Stocks finished higher on Friday following another strong U.S. jobs report but the major equity indexes closed mixed for the week as some investors may be looking to lock in their profits for the year.
Both the Dow Jones Industrial Average and S&P 500 gained 0.4% in price for the week while NASDAQ, which has gained more than 27% this year, slipped 0.1%, its second straight down week. The Dow is up more than 23% so far this year while the S&P is up 18.4% in price. Small cap stocks, as measured by the Russell 2000, fell 1%; that index is up 12.1% this year. Stocks were mostly lower the first half of the week but gradually rebounded into positive territory as the week wore on. Congress moved forward to complete a tax reform package before yearend and reached a budget deal to avoid a potential government shutdown.
The November jobs report was slightly better than expected. The Labor Department said nonfarm payrolls increased by 228,000 last month, although it downwardly revised the prior month’s gain by 17,000 to 244,000. The unemployment rate held steady at a 17-year low of 4.1%. The only slight disappointment in the report was in average hourly earnings, which rose 0.2% compared to the month earlier but only 2.5% versus a year ago. The jobs report is the last major economic indicator to be released prior to the Federal Reserve’s monetary policy meeting this week and isn’t likely to dissuade it from raising its benchmark federal funds interest rate by 25 basis points.
European stocks rebounded sharply from the previous week’s losses, notching their best gains since late September. The broad-based Stoxx Europe 600 jumped 1.4% while Italian stocks rose 3% and German and Spanish equities both gained 2.3%. Sovereign bond prices were slightly higher. On Friday the U.K. and the European Union reached an agreement on London’s exit from the EU, a prelude to trade negotiations starting between the two parties. Despite strong gains on Friday, Asian stocks were mostly lower for the week. Japan’s Nikkei 225 registered a small loss while Hong Kong stocks, one of the best performers this year, fell 1.5% after losing 2.7% the prior week. The Hang Seng index is still up more than 30% year-to-date.
Reports/dates/facts/links worth paying attention to over the next week:
1. December 12: The Federal Open Market Committee begins its two-day meeting in Washington; producer price index for November.
2. December 13: Consumer price index for November; FOMC meeting ends at 2:00 PM EST, followed by meeting announcement, Fed Chair Janet Yellen press conference and updated Fed economic forecasts.
3. December 14: Weekly unemployment claims; retail sales for November.
4. December 15: Industrial production for November; Empire State Manufacturing Survey for December.