Rallying Wall Street takes a breather

NEW YORK – Wall Street paused from its big rally Friday, with stocks closing narrowly mixed after the government’s November labor report showed tepid job growth as well as a pickup in inflation. The major indexes ended the week higher, with the Dow Jones industrials having gained nearly 900 points over nine trading days.

The Labor Department reported 94,000 jobs were added to payrolls in November and that the unemployment rate held steady at 4.7 percent. Thomson/IFR analysts had set a median projection of 100,000 new jobs. The report also showed that average hourly earnings increased 0.5 percent in November, compared with forecasts for a more-modest 0.3 percent.

The report at least temporarily chilled a rally that has left the Dow only 538 points, or 3.8 percent, below the record close it reached on Oct. 9.

“I’d call it an employment letdown,” said Jack A. Ablin, chief investment officer at Harris Private Bank. “A little air came out of the party balloon.”

“Stocks are taking a breather from a maniacal runup over the last few days,” said Paul Nolte, director of investments at Hinsdale Associates. He described the stock market as paralyzed ahead of the Federal Reserve’s meeting on interest rates on Tuesday, and said many investors don’t want to make bold moves until the Fed’s decision is announced.

On the plus side, the report did give the Fed more room to lower rates. The debate now centers on whether the central bank will drop rates by a quarter percentage point when it meets on Tuesday, or finish the year with a half-point cut. However, Nolte noted that it would be easier to make a case for a larger cut if the November employment report had been weaker.

The Dow rose 5.69, or 0.04 percent, to 13,625.58, and finished the week up 1.9 percent.

The Standard & Poor’s 500 index fell 2.68, or 0.18 percent, to 1,504.66, but ended the week up 1.59 percent.

The technology-dominated Nasdaq composite index dipped 2.87, or 0.11 percent, to 2,706.16, but ended the week 1.70 percent higher.

The week’s trading saw investors growing in confidence about the overall health of the economy and the nation’s ability to generally weather the months-long credit crisis. Stocks’ big advance over the past two weeks came amid signs that the Fed was indeed concerned about slowing economic growth, and as financial institutions and the government took steps to mitigate the damage from billions of dollars in soured mortgages and credit losses.

Bond prices fell Friday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 4.11 percent from 4.02 percent late Thursday. The dollar slumped, while gold prices also fell.

Light, sweet crude fell $1.95 to settle at $88.28 per barrel on the New York Mercantile Exchange. Government data released earlier this week showed an increase in U.S. supplies of gasoline and distillates.

Oil’s retreat boosted airline and other transportation stocks, as did November traffic reports showing that carriers are making inroads in offsetting fuel costs. The Dow Jones Transportation Average rose 86.82, or 1.81 percent, to 4,876.35.

The University of Michigan’s preliminary reading on consumer confidence for this month showed that consumers are worried about higher gas prices and weakness in the credit markets. The headline index declined to 74.5 from 76.1 in November. Thomson/IFR had forecast a 76.0 reading.