Rally ebbs as investors seek safety after weak wage data
Investors made a small move back to safer assets on Friday after the US government's November jobs report showed continued hiring, but weak wages.
Indexes finished little changed as real estate and household goods companies rose, but banks, which have soared since the presidential election, took losses.
Most stocks finished higher, and the biggest gains went to companies that pay big dividends, similar to bonds. Investors also bought bonds, and prices rose and yields fell.
The dollar also weakened as investors expected less inflation. Thanks to a loss from Goldman Sachs, which closed at a nine-year high on Thursday, the Dow Jones industrial average dipped after closing at a record high a day ago.
The jobs report called into question some of investors' hopes about the state of the economy, and they reversed some of the moves they have made since the presidential election three weeks ago.
"It suggests that inflationary pressures maybe aren't building as quickly, at least on the wage side, as some had supposed," said Russ Koesterich, head of asset allocation for BlackRock's Global Allocation Fund.
He said investors want to see a combination of strong wage growth and stimulus spending to boost the economy in 2017. The weak wage figures throw that into doubt.
"You're less likely to see inflation build if people aren't getting paid more because they can't afford to spend more," said Koesterich.
The Dow lost 21.51 points, or 0.1%, to 19,170.42. The Standard & Poor's 500 index rose 0.87 points to 2,191.95. The Nasdaq composite added 4.55 points, or 0.1%, to 5,255.65.
The weak finish appeared to mark an end, at least for now, of the post-election rally for US stocks. The S&P 500 and Nasdaq fell this week after a three-week rally took them to record highs. The Dow finished little changed.
The Labour Department said US employers added 178,000 jobs in November as hiring remained steady. Investors have long expected that the Federal Reserve will raise interest rates later this month, and the jobs report did nothing to dispel that notion. But fewer people looked for work and hourly wages slipped.
Bond prices, which have been falling sharply since the presidential election, rose. The yield on the 10-year Treasury note fell to 2.30% from 2.45%.
Lower bond yields pushed investors to buy utility and real estate companies and consumer goods makers, which are often compared to bonds because of their big dividend payments. When bond yields fall, those stocks become more appealing to investors seeking income.
General Growth Properties rose 62 cents, or 2.5%, to 25.46 dollars and Exelon rose 84 cents, or 2.6%, to 33.01 dollars. PepsiCo climbed 1.57 dollars, or 1.6%, to 100.60 dollars.
The drop in bond yields also affected banks because yields are linked to long-term interest rates. Lower interest rates mean banks cannot make as much money from lending. Goldman Sachs fell 3.27 dollars, or 1.4%, to 223.36 dollars and Citigroup gave up 1.25 dollars, or 2.2%, to 56.02 dollars.
The financial sector of the S&P 500 is the highest it has been since 2008, up 13% since the presidential election.
Benchmark US crude added 62 cents, or 1.2%, to 51.68 dollars a barrel in New York. Brent crude, the standard for pricing international oils, picked up 52 cents, or 1%, to 54.46 dollars a barrel in London. The price of oil surged 12% this week after Opec countries agreed to trim the production of oil next year. That was the biggest weekly rise in oil prices since February 2011.
Starbucks shares slid 1.30 dollars, or 2.2%, to 57.21 dollars after the coffee chain said Howard Schultz will step down as chief executive in April. He will remain chairman, and Starbucks said he will focus on new ideas like high-end shops. President and chief operating officer Kevin Johnson will become chief executive.
Human resources software company Workday gave a weak forecast. Chief executive Aneel Bhusri said some customers have recently delayed completing large deals, partly because of "global uncertainties such as Brexit, the US presidential election, and pending elections in other G8 countries". Workday's stock tumbled 10.20 dollars, or 12.5%, to 71.40 dollars.