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Technology sector buoys US markets

The major US stock indexes ended the first trading week of the year mixed on Friday with the technology sector generally faring better than blue-chip shares as the debate over inflation gained momentum.

The market see-sawed through the week, but fell on Friday as traders lowered their odds after a government jobs report that the US Federal Reserve would trim interest rates anytime soon.

While the Labor Department reported on Friday that job growth had accelerated by a larger-than-expected 167,000 new positions, a hefty jump in wages sent stocks lower on concerns that the data could trigger fresh inflation worries at the Fed.

The blue-chip Dow Jones Industrial Average lost 0.66 percent in the week to Friday, ending at 12,398.01 points.

The Standard & Poor's 500 lost 0.61 percent for the week to 1,409.71. The NASDAQ composite, however, gained 0.78 percent for the week to 2,434.25.

"The job growth was definitely solid but one thing that you did see within that job growth was higher-than-expected hourly earnings. So I think that raises perhaps some inflationary concerns," Cowen and Co analyst Michael Malone said.

"The market had a great run in the last six months of 2006 and investors have been expecting perhaps a minor retracement. I don't think we're transitioning from a bull market to a bear market. We're simply seeing a bit of profit-taking here," Malone said.

The inflation debate was revived earlier in the week after the Fed released the minutes from its last interest rate-setting meeting last month.

"Members agreed that the statement should continue to convey that inflation risks remained of greatest concern and that additional policy firming was possible," the minutes, released on Wednesday, showed.

Most analysts are betting that the US central bank will keep its key fed funds interest rate pegged at 5.25 percent at its next policy meeting on January 31.

In the meantime, traders said they would be mainly focusing on retail sales in the coming week. A government snapshot on last month's retail sales, due for release next Friday, will give a broad indication of sales over the critical Christmas holiday period.

Most analysts expect retail sales to moderate to 0.7 percent last month compared with sales of 1 percent in the prior month.

Analysts track retail sales closely as consumer spending accounts for some two-thirds of US economic growth.

Separately, a fresh update on the US November trade deficit with its major trading partners, due for release next Wednesday, is expected to show the deficit expanding to US$59.5 billion from US$58.9 billion in October.

The coming week will also yield fresh updates on export and import prices and business and wholesale inventories.
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