Higher wages lift stocks to record highs; Dow almost touches 20,000

The Dow Jones industrial average missed the 20,000 mark by a fraction of a point Friday as U.S. stock indexes rose after the government said wages jumped in December. The Standard & Poor's 500 index and the Nasdaq composite rose to new record highs.

Stocks wavered between gains and losses in the morning after the December jobs report, which showed less hiring than analysts hoped to see. Bond yields rose sharply, as the continued job gains should encourage the Federal Reserve to keep raising interest rates.

Read more: U.S. economy creates a modest 156,000 jobs in December »

Indexes turned higher as investors concluded that the rising wages will lead to more spending on technology and consumer goods. Industrial companies rose as investors hoped for greater economic growth.

Sam Stovall, a U.S. equity strategist for S&P Capital IQ, said there was good news for most industries. That's because workers are being paid more, but not enough to push the Federal Reserve to raise interest rates quickly to stave off inflation.

“Consumers are earning a bit more and as a result can spend more,” he said. “But people are not too worried the Fed will have to slam on the brakes.”

The Dow peaked at 19,999.63 but then lost steam. It finished up 64.51 points, or 0.3%, at 19,963.80. The S&P 500 rose 7.98 points, or 0.4%, to 2,276.98. The Nasdaq composite jumped 33.12 points, or 0.6%, to 5,521.06.

The small-cap Russell 2000 index slid 4.65 points, or 0.3%, to 1,367.28.

Stocks finished the week with a big gain as investors remained optimistic about the U.S. economy. The S&P 500 climbed 1.7%. That was a marked change from the first week of last year, when the index lost 6% as the market got off to its worst opening week in history.

The biggest gains went to companies that stand to benefit from higher wages and greater spending by consumers. Among technology companies, Facebook rose 2.3% to $123.41 and Apple rose 1.1% to $117.91. Amazon had its second big gain in a row, climbing 2% to $795.99, and travel website TripAdvisor jumped 3.2% to $50.77.

Industrial companies, which have climbed since the November election, also fared well. Machinery and equipment maker Honeywell rose 1.5% to $118.53.

Bond prices fell. The yield on the 10-year Treasury note rose to 2.42% from 2.35%. Higher bond yields mean higher interest rates, which enable banks to make more money on lending. Investment banks and other financial firms did better than the rest of the market Friday afternoon. SunTrust Banks rose 1.1% to $55.53 and Goldman Sachs climbed 1.5% to $244.90.

Companies that pay large dividends, including phone companies and real estate investment trusts, lagged behind the overall market as bond yields rose. Those stocks are often compared to bonds because of the steady income they provide. AT&T fell 2% to $41.32 and Crown Castle International fell 2% to $85.50.

Amgen climbed 2.5% to $156.78, Sanofi fell 2.8% to $40.32 and Regeneron Pharmaceuticals sank 5.8% to $358.68 after a court moved to block sales of Sanofi and Regeneron's cholesterol drug Praluent. A federal jury ruled in March that Praluent infringes on two patents that belong to Amgen. Both are costly biotech drugs designed to be injected once or twice a month. Sanofi and Regeneron said they would appeal the ruling, which came in U.S. District Court in Delaware.

ICU Medical slumped 10.5% to $131.88 after the San Clemente maker of medical devices said sales at a business it is buying are still falling.

Gap ticked up 0.4% to $23.34 after the San Francisco clothier reported improved sales in November and December.

The dollar rose to 117.02 yen from 115.62 yen after a dip Thursday. The euro slipped to $1.0532 from $1.0590.

U.S. crude oil rose 23 cents to $53.99 a barrel. Brent crude, which is used to price oil sold internationally, rose 21 cents to $57.10 a barrel.

Wholesale gasoline slipped less than 1 cent to $1.63 a gallon. Heating oil rose 1 cent to $1.70 a gallon. Natural gas rose 1 cent to $3.29 per 1,000 cubic feet.

Gold fell $7.90 to $1,173.40 an ounce. Silver fell 12 cents to $16.52 an ounce. Copper rose 1 cent to $2.55 a pound.

The FTSE 100 index in Britain inched up 0.2%. It's risen nine days in a row, reaching all-time highs. Germany's DAX edged up 0.1% and the CAC-40 of France rose 0.2%. Japan's benchmark Nikkei 225 index lost 0.3% while the Kospi in South Korea added 0.4%. In Hong Kong, the Hang Seng advanced 0.2%. 

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UPDATES:

2:05 p.m.: This article was updated with closing prices, context and analyst comment.

1:10 p.m.: This article was updated with the close of markets.

10:05 a.m.: This article was updated with more recent market information.

9:20 a.m.: This article was updated with more recent market information.

7:45 a.m.: This article was updated with additional details. 

This article was originally published at 6:50 a.m.

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