Major share indexes lost ground after an ambivalent session Friday, with investors concerned that stock prices were too high despite the day's better-than-expected employment report. Still, the broader market was up on the day, and the three main market gauges posted their second straight week of gains.
The indexes are near 52-week highs, and many investors had picked up shares in recent weeks in anticipation of a strong jobs report. As a result, the market had little momentum to move upward once the news was out, analysts said.
The Labor Department reported Friday that the nation's unemployment rate fell to 6% in October after payrolls grew by 126,000. Economists had predicted a more modest figure of 50,000 net new jobs.
"I think the employment report validates" investors' expectations for strong growth, "but it was anticipated by the market going back six months," said Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co.
"The recovery is indeed on a solid footing, the expansion is finally appearing, and the great debate now is at what rate corporate profits can expand going into 2004 and in 2005."
The Dow Jones industrial average closed down 47.18 points, or 0.5%, at 9,809.79, having gained 36 points Thursday. The Nasdaq composite index fell 5.63 points, or 0.3%, to 1,970.74 after a 17-point advance the previous day that lifted the tech-focused index to its highest level since Jan. 17, 2002. The Standard & Poor's 500 index dropped 4.84 points, or 0.5%, to 1,053.21.
Although the indexes were down, the broad market closed slightly to the upside. Winners led losers by 6 to 5 on the New York Stock Exchange and by a razor thin margin on Nasdaq. Trading was active.
For the week, the Dow gained 0.1%, Nasdaq rose 2%, and the S&P; advanced 0.2%.
Stocks have moved mostly higher since mid-March as investors have grown increasingly confident that the economic recovery is firmly back on track. But with the main gauges trading at their highest levels in more than a year, analysts believe further advances may be difficult.
"I think we're going to see some consolidation at this point," said Ed Peters, chief investment officer at PanAgora Asset Management Inc. "We might even see a slight pullback and a rally later in the year."
He also said it was hard to predict whether the Dow would hit the 10,000 mark and the Nasdaq would reach 2,000 by year's end. He cited in part the risk of rising bond yields.
"It's a psychological barrier," he added.
The yield on the benchmark 10-year Treasury note rose to 4.44% from Thursday's close of 4.41%. Bond yields had ticked up in anticipation of the jobs report.
In other highlights:
* Eastman Kodak climbed 42 cents to $25 after Chairman Daniel Carp said he would meet next week with investor Carl Icahn, who received clearance from the Federal Trade Commission to buy as much as $500 million of Kodak stock.
* McDonald's edged up 3 cents to $26.01 after the fast-food chain said same-store sales in October jumped 8.4%.
* Nvidia jumped $3.58, or 19.7%, to $21.75 after the company reported a jump in quarterly profit and predicted strong growth ahead.
* Decliners included Wyeth, which slid $2.98 to $39.72, after a Texas jury awarded a woman who sustained heart damage after taking Fen-Phen diet pills more than $1.3 million in damages. Dow Chemical fell 35 cents to $37.64 after UBS lowered the company's stock rating to "neutral" from "buy."
* European markets rallied, with key share indexes gaining 1.2% in France and Britain and 1.3% in Germany.
Market Roundup, C4