Market Wrap: Buoyed by Jobs Report, Stocks End Week Higher

Financial Markets Wall Street
Richard Drew/APA trader adjusts his Dow 18,000 cap as he works on the floor of the New York Stock Exchange on Friday.

By Ryan Vlastelica

NEW YORK — The Dow and SP 500 closed a seventh straight weekly advance Friday as a better-than-expected jobs report indicated strong economic growth, but perhaps to the point where interest rates could rise sooner than previously anticipated.

Bank stocks and other sectors tied to the pace of growth led on the day, though continued weakness in crude oil weighed on energy shares. While major indexes ended off their highs of the session, both the Dow and SP closed at records.

Payrolls rose by 321,000 in November, way above the 230,000 estimated, while the unemployment rate held steady at 5.8 percent, a six-year low.

The report blew past forecasts, but also raised expectations that a rate hike from the Federal Reserve may materialize sooner than previously thought.

Ronald Sanchez, chief investment officer of Fiduciary Trust Company International in New York, said the number was “unambiguously strong,” though it “could mean some changes to policy recommendations with the Fed. June 2015 is back on the table for when rates could rise.”

Payrolls confirm the strength of the economy, but that strength is reflected in stock prices.

Financials rose 1 percent as higher interest rates would prop up earnings in the sector. Bank of America rose 2.7 percent to $17.68 while Goldman Sachs was up 1.8 percent to $195.45, boosting the Dow.

Utilities, a dividend play, fell 0.8 percent as Treasuries yields rose. Energy fell 1.2 percent alongside a 1.7 percent drop in crude prices. Most sectors ended well off their highs of the session.

“The day’s market action has to be seen in the context of the recovery we’ve had year-to-date. Payrolls confirm the strength of the economy, but that strength is reflected in stock prices,” said Sanchez, who helps oversee $16 billion in assets.

Separate data showed new orders for U.S. factory goods fell for a third straight month in October, pointing to a slowdown in manufacturing activity.

The Dow Jones industrial average (^DJI) rose 58.69 points, or 0.33 percent, to 17,958.79, the Standard Poor’s 500 index (^GPSC) gained 3.45 points, or 0.17 percent, to 2,075.37 and the Nasdaq composite (^IXIC) added 11.32 points, or 0.24 percent, to 4,780.76.

For the week, the Dow rose 0.7 percent and the SP rose 0.4 percent. It was the seventh straight weekly gain, a streak not seen in a year for both. The Nasdaq fell 0.2 percent on the week.

American Eagle Outfitters (AEO) fell 13.8 percent to $11.91 after the teen apparel retailer forecast a current-quarter profit below analyst estimates and reported its fifth straight drop in quarterly income.

About 5.81 billion shares traded on all U.S. platforms, according to BATS exchange data.

NYSE advancers outnumbered decliners 1,614 to 1,480, for a 1.09-to-1 ratio; on the Nasdaq, 1,809 issues rose and 927 fell, for a 1.95-to-1 ratio favoring advancers.

The SP 500 posted 98 new 52-week highs and 10 new lows; the Nasdaq Composite recorded 168 new highs and 93 new lows.

What to Watch Monday:

  • HR Block (HRB) and Vail Resorts (MTN) are scheduled to release quarterly financial results.
  • 1. Open a 401K or IRA account

  • For 2014, you’re allowed to contribute up to $17,500 to your 401(k). (If you’re 50 and over, that limit increases to $23,000.) This is the maximum you’re able to save per year and still defer paying income tax on that money.

    Since 401(k) contributions must be made through payroll deductions, talk to your company’s payroll department about adjusting your December contribution or adding a lump-sum amount from your holiday bonus when you receive it. Also, chat with your human resource department to see if it will let you retroactively earmark contributions made prior to April 15, 2015 for the 2014 tax year.

    2. Max out your 401(k) contributions

  • 3. Take your required minimum distributions

  • 4. Contribute to a 529 plan

  • 5. Think about a Roth IRA conversion

  • 6. Consider tax loss harvesting

  • Do you have a flexible spending account, or FSA, at work? Check the detail of your company’s policy; many are “use it or lose it,” meaning if you don’t use the full amount in your FSA by year’s end, that money will not roll over.

    New federal laws permit employers to let their workers roll over a maximum of $500, but it’s the employers choice whether or not to allow this rollover. Also, some employers give their workers a grace period until March of the following year to use the prior year funds, while other employers require that the funds are used by Dec 31. Check with your HR department to learn your employers’ rules.

    Remember that FSA funds can be used for a lot more than just prescriptions and co-pays. If you have money you need to spend before it’s gone, you may also be able to use it for things like dental work, glasses or contact lenses, and even some qualified over-the-counter medicine and supplies.

    7. Use your FSA funds

  • Secure some additional tax deductions for 2014 by donating to a charitable cause. As long as you itemize your donations, you can claim everything from cash donations to goods to used vehicle donations. You can even give some of your stock to charity, thus avoiding capital gains tax.

    Just be sure to get a signed and dated receipt from the charity, noting the amount of your contribution — especially if you’re donating goods instead of cash. As an added precaution, take photographs of any high-value donations (over $250).

    8. Donate to charity

  • 9. Make your home more energy-efficient

  • 10. Sign up for health insurance

  • You can give up to $14,000 to individuals per year without needing to file a gift tax return. If you’re married, you and your spouse can each bequeath gifts of $14,000 to an individual without triggering a taxable event. If you decide to give a major financial gift to your children, talk to your kids first about strong money-management skills. Here’s a free guide to help to talk to your kids about money.

    Giving a little bit each year can also help reduce your overall estate tax burden (although the estate tax exemption is $5.34 million in 2014, which means few taxpayers will need to worry about this).

    11. Gift your wealth

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