The major U.S. index futures are pointing to a higher opening on Friday, with sentiment reflecting relief, as the employment report came roughly in line with estimates. Although January's payroll gains were less than expected, the upward revision to the previous month's numbers offset the negativity. Nevertheless, the jobless rate ticked up, vindicating the Fed's stance of maintaining ultra loose monetary policy.
Earnings news from blue chips was encouraging, adding to the buoyant mood of the markets. Notwithstanding the early indication of a reversal in the sentiment seen for the past two sessions, the results of the Institute for Supply Management's manufacturing survey may also dictate market mood.
U.S. stocks retreated for the second straight session on Thursday amid the release of mixed economic data and pre-jobs data anxiety. The major averages opened lower after separate reports showed that jobless claims spiked and consumer spending growth remained muted. The Dow Industrials and the S&P 500 Index languished below the unchanged for the bulk of the session before closing modestly lower.
The Nasdaq Composite managed to stay above the unchanged line for much of the session and yet closed marginally lower. At the close of trading, the index was down 0.18 points or 0.01 percent at 3,142. The S&P 500 Index closed 3.85 points or 0.26 percent lower at 1,498 and the Dow Industrials slid 49.84 points or 0.36 percent before closing at 13,861.
Twenty of the thirty Dow components closed lower and one stock ended unchanged, while the remaining nine stocks advanced. Chevron (CVX), Microsoft (MSFT), Intel (INTC), UnitedHealth (UNH) and United Technologies (UTX) were among the worst performers of the session. On the other hand, AT&T (T) and Travelers Companies (TRV) saw notable strength.
On the economic front, jobless claims rose by 38,000 to 368,000 in the week ended January 26th. The four-week moving average rose more modestly to 352,000 from 351,750 in the previous week. Meanwhile, continuing claims calculated with a week's lag climbed to 3.197 million in the week ended January 19th from 3.175 million in the previous week.
The Commerce Department reported that personal income rose by a much more than expected 2.6 percent in December compared to the previous month, marking the biggest gain since December 2004. The increase was partly due to accelerated dividend payments. However, personal spending rose a muted 0.2 percent. Real spending adjusted for inflation was also up 0.2 percent. The core price consumption expenditure index was unchanged compared to the previous month, while annually the index was up 1.4 percent.
The results of the ISM-Chicago's manufacturing survey showed that its manufacturing index rose 5.6 points to 55.6 in January, climbing to the highest level since May 2012. The employment index jumped to 58 from 46.8 and the new orders index rose to 58.2 from 50.4. The production index also improved to 60.9 from 52.4.
Currency, Commodity Markets
Crude oil futures are receding $0.15 to $97.34 a barrel after slipping $0.45 to $97.49 a barrel on Thursday. Gold futures are currently gaining $12.40 to $1,674.40 an ounce. In the previous session, the precious metal fell $19.60 to $1,662 an ounce on Thursday.
Among currencies, the U.S. dollar is trading at 92.08 yen compared to the 91.71 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1,3657 compared to yesterday's $1.3579.
The major Asian markets closed on a mixed note, with caution remaining the underlying sentiment, as traders prepared to receive the U.S. non-farm payrolls report later in the global trading day. A mixed reading on the Chinese manufacturing sector did little to improve sentiment.
Japan's Nikkei 225 average held above the unchanged line throughout the session, although amid some volatility, before closing up 52.68 points or 0.47 percent at 11,191. The index rose for the fourth straight session and settled at a fresh 33-month high. The yen's weakness once again propped up export stocks. NEC, Mitsubishi Motors, Sapporo Holdings and Fuji Electric were among the best performers of the session. Meanwhile, defensive pharma and utility stocks experienced weakness.
Australia's All Ordinaries opened lower but recovered in late morning trading. Thereafter, the index rose steadily before closing up 40.90 points or 0.83 percent at 4,942. Material, financial and consumer staple stocks saw notable strength, while energy and IT stocks came under selling pressure.
Hong Kong's Hang Seng Index closed at 23,722, down 7.69 points or 0.03 percent.
On the economic front, a report released by Japan's Ministry of Internal Affairs and Communication showed that Japan's jobless rate ticked up to 4.2 percent in December from 4.1 percent in November. A separate report showed that consumer spending per household edged down 0.7 percent year-over-year in December, Economists expected a more modest 0.2 percent drop.
The results of a manufacturing survey by the China Federation of Logistics and Purchasing showed that Chinese manufacturing activity expanded at a slower pace in January than in the previous month. The official purchasing managers' index fell to 50.4 in January from 50.8 in December. Meanwhile, Markit's manufacturing purchasing managers' index rose 0.8 points to 52.3, suggesting a quickening in the pace of activity.
After some early apprehension, European stocks have turned higher, signaling that the markets could break a 2-session losing streak.
In corporate news, Electrolux reported an increase in its fourth quarter core earning, although the result was below estimates by most analysts, as its performance was hurt by softness in Europe. French banking giant Credit Agricole announced that its fourth quarter results will include a goodwill impairment charge of 2.68 billion euros.
U.K.'s BT Group reported better than expected third quarter adjusted EBITDA, while revenues declined year-over-year. Spanish bank BBVA reported a profit for its fourth quarter, which was better than expected.
Final estimates released by Markit Economics showed that the euro area's manufacturing purchasing managers' index was upwardly revised to 47.9 for January from the flash estimate of 47.5. In December, the index was at 46.1. The manufacturing index for the U.K. fell to 50.8 from 51.2 in December, while economists expected a reading of 51.
Eurostat reported that the euro area's jobless rate remained unchanged at 11.7 percent in December compared to expectations for an increase to 11.9 percent. A flash estimate released by Eurostat showed that the annual consumer price inflation slowed to 2 percent in January from 2.2 percent in December.
U.S. Economic Reports
Employment in the U.S. increased by slightly less than expected in the month of January, according to a report released by the Labor Department, although the report also showed notable upward revisions to the job growth in previous months.
The report showed that non-farm payroll employment increased by 157,000 jobs in January following an upwardly revised increase of 196,000 jobs in December. Economists had been expecting employment to increase by about 165,000 jobs compared to the addition of 155,000 jobs originally reported for the previous month.
Despite the continued job growth, the unemployment rate unexpectedly edged up to 7.9 percent in January from 7.8 percent in December. The increase surprised economists, who had expected to unemployment rate to dip to 7.7 percent.
The automakers are scheduled to release their monthly sales data. The consensus expectations call for vehicle sales at a seasonally adjusted annual rate of 15.3 million units in January compared to 15.4 million units in December.
Reuters and the University of Michigan are due to release the final results of their consumer sentiment survey for January at 9:55 am ET. Economists expect the consumer sentiment reading to be upwardly revised to 71.5 from the mid-month reading of 71.3.
The Institute for Supply Management will release the results of its manufacturing survey at 10 am ET. The purchasing managers' index based on the survey is expected to have remained stable at 50.7 in January.
The manufacturing index rose to 50.7 in December from 49.5 in November. The new orders index remained unchanged at 50.3, the order backlogs index climbed 7.5 points to 48.5, and the production index slipped about 1 point to 52.6. At the same time, the employment index rose 3 points to 55.5.
Around the same time, the Commerce Department will release its report on construction spending in the month of December. Economists expect a 0.8 percent increase in spending following a 0.3 percent drop in November.
Construction spending fell 0.3 percent month-over-month in November. Spending growth for October was downwardly revised to 0.7 percent from 1.4 percent. Residential construction spending was up 0.4 percent, a slowdown from the 1.3 percent growth seen in the previous month. Private non-residential construction spending and public spending declined 0.2 percent and 0.4 percent, respectively.
Stocks in Focus
Merck (MRK) reported better than expected fourth quarter results and issued a fairly robust guidance. Chevron (CVX) and Exxon Mobil (XOM) also reported better than expected fourth quarter earnings.
Con Edison (ED) reported fourth quarter ongoing operating earnings of 69 cents per share on operating revenues of $2.90 billion. The results trailed estimates. However, the company boosted its dividend and also issued 2013 earnings guidance surrounding the consensus estimate.
Manitowoc (MTW) reported fourth quarter adjusted earnings from continuing operations of 27 cents per share, higher than 14 cents per share last year. Sales rose slightly to $1.1 billion from the year-ago quarter's $1.0 billion. The results exceeded estimates.
Polaris Industries (PII) said its board approved a 14 percent increase in its quarterly dividend. Separately, the company announced that its board voted to elect its CEO Scott Wine as Chairman of the board.
Ctrip.com (CTRP) reported fourth quarter non-GAAP earnings of 35 cents per share on net revenues of $177 million. The results were better than expected. For the first quarter, the company estimates net revenue growth of 15-20 percent.
Reinsurance Group of America (RGA) reported better than expected fourth quarter operating earnings and its revenues trailed expectations.
Emulex's (ELX) fourth quarter earnings trailed estimates, while its guidance was also weak.
Wynn Resorts (WYNN) reported fourth quarter adjusted earnings of $1.17 per share on net revenues of $1.29 billion. The earnings were below estimates, while the revenues exceeded estimates.
Bebe Stores (BEBE) reported a second quarter net loss of 6 cents per share on revenues of $135.5 million. The loss was wider than what analysts had expected, while the revenues were above estimates. The company's guidance was lackluster.
Principal Financial Group (PFG) reported better than expected fourth quarter operating earnings, while its revenues trailed expectations.
Brooks Automation (BRKS) reported a loss on an adjusted basis for its first quarter, although the loss was narrower than estimates. Revenues also exceeded estimates. The company's second quarter guidance was also positive.
McKesson's (MCK) reported below-consensus third quarter earnings and also issued lackluster earnings guidance for the full year.
Chubb Board (CB) said its board authorized a $1.3 billion new stock buyback program. The company also reported a steep decline in its fourth quarter earnings, which were below the consensus estimate.
Tellabs (TLAB) reported fourth quarter non-GAAP earnings of 1 cent per share, flat with last year. Revenues fell to $242 million from $317 million last year. The company issued below-consensus revenue guidance for the first quarter.
MetLife (MET) said it has agreed to acquire BBVA's Chilean pension fund administrator AFP Provida for $2 billion through a cash tender offer. MetLife expects the deal to close in the third quarter of 2013 and also said it expects the deal to boost earnings by 5 cents per share in 2013 and by 15 cents per share in 2014.
Research In Motion (RIMM) confirmed that the company will begin trading under the ticker symbol BBRY on the Nasdaq, effective February 4th.
by RTT Staff Writer
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