Higher wages push stocks to records, but Dow misses 20,000 mark
The Dow Jones industrial average missed the 20,000 mark by a fraction of a point on Friday as US stock indexes rose after the government said wages jumped in December, but two other major indexes set records.
Stocks wavered between gains and losses in the morning after the December jobs report, which showed less hiring than analysts hoped to see. Bond yields rose sharply, as the continued job gains should encourage the Federal Reserve to keep raising interest rates.
Indexes turned higher as investors concluded that the rising wages will lead to more spending on technology and consumer goods. Industrial companies rose as investors hoped for greater economic growth.
Sam Stovall, a US equity strategist for S&P Capital IQ, said there was good news for most industries because workers are being paid more, but the report will not push the Fed to raise rates quickly in order to stave off inflation.
"Consumers are earning a bit more and as a result can spend more," he said. "But... people are not too worried the Fed will have to slam on the brakes."
At about 12.40pm the Dow peaked at 19,999.63, but later lost steam. It finished up 64.51 points, or 0.3%, at 19,963.80. The S&P 500 rose 7.98 points, or 0.4%, to 2,276.98. The Nasdaq composite jumped 33.12 points, or 0.6%, to 5,521.06.
The small-cap Russell 2000 index slid 4.65 points, or 0.3%, to 1,367.28.
Stocks finished the week with a big gain as investors remained optimistic about the US economy. The S&P 500 climbed 1.7%. That was a marked change from last year, when the index lost 6% as the market got off to its worst opening week in history.
The Labour Department said US employers added 156,000 jobs in December, which was solid but slightly disappointing. However the government said hourly pay jumped 2.9 % from December 2015, the biggest monthly increase in seven years. Overall, job growth remained steady in 2016 but slowed a bit from 2015.
The biggest gains went to companies that stand to benefit from higher wages and greater spending by consumers. Among technology companies, Facebook rose 2.74 dollars, or 2.3%, to 123.41 dollars and Apple gained 1.30 dollars, or 1.1%, to 117.91 dollars. Amazon had its second big gain in a row and added 15.54 dollars, or 2%, to 795.99 dollars while travel website TripAdvisor picked up 1.57 dollars, or 3.2%, to 50.77 dollars.
Industrial companies, which have climbed since the presidential election two months ago, also fared well. Machinery and equipment maker Honeywell rose 1.77 dollars, or 1.5%, to 118.53 dollars.
Bond prices fell. The yield on the 10-year Treasury note rose to 2.42% from 2.35%. Higher bond yields mean higher interest rates, which allow banks to make more money on lending. Investment banks and other financial firms did better than the rest of the market Friday afternoon. SunTrust Banks rose 63 cents, or 1.1%, to 55.53 dollars and Goldman Sachs jumped 3.58, or 1.5%, to 244.90 dollars.
Companies that pay large dividends, including phone companies and real estate investment trusts, lagged the market as bond yields rose. Those stocks are often compared to bonds because of the steady income they provide. AT&T gave up 84 cents, or 2%, to 41.32 dollars and Crown Castle International fell 1.74 dollars, or 2 %, to 85.50 dollars.
Amgen climbed and Sanofi and Regeneron Pharmaceuticals fell after a court moved to block sales of Sanofi and Regeneron's cholesterol drug Praluent. A federal jury ruled in March that Praluent infringes on two patents that belong to Amgen. Both are costly biotech drugs designed to be injected once or twice a month. Sanofi and Regeneron said they will appeal the ruling, which came from US District Court in Delaware.
Amgen stock gained 3.80 dollars, or 2.5%, to 156.78 dollars while Regeneron slid 22.24 dollars, or 5.8%, to 358.68 dollars and Sanofi lost 1.18 dollars, or 2.8%, to 40.32 dollars.
The dollar rose to 117.02 yen from 115.62 yen after a dip on Thursday. The euro slipped to 1.0532 dollars from 1.0590 dollars.
US crude oil rose 23 cents to close at 53.99 dollars a barrel in New York. Brent crude, which is used to price oil sold internationally, added 21 cents to close at 57.10 dollars a barrel in London.
In other energy trading, wholesale gasoline slipped less than one cent to 1.63 dollars a gallon. Heating oil rose one cent to 1.70 dollars a gallon. Natural gas rose one cent to 3.29 dollars per 1,000 cubic feet.
Gold fell 7.90 dollars to 1,173.40 dollars an ounce. Silver sank 12 cents to 16.52 dollars an ounce. Copper rose one cent to 2.55 dollars a pound.
The FTSE 100 index inched up 0.2%. It has risen nine days in a row and is at all-time highs. Germany's DAX edged up 0.1% and the CAC-40 of France rose 0.2%. Japan's benchmark Nikkei 225 index lost 0.3% while the Kospi in South Korea added 0.4%. In Hong Kong, the Hang Seng advanced 0.2%.