Major Averages End Turbulent Week Little Changed; Small Caps Jump
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The major market averages closed out an unusually choppy trading week only slightly changed as optimism over the U.S. economy was counterbalanced by ongoing wariness about the Greek debt saga. However, small-cap names posted a solid gain.
Today's Markets
The Dow Jones Industrial Average rose 14.1 points, or 0.11%, to 12922, the S&P 500 gained 5 points, or 0.36%, to 1371 and the Nasdaq Composite climbed 17.9 points, or 0.6%, to 2988.
For the week, the Dow fell 0.4%, the S&P 500 rose 0.1% and the Nasdaq jumped 0.6%. The Russell 2000, which tracks the smallest companies by market capitalization, rallied 1.8% over the course of the week.
The Dow had its worst day of the year on Tuesday, just to counteract those losses over the following three trading days. The major focuses throughout the week were Greece and the state of the global economy.
After months riddled with false starts, misplaced optimism and intense negotiations, Greece finally closed a critical chapter in its debt drama. The country said early on Friday that 83.5% of private creditors agreed to a deal in which they will voluntarily swap their bonds for new ones with a lower face value.
The participation was above expectations, but not enough to prevent the use of so-called "collective action clauses (CACs)." As a result, the International Swaps and Derivatives Association said a credit event has occurred regarding some of those bonds that were not voluntarily swapped. That means up to $3.16 billion in credit default swaps, which are insurance policies that protect holders against defaults, may be activated.
The ISDA said in a call with reporters following the close of trading in New York that it is likely that the actual impact of the CDS trigger will be less than the full $3.16 billion. The group also said it does not see the event substantially impacting the financial markets.
It is not clear exactly what the impact of the triggering will be, however, analysts say many banks have written such policies, meaning they may be on the line to pay out.
"There was little doubt the use of CACs would represent a credit event," Dan Greenhaus, chief global strategist at BTIG said in an e-mail. "What was always a question was the counterparty risk raised by the triggering and the smoothness of the CDS auction process."
The ISDA said in a release that the auction that will provide more specific information will occur on March 19.
Employment Data Top Expectations
The other major market driver of the day was the U.S. employment report.
The economy added 227,000 jobs last month, the Labor Department reported, better than the 210,000 economists expected. The January reading was also revised higher to an addition of 284,000 from 243,000. The unemployment rate held steady at 8.3% as economists forecast. The labor force participation rate, which tracks the proportion of the population in the labor force, ticked higher by 0.2-percentage point to 63.9%.
"Hiring has picked up as companies have become more upbeat about business prospects," Markit chief economist Chris Williamson said in an e-mail.
Digging into the data, the private sector tacked on 233,000 jobs, while the government shed 6,000. Average hourly earnings edged higher by 0.1% to $23.31, increasing 1.9% from the year prior.
The jobs market has began recovering faster than many economists expected, but now some fear rising energy prices and other headwinds could put a damper on the rate of growth. The unemployment rate peaked in October 2009, and has only slowly moved lower.
Fed funds futures, which are a gauge of expectations of future moves by the central bank, showed the odds of an interest rate hike in early 2014 rise to 60% from 54% before the report. The 10-year Treasury yield rose by 0.03-percentage point to 2.047%.
Commodities were broadly to the upside. The benchmark crude oil contract traded in New York rose $1.33, or 1.3%, to $107.91 a barrel. Wholesale New York Harbor gasoline climbed 0.28% to $3.323 a gallon.
In metals, gold gained $12.50, or 0.74%, to $1,711 a troy ounce.
Foreign Markets
European blue chips edged higher by 0.07%, the English FTSE 100 rose 0.47% to 5887 and the German DAX climbed 0.67% to 6880.
In Asia, the Japanese Nikkei 225 rallied 1.7% to 9930 and the Chinese Hang Seng jumped 0.89% to 21086.