Stocks pushed higher with the S&P 500 and NASDAQ closing on Friday at record levels, with weekly gains of 1.7% and 2.6%, respectively. The Dow Industrials advanced one percent for the week, but failed to reach the elusive 20,000 mark. Equities shrugged off a less-than-stellar employment report for December, with 156,000 new jobs created vs. an expected 175,000. However, November employment figures were revised upward. For the year, wages increased 2.9%, but the unemployment rate closed out 2016 at 4.7%, up 0.1% from last month.
Industry performance changed course in the first week of trading with lagging healthcare stocks up 3% followed by an under-performing technology sector showing a 2.3% gain. That said, all but the year-end-strong telecommunication stocks were in the green, as telecoms gave up an average of 1%. With inflation fears in the minds of traders, gold prices moved higher by $22/oz. West Texas oil prices closed at their highest level in a year at $54/bbl. and Brent crude above $57/bbl. So far, Saudi Arabia, Kuwait, Iraq and Venezuela are honoring the commitment to cut output, while Iran uses the time to shore up lost market share, and Libya and Nigeria struggle to ramp up production to avoid destabilization. S&P Platts Global said it expected the oil output agreement would help draw down the global inventory build by the third quarter of this year, assuming all parties to the deal comply with their commitments.
With the jobs number behind us, the next few weeks will turn to earnings for the fourth and final quarter of the year. Expectations for improved guidance are high, given the elevated valuations for stocks. While retail numbers will not be out until sometime in February, department store chains had a dismal Christmas showing with Kohl’s, Macy’s and Sears all reporting declining sales and store closings. The Limited, owners of Victoria Secret, Bath & Body Works and Lane Bryant, said it will close all of its 250 retail outlets, succumbing to the growth in online shopping. On Friday, a number of banks will be reporting earnings, including aggressive candidate JPMorgan Chase with a consensus of $1.43 per share vs. $1.32 a year ago. With valuations at record-highs, headwinds persist and the ride through the first half of the New Year can be bumpy.
Today’s Trivia Question: Sears Holdings announced the closing of 150 K-Mart and Sears stores and will sell its iconic Craftsman tool brand to? Stanley Black & Decker, The Toro Co., Snap-On Tools or Fortive Corp. (Matco Tools Div.)