Momentum has slowed on Wall Street after the surge at the end of last year, but the stock market’s tally at week’s end was still respectable, even if not outstanding.
While the market spent much of the week in the red, two of the three indices still finished the year’s first full week of trade in positive territory.
The Dow Jones Industrial Average dipped 32.94 (0.20 percent) to end at 16,437.05, while the broad-based S&P 500 rose 11.00 (0.60 percent) to 1,842.37 and the tech-rich NASDAQ Composite Index added 42.75 (1.03 percent) to close at 4,174.66.
“We’ve had a soggy start to the year, but we haven’t had a bearish start,” Marblehead Asset Management director Mace Blicksilver said. “The market is still kind of digesting last year’s gains, which were two year’s worth of gains.”
Analysts described a bit of a hangover-type atmosphere to the beginning of trade this month, after the market repeatedly rocketed to new records in the last weeks of last year, when the S&P 500 gained nearly 30 percent.
Investors received a shock on Friday when the US Department of Labor’s monthly employment report said that the US added just 74,000 jobs last month, well below the 197,000 expected by analysts.
The result followed several solid data releases in recent weeks, including a strong employment report two days ago from payrolls firm ADP.
Stocks plunged into negative territory for much of the day on Friday, before rallying on sentiment that that US Federal Reserve was now less likely to aggressively scale back stimulus. Analysts also said last month’s jobs report could be revised in subsequent months.
Some analysts also fretted over a dreary kickoff to corporate earnings season. Aluminum producer Alcoa Inc reported a US$2.3 billion loss following a US$1.7 billion write-down and operating results that missed expectations.
A spate of retailers gave mostly downcast assessments of the holiday shopping season, which typically accounts for between 20 and 40 percent of a retailer’s sales.
Victoria’s Secret parent comapny L Brands Inc and home decor chain Pier 1 Imports Inc slashed their earnings forecasts due to weak sales, while Bed, Bath & Beyond Inc and Family Dollar Stores Inc also underperformed.
At the week’s end, Target Corp said that it too was trimming its fourth-quarter earnings forecast after a giant hacking theft of customer financial data depressed store traffic during the holidays.
“We were cautious heading into the holiday season,” Morningstar senior retail analyst R.J. Hottovy said.
Yet the surprisingly bad results from Bed, Bath & Beyond and others suggests “the pressures were a lot more widespread than we initially thought,” Hottovy added.
An unusually high proportion of companies have warned of disappointing earnings ahead of the coming quarter, S&P Capital IQ’s Sam Stovall said.
About eight companies project earnings disappointments for every one that forecasts a positive surprise, Stovall added. Usually, this ratio is much more even.
The corporate calendar next week includes earnings releases from major banks, such as JPMorgan Chase Co and Citigroup Inc, as well as Intel Corp and General Electric Co.
Investors will also keep an eye on major economic releases, including last month’s retail sales report, as well as the consumer and producer price indices.