Rally ebbs as in­vestors seek safety af­ter weak wage data WALL STREET WEEKLY RE­PORT

Kuwait Times - - BUSINESS -

In­vestors made a small move back to safer as­sets Fri­day af­ter­noon af­ter the 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’ve 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 per­cent, 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 per­cent, 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 La­bor 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 per­cent from 2.45 per­cent. 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 per­cent, to $25.46 and Ex­elon rose 84 cents, or 2.6 per­cent, to $33.01. Pep­siCo climbed $1.57, or 1.6 per­cent, to $100.60.

The drop in bond yields also af­fected banks be­cause yields are linked to long-term in­ter­est rates. Lower in­ter­est rates mean banks can’t make as much money from lend­ing. Gold­man Sachs fell $3.27, or 1.4 per­cent, to $223.36 and Cit­i­group gave up $1.25, or 2.2 per­cent, to $56.02.

The fi­nan­cial sec­tor of the S&P 500 is the high­est it’s been since 2008, up 13 per­cent since the pres­i­den­tial elec­tion. Bench­mark US crude added 62 cents, or 1.2 per­cent, to $51.68 a bar­rel in New York. Brent crude, the stan­dard for pric­ing in­ter­na­tional oils, picked up 52 cents, or 1 per­cent, to $54.46 a bar­rel in Lon­don. The price of oil surged 12 per­cent 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.

The dol­lar fell to 113.67 yen. The euro rose to $1.0660 from $1.0645.

Star­bucks shares slid $1.30, or 2.2 per­cent, to $57.21 af­ter the coffee chain said Howard Schultz will step down as CEO 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 CEO. Schultz gave up the CEO ti­tle in 2000, and in­vestors feel Star­bucks strug­gled un­til he be­came CEO again in 2008.

Hu­man re­sources soft­ware com­pany Work­day gave a weak fore­cast. CEO 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.”

NEW YORK: Trader Peter Costa (left) works at the post that han­dles Sales­force on the floor of the New York Stock Ex­change on Fri­day. —AP

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