On Friday, the Labor Department said the U.S. economy added 162,000 nonfarm payrolls in March, after shedding 14,000 in February. Economists had projected 190,000 new jobs. The unemployment rate held at 9.7%, which was in line with expectations. Only the bond market opened for a few hours on Friday, a holiday.

Morning data also showed improving conditions within the services and housing sectors. The Institute for Supply Management said the U.S. services sector grew at the swiftest pace in nearly four years in March and the National Association of Realtors said pending home sales rose 8.2% in February.

Overseas, Japan’s Nikkei rose 0.5%. Hong Kong’s Hang Seng was closed for a holiday. Most European markets also were closed.

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In other words, traders will need their rest this weekend before the data overload. Too bad they’ll lose an hour of sleep due to daylight savings.

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“This past week was lighter in data, and we had more good news than bad,” says Art Hogan, chief market analyst with Jefferies, specifically noting the better-than-expected retail sales data delivered Friday.

“The question is whether the data next week is more or less supportive,” Hogan adds. “It’s certainly a data-rich week with plenty to go by. It’s a perfect combination of data, and it’ll certainly keep us on our toes.”

On the other hand, James Paulsen, chief investment strategist with Wells Capital Management, says that despite the large volume of economic releases on tap, the next five sessions aren’t filled with data important enough to sway someone’s view of the economy.

“We’re working to debunk the major crisis fear that we’re going to experience a double-dip recession. That’s the bigger picture here,” Paulsen argues. “Usually the most important data is the jobs number and Institute for Supply Management numbers, which come early in the month and set a tone. Those reports, especially ones about the job market, are very important.”

Paul Nolte, with Dearborn Partners, agrees. “The focus is really on earnings and employment, and that’s it,” he says. “That gives you this slow-moving market with not a lot of volume, although we are slowly grinding higher.”

Whether they prove to be important or not, the parade of reports kicks off early Monday with the New York Fed’s Empire State manufacturing index for March at 8:30 a.m. EDT, followed at 9 a.m. EDT by the December report on net long-term TIC flows, which measures capital flows out of the U.S. Fifteen minutes later, the Fed will release more industrial data in the form of production and capacity utilization statistics for February.

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An unexpectedly strong report on manufacturing activity Monday bolstered confidence that the nation’s factories will help sustain an economic recovery.

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The report by a private trade group signals that industrial production is likely to keep expanding in coming months, economists said. That could lead, in turn, to increased hiring and job creation.

The Institute for Supply Management, a trade group of purchasing executives, said its manufacturing index read 55.9 in December after 53.6 in November. A reading above 50 indicates growth.

It was the fifth consecutive month of expansion and the highest reading for the index since April 2006. Analysts polled by Thomson Reuters had expected a reading of 54.3.

But a separate report on construction spending sounded a more cautionary note. Construction activity fell in November for a seventh consecutive month as spending on residential and commercial projects declined. The 0.6 percent drop was bigger than the 0.4 percent decline that economists had been expecting.

Increased spending on federal construction projects, likely fueled by stimulus spending, was largely canceled out by lower state and local construction spending.

Still, the institute said its index of new orders, a signal of future production, jumped last month to 65.5 from 60.3 in November, the highest level in five years. That indicates the overall index should keep climbing and could near 60 in coming months, economists said.

The index’s peak in the past decade was 61.4 in May 2004. It bottomed at 32.9 in the midst of the recession in December 2008.

“Overall, this was a very strong report, and it suggests that the recovery in the U.S. manufacturing sector is gaining further traction,” Millan Mulraine, an economist at TD Securities, wrote in a note to clients.

The institute survey showed that inventories held by manufacturers’ customers are still declining.

This article appeared on page DC – 3 of the San Francisco Chronicle

A measure tracking the U.S. service sector returned to growth last month, helped higher by the holiday season’s retail sales, but the slight expansion wasn’t enough to kick-start hiring.

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The Institute for Supply Management, a private trade group, said its service index rose to 50.1 in December from 48.7 in November. Analysts polled by Thomson Reuters had expected a reading of 50.5.

A level above 50 signals growth. The gauge rose in September for the first time in 13 months, but the comeback has been fitful amid tiny gains in consumers’ incomes and tight bank lending to small businesses.

Seven industries reported growth, led by agriculture and retail.

ISM’s service-sector gauge is closely watched because service jobs comprise more than 80 percent of non-farm U.S. employment.

ISM said its employment measure shrank in December, but at a slower pace than in November. It hasn’t grown in 2 years. The employment index was 44 in December versus 41.6 a month earlier. The four industry groups adding jobs were retail, finance and insurance, public administration and what is called other services.

Meanwhile, new orders, a signal of future business, expanded for the fourth straight month, although less quickly than in November. Business activity also grew, as did the prices paid by businesses.

That may mean service companies will pass their higher costs on to consumers, collecting higher revenue.

More spending by U.S. consumers will translate into higher sales for the nation’s service providers — and eventually, should mean more jobs.

ISM said on Monday that manufacturing grew in December for the fifth straight month. A rebound in the industrial sector has been helping the U.S. limp out of the recession, but manufacturing doesn’t add many American jobs. The service sector, which depends on consumer spending and tends to be less efficient, is currently the key to job creation.

The ADP National Employment Report said Wednesday that 84,000 private-sector jobs were lost in December, an improvement from November. ADP said private nonfarm employment in the service sector grew by 12,000 jobs, while manufacturing lost 43,000 jobs.

Percentage gains from Boeing(BA Quote), Bank of America(BAC Quote) and Pfizer(PFE Quote), which advanced around 4% each, helped power the Dow to its highest close since October 2008.

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Stocks extended gains in the morning after a report showed that manufacturing activity rose for the fifth consecutive month in December. An index of national factory activity from the Institute for Supply Management rose to 55.9 — the highest level since April 2006. Economists had expected a reading of 54.

The news came on the same day that Chinese manufacturing data showed that factory activity expanded at the swiftest pace in more than five years in December.

U.S. construction spending, however, fell 0.6% in November, marking the seventh straight month of declines.

Trading volumes strengthened after the somewhat sluggish sessions over the past two holiday-shortened trading weeks. In the afternoon, volume on the Dow hit 179.76 million, compared with volume of 92.9 million for the whole of last Tuesday’s session. The 10-day average volume for the Dow is 152.2 million.

Basic materials and energy sectors were the best performers, as a weaker dollar supported commodity prices. Shares of BHP Billiton(BHP Quote) gained 3.5%, Royal Dutch Shell(RDS.A Quote) added 3.7% and Petroleo Brasileiro(PBR.A Quote) rose over 3%.

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Stocks appear headed for a higher opening on the first day of trading in the new year following the lead of overseas markets. Stock futures rose Monday.

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Asian markets received a boost after new data showed China’s manufacturing sector expanded at its fastest rate in 20 months in December. European markets also rose.

In the U.S., investors will receive key data throughout the week that could show the economic recovery is continuing, including a report on manufacturing Monday. Ongoing signs of a rebound helped the market surge during the final nine months of 2009 from its 12-year lows.

The Institute for Supply Management’s manufacturing index is expected to show modest growth in the sector last month. Economists polled by Thomson Reuters, on average, forecast the ISM’s index for December will increase to 54 from 53.6 a month earlier.

The report is due out at 10 a.m. EST.

Ahead of the opening bell, Dow Jones industrial average futures rose 59, or 0.6 percent, to 10,424. Standard & Poor’s 500 index futures rose 7.30, or 0.7 percent, to 1,118.00, while Nasdaq 100 index futures rose 20.50, or 1.1 percent, to 1,879.25.

On Friday, the Labor Department releases its monthly employment report. Considered the biggest economic report of the month, it will likely set the early tone for trading in 2010.

Economists surveyed by Thomson Reuters are forecasting that 23,000 jobs were lost, a further signal that the job market is starting to stabilize. The government said employers cut just 11,000 jobs in November, far fewer than anticipated. That pushed the unemployment rate down to 10 percent.

Stocks closed out 2009 on a down note, with major indexes all falling around 1 percent in light, holiday-shortened trading on Thursday. The market was closed Friday for the New Year’s holiday.

An upbeat reading on weekly jobless claims sparked concerns the government would have to cut stimulus measures in the coming months, such as low interest rates, to help avoid potential inflation. A much stronger than expected report Friday on monthly employment could stoke similar concerns.

Federal Reserve Chairman Ben Bernanke said Sunday he wouldn’t rule out higher interest rates to stop new speculative investment bubbles from forming. However, he did say stronger regulation is the best way to avoid such bubbles that helped push the economy into recession.

Meanwhile, bond prices fell Monday. Bond prices, which are often used to price interest rates on consumer loans, often fall when investors worry about inflation, which eats into fixed returns on government-backed bonds.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.85 percent from 3.84 percent late Thursday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.07 percent from 0.05 percent.

The dollar fell against other major currencies, while gold prices rose.

Overseas, Japan’s Nikkei stock average rose 1 percent. In afternoon trading, Britain’s FTSE 100 gained 0.6 percent, Germany’s DAX index rose 0.7 percent, and France’s CAC-40 gained 1.1 percent.