Banking stocks also saw extreme weakness, leading the S&P Bank Index to its lowest level in over 4 years with a 1.6 percent loss. Among banking stocks, Washington Mutual (WM) posted one of the largest losses, with its stock declining for the third consecutive session to reach its lowest level in over seven years. Insurance stocks also underperformed the markets, sending the S&P Insurance Index to a 0.7 percent decline. Among insurance stocks, Cigna (CI) turned in one of the worst performances, closing down 3.5 percent despite reporting a 22 percent increase in third-quarter income this morning. Additionally, real estate stocks saw significant selling pressure, driving the Morgan Stanley REIT Index to a 2 percent loss. Within the sector, Apartment Investments (AIV) posted the largest loss despite raising the low end of its full year earnings outlook this morning. Jobs Report October job growth came in more than double what economists had been expecting, according to a Department of Labor report released on Friday, with the job growth largely due to a significant increase in service sector jobs. The report showed that non-farm payroll employment increased by 166,000 jobs in October following a revised increase of 96,000 jobs in September. The increased represented the strongest job growth since an increase of 188,000 jobs in May. Economists had expected an increase of about 80,000 jobs compared to the increase of 110,000 jobs originally reported for the previous month. The better than expected job growth was largely due to an increase in employment in the service sector, which added 190,000 jobs in October following an increase of 127,000 jobs in September. Following Wednesday's better than expected third quarter GDP report, the stronger than excepted employment growth in October is likely to lead to additional confidence in the outlook for the U.S. economy. At the same time, the data is likely to further offset recent optimism about the possibility of additional interest rate cuts by the Federal Reserve. The Fed helped to dash those hopes with the statement announcing its decision to cut interest rates on Wednesday. While the Fed decided to cut interest rates by another 25 basis points after a 50 basis point cut in September, it said following the cuts it now judges that the upside risks to inflation roughly balance the downside risks to growth. Other Markets In overseas trading, Asian stocks fell sharply, as financial stocks dragged the markets lower on continued credit fears. Japan's Nikkei 225 fell 2.1 percent. In Europe, stocks also fell on credit fears, as investors worried about the exposure of several large U.K. banks to the U.S. subprime mortgage market. The U.K.'s FTSE 100 declined 0.8 percent. Oil prices continued to move higher in U.S. trading on Friday and set a new record closing high. Light sweet crude for December delivery finished the session at $95.93 a barrel, up $2.44 on the session. Gold soared again on Friday and moved past the $800 an ounce level again. December-stamped bullion closed at $808.50, up $14.80 on the day. The precious metal moved as high as $811.00 in mid-day trading, a 27-year high. The dollar continued to show weakness against the euro, the sterling and the loonie in New York on Friday, as traders assessed key employment data from the US. The dollar hit another record low against the euro Friday afternoon, slipping to 1.4527. Looking Ahead Next week, the markets will be looking for any fresh news out of the financial markets in an attempt to gauge what further effect the credit crisis will have on financial stocks. Investors will also be focused on earning results. The notable companies set to release their quarterly results next week include Burger King (BKC), Sun Microsystems (JAVA), Citizens (CZN), Onyx Pharma (ONXX), DirecTV (DTV), Time Warner (TWX), Cisco Systems (CSCO), Beazer Homes (BZH), Ford Motors (F), Vonage (VG), Bausch & Lomb (BOL), and Walt Disney (DIS).
November 2, 2007 4:41 PM