Stocks Turn Higher, Led by Energy; Apple Falls 2%

JeeYeon Park CNBC

Jan. 4, 2013 at 12:11 PM ET

Stocks edged higher Friday, led by gains in materials and energy, following a better-than-expected ISM non-manufacturing index and a monthly government jobs report that showed gradual improvement in the labor market.

The Dow Jones Industrial Average turned higher, led by Disney and Alcoa, for direction after closing lower in the previous session. The blue-chip index has been trading in a narrow 45-point range.

The S&P 500 and the Nasdaq also edged higher. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, declined near 14.

Despite the lackluster session, all three major averages are on pace to finish sharply higher for the week.

Among the key S&P sectors, materials and energy led the gainers, while techs slipped.

"Right now, investors are in a bit of a holding pattern to see if there's any collateral damage to the fiscal cliff as it relates to corporate profits for the fourth quarter," said Jeffrey Kleintop, chief market strategist at LPL Financial. "We got a deal done, but it doesn't mean corporate leaders weren't still either paralyzed or focused more on tax planning for their shareholders than executing on business plans."

"We did see that business spending was down in terms of capital investment and we'll see if that translates into weaker results," he continued. "Next week we'll start to see those results and that will give us a glimpse into whether corporate profits were able to make it through this fiscal cliff battle unscathed."

Alcoa and Wells Fargo are scheduled to report quarterly results next week, kicking off the fourth-quarter earnings season.

On the economic front, U.S. employers added 155,000 jobs in December, according to the Labor Department, mostly in line with analysts' expectations and slightly below the level for November. The unemployment rate edged higher to 7.8 percent.

"[The number] was a bit disappointing to those who thought the ADP data was a reliable tell of a stronger number," wrote Marc Chandler, global head of currency strategy at Brown Brothers Harriman. "However, the details were stronger than expected...The manufacturing sector remains a key bright spot for the U.S. economy. Upward revisions added another 38,000 jobs, which if added back to the headline, would be close to the 200,000 increase that some economists forecast."

The services sector rose to 56.1 in December from 54.7 in November, growing at its fastest pace in 10 months, according to the Institute for Supply Management. Economists had expected a reading of 54.2, according to a Reuters poll. A reading above 50 indicates expansion in the sector.

Meanwhile, factory orders were flat in November, according to the Commerce Department, after a 0.8 percent gain in October. Analysts polled by Reuters had expected an increase of 0.4 percent.

Stocks finished slightly in the red Thursday, as investors became nervous that the Federal Reserve could take action to end bond purchases earlier than expected. Still, all major indexes are still on track to finish sharply higher for the week. (Read More:Why Central Banks Still Hold All the Cards in 2013)

Citigroup edged higher after Goldman Sachs added the bank to its "conviction buy" list. Meanwhile, JPMorgan was removed from Goldman's "conviction buy" list, though the brokerage still rates the stock a "buy."

Lululemon slumped after the sports apparel retailer was downgraded to "neutral" from "outperform" at Credit Suisse.

Chipmakers including Intel, Advanced Micro Devices and Texas Instruments will be in focus after the Semiconductor Industry Association reported that November sales were up 2 percent from a year earlier, marking 2012's first year-over-year gain for the industry.

—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)

On Tap Next Week:

MONDAY: Supreme Court in session
TUESDAY: NFIB small business optimism index, 3-yr note auction, consumer credit, International Consumer Electronics Show; Earnings from Alcoa, Apollo Group
WEDNESDAY: Weekly mortgage applications, oil inventories, 10-yr note auction; Earnings from Constellation Brands, PriceSmart
THURSDAY: Jobless claims, wholesale trade, natural gas inventories, Fed's George speaks, 30-yr bond auction, Fed's Bullard speaks, Fed's balance sheet, money supply, Fed's Kocherlakota speaks, Herbalife analysts day, videogame sales data release; Earnings from Chevron (interim report), Ruby Tuesday
FRIDAY: International trade, import and export prices, Fed's Plosser speaks, Treasury budget, Best Buy to report holiday sales; Earnings from Wells Fargo

Stocks Turn Higher, Led by Energy; Apple Falls 2%

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