Saturday, December 4, 2010

Wall St flat but eyes best week in a month

NEW YORK: U.S. stocks were headed for their best week in a month on Friday, Dec 3 after a brighter assessment of the economy and a more optimistic view of Europe's debt crisis drove a rally earlier this week.

Major indexes were little changed on Friday after a lower-than-expected rise in U.S. nonfarm payroll jobs last month.

However, investors have been reassured by signs the economy is stabilizing and said the Federal Reserve would be less likely to withdraw stimulus with employment still below expectations.

Commodity-related shares benefited from a weaker dollar, which declined after the jobs report, helping to limit losses. Aluminum company Alcoa Inc gained 1 percent TO $14.23. Financials, which had their biggest day in three months on Thursday, gave up some gains. The KBW bank index fell 0.6 percent.

Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut, said that as well as making the Fed less likely to curtail its bond purchases, the disappointing jobs data would make Congress think twice about raising taxes next year.

"The likelihood of extending current tax rates has grown and we are unlikely to see any large legislation out of Washington that is unfriendly to the economy," he said.

The Dow Jones industrial average fell 11.80 points, or 0.10 percent, at 11,350.61. The Standard & Poor's 500 Index lost 1.05 points, or 0.09 percent, at 1,220.48. The Nasdaq Composite Index rose 6.21 points, or 0.24 percent, at 2,585.56

Employment barely grew in November. Nonfarm payrolls rose by 39,000, much less than forecast. The unemployment rate unexpectedly jumped to a seven-month high of 9.8 percent, the Labor Department said.

But recent data, including retail sales and other labor reports, have raised optimism the recovery remains on track after hitting a soft patch in the summer when fears of a double-dip recession drove stocks sharply lower.

The lack of investor alarm over the jobs report was reflected in the CBOE Volatility Index, or VIX, known as Wall Street's "fear gauge," which shed 6.7 percent to 18.10.

A separate report showed the U.S. services sector grew for an 11th straight month in November, according to the Institute for Supply Management. U.S. factory orders dropped in October, the government said.

The S&P 500 faced strong technical resistance at about 1,228, near a recent high of more than two years and also the 61.8 percent Fibonacci retracement of the index's slide from October 2007 to March 2009, a key technical indicator.

Support for the benchmark kicks in at 1,200, which was recently a stubborn resistance point, and the top end of its recent trading range, and near 1,195, its 10-day moving average.

Also helping to curb stocks' decline was the euro's gain on Friday of more than 1 percent against the U.S. dollar. In recent weeks, the euro's moves have been tightly coupled with U.S. and global equities.

In company news, U.S.-based mining group Walter Energy Inc agreed to buy Canada's Western Coal Corp for about $3.25 billion to create the world's leading metallurgical coal producer. Walter added 2.6 percent to $108.29. - Reuters

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