Stock Market News for December 5, 2011

A robust week of gains that saw all the benchmarks surge over 7% ended on a quiet note. On Friday, markets gave up early gains to end almost flat. Initially, benchmarks had been trading in the green after sentiments were boosted by the nonfarm payroll data that reported the jobless rate to have bottomed to a 2.5 years low.

A mixed day of trading finally saw each of the benchmarks decline by less than 0.1%. The Dow Jones Industrial Average (DJIA) slipped by 0.01% to remain almost unchanged at 12,019.42. The Standard & Poor 500 (S&P 500) was down 0.02% and settled at 1,244.28. The Nasdaq Composite Index moved up 0.03% and finished at 2,626.93. With negligible change in the benchmarks, the fear-gauge CBOE Volatility Index (VIX) edged slightly higher to hover over 27.50. On the New York Stock Exchange, NYSE Amex and Nasdaq, consolidated volumes remained low at 7 billion shares, compared with the current daily average for the year of 7.96 billion. For every three stocks that advanced on the NYSE, two stocks were on the declining side.

On the economic front, reports have mostly been an encouraging factor for the investors. Consumer, retail, housing and jobs data came in strong and acted as catalysts for the week’s robust gains. Also, The Institute for Supply Management reported that the manufacturing sector had expanded in November. Separately, the Fed’s Beige Book stated: “Overall economic activity increased at a slow to moderate pace since the previous report across all Federal Reserve Districts except St. Louis, which reported a decline in economic activity”. Investors also heaved a sigh of relief as a solution to lingering European debt concern seemed to have emerged. On Tuesday, coordinated action by the central banks to ease the cost of borrowing in dollars helped the markets gain over 4%.

With all these catalysts spurring the markets’ rally, the week saw the Dow, S&P 500 and Nasdaq end 7%, 7.4% and 7.6% higher, respectively. It was the Dow’s best weekly performance since July 2009, and the S&P 500 recorded its strongest weekly rally since March 2009.

Also on Friday, investors had strong economic reports to talk about. The U.S. Bureau of Labor Statistics reported that nonfarm payroll employment had risen by 120,000 in November, and the unemployment rate dropped to a 2.5 years low of 8.6%. According to the report: “Employment continued to trend up in retail trade, leisure and hospitality, professional and business services, and health care. Government employment continued to trend down”. Consensus estimates for the period had projected the unemployment rate to come in at 9%.

This job reports follows data from Automatic Data Processing, Inc. (NASDAQ:ADP) released on Wednesday, according to which the private sector added a seasonally adjusted 206,000 jobs in November, the largest increase in hiring since December 2010. The only note of dissent on the employment situation came from the U.S. Department of Labor which reported that unemployment benefits had moved up for the second consecutive week. According to the report, initial claims increased 6,000 from the previous week to a seasonally adjusted figure of 402,000, for the week ending November 26.

Coming to sectoral stocks, the financial sector garnered most of the gains and the Financial Select Sector SPDR (XLF) fund was up 1.4%. Stocks including Bank of America Corporation (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), Citigroup, Inc. (NYSE:C), The Goldman Sachs Group, Inc. (NYSE:GS), Morgan Stanley (NYSE:MS) and Wells Fargo & Company (NYSE:WFC) surged 2.0%, 6.1%, 4.4%, 3.0%, 7.0% and 1.7%, respectively.

On the European front, a report from Bloomberg cited that the European Central Bank might be preparing to make a payment of $270 billion to the International Monetary Fund to deal with the lingering debt crisis.