Dow falls short of 18K, but stocks reach new high

NEW YORK The Dow Jones industrial average flirted with a new milestone, boosted by the U.S. Labor Department's surprisingly strong November employment report.

But the blue-chip average did notch another record high, climbing 59 points, or 0.3 percent, to close at 17,959. The Standard & Poor's 500 index also hit a new peak, inching up 3 points to 2,075, while the Nasdaq composite added 11 points to 4,781.

Total nonfarm payrolls grew by 321,000 last month, the strongest pace of expansion in nearly three years. The labor market has added at least 200,000 jobs for 10 straight months, with 2014 on track to be the best year for hiring since 1999.

During the economic recovery, investors have often responded to surging job growth by bidding down stocks. Their rationale: Accelerating economic growth hastens the time that the Federal Reserve would start to raise interest rates.

Indeed, the yield on the benchmark 10-year U.S. Treasury note climbed to 2.31 percent on Friday, from 2.24 percent the day before, as investors sold bonds in anticipation of higher rates.

But the burst in hiring last month, along with other signs that the economy is gaining traction, seems to have outweighed investor concerns about earlier-than-expected rate hikes. Financial markets have also "priced in" the prospects of rising rates, while the Fed has emphasized that when the time comes, rates will rise slowly.

"The bottom line is this was yet another very solid employment report and another strong data point reaffirming the strength of U.S. growth versus a sluggish global [economy]" Rick Rieder, chief investment officer of fundamental fixed income at BlackRock, wrote in a note to reporters.

Just five months after cresting the 17,000-point level for the first time, the Dow is on the verge of another round-number landmark. But the Dow's performance this year has trailed the other major indexes. The index is up 8.4 percent in 2014, while the S&P 500, which is tracked more by mutual funds and Wall Street, is up 12.4 percent. The Nasdaq is up the most, rising 14.5 percent.

"We continue to see this steady drip into the equities markets, and I don't think it's going to stop any time soon," said David Kelly, David Kelly, chief global strategist for J.P. Morgan Funds.

Along with the improving economy, the drop in oil prices has been encouraging to investors. Gas prices have fallen roughly 30 percent since June to a national average of $2.75 a gallon, the lowest level in more than four years. Oil continued to drift down Friday, with light, sweet crude January futures dipping to $65.84 a barrel.

Lower energy prices are effectively a tax cut on the average U.S. consumer, and it could translate into higher consumer spending and stronger growth down the road.