Beyond the Numbers
Strong Job Gains Could Trigger Positive Reaction
3/7/2014 9:08 AM
The major U.S. index futures are pointing to a higher opening on Friday, with sentiment reflecting relief that the U.S. non-farm payroll numbers came in stronger than expected. Notwithstanding widespread fears that the inclement weather may have hurt the numbers, the economy added jobs at a brisk pace, with the numbers allaying fears lurking in the minds of traders concerning the domestic economy’s recovery. The unemployment rate unexpectedly ticked up due to an increase in the size of the labor force. However, given the recent run up of the markets, substantial run up from current levels is unlikely.
U.S. stocks closed mixed on Thursday, with the S&P 500 Index closing at a new record closing high on the heels of upbeat jobless claims data. The Dow Industrials and the S&P 500 Index hovered above the unchanged line throughout the session before closing modestly higher. After trading above the unchanged line until late trading, the Nasdaq Composite experienced some weakness before closing slightly lower.
Twenty-five of the thirty Dow components closed higher, while the remaining five stocks declined. American Express (AXP), General Electric (GE), Caterpillar (CAT), Nike (NKE) and JP Morgan Chase (JPM) led the Dow’s gains.
Transportation, oil service and gold stocks gained ground in the session, while biotechnology stocks retreated.
On the economic front, the Labor Department reported that jobless claims fell to 323,000 in the week ended March 1st from 349,000 in the previous week. The four-week average slipped to 337,000 from 339,000. Continuing claims calculated with a week’s lag fell to 2.907 million in the week ended February 22nd from 2.915 million in the previous week.
A separate Labor Department report showed that non-farm productivity growth for the fourth quarter was downwardly revised to 1.8 percent from 3.2 percent. Accordingly, unit labor costs edged down 0.1 percent compared to the 1.6 percent drop estimated initially.
Meanwhile, the Commerce Department said factory orders fell 0.7 percent month-over-month in January. The previous month’s reading was downwardly revised to show a 2 percent decline versus the 1.5 percent drop estimated initially. Excluding transportation, orders were up 0.2 percent in January. Commodity, Currency Markets
Crude oil futures are rising $0.87 to $102.43 a barrel after edging up $0.11 to $101.56 a barrel on Thursday. Gold futures are currently slipping $19.70 to $1,332.10 an ounce. In the previous session, gold added $11.50 to $1,351.80 an ounce.
Among currencies, the U.S. dollar is trading at 103.53 yen compared to the 103.07 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.3864 compared to yesterday’s $1.3861.Asia
The major Asian markets closed on a mixed note, as traders chose to remain cautious amid light domestic news and ahead of the U.S. non-farm payrolls report. The Japanese, Australian, Indian, New Zealand and Singaporean markets closed to the upside, while the Hong Kong, Chinese, Indonesian and Malaysian markets retreated.
The Japanese market advanced for the fourth straight session amid subdued trading in the yen. The Nikkei 225 average hovered in positive territory throughout the session, although buying interest waned by the mid-session before recovering in the afternoon. The index ended up 139.32 points or 0.92 percent at 15,274, representing a one-month high. The market witnessed broad based strength.
Australia’s All Ordinaries spent the better part of the session above the unchanged line before closing up 17.30 points or 0.32 percent at 5,477, representing the highest closing level in about 5-1/2 years. Energy and material stocks rallied strongly, while financial stocks lost ground.
Meanwhile, China’s Shanghai Composite Index ended 1.67 points or 0.08 percent lower at 2,058, and Hong Kong’s Hang Index ended at 22,661, down 42.48 points or 0.19 percent.
On the economic front, preliminary data published by the Cabinet Office revealed that a leading indicator of the performance of the Japanese economy recorded growth for the fifth consecutive month in January. The leading economic index advanced to112.2 in January from 111.7 in December. Europe
After opening little changed, European stocks traded mixed for much of the morning. After retreating into negative territory ahead of the non-farm payrolls report, they have snapped their losses and are currently trading mixed.
In corporate news, Fraport, the owner and manager of the Frankfurt Airport, reported that its revenue grew by 4.9 percent to 2.56 billion euros in 2013.
France’s trade deficit widened to 5.73 billion euros in January from 5.40 billion euros in the year-ago period, according to a report released by the French Customs Office. The deficit was at 5.213 billion euros in December. U.S. Economic Reports
Employment in the U.S. increased by more than anticipated in the month of February, according to a report released by the Labor Department on Friday, although the unemployment rate still unexpectedly ticked higher.
The report said non-farm payroll employment rose by 175,000 jobs in February following an upwardly revised increase of 129,000 jobs in January.
Economists had expected an increase of about 150,000 jobs compared to the addition of 113,000 jobs originally reported for the previous month. Despite the job growth, the unemployment rate edged up to 6.7 percent in February after dipping to a five-year low of 6.6 percent in January. The unemployment rate had been expected to come in unchanged.
With imports increasing by slightly more than exports, the Commerce Department released a report on Friday showing that the U.S. trade deficit edged wider in the month of January.
The report showed that the trade deficit widened to $39.1 billion in January from a revised $39.0 billion in December. Economists had been expecting the deficit to widen to $39.0 billion from the $38.7 billion originally reported for the previous month.
New York Federal Reserve Bank President William Dudley is scheduled to speak on the economy in New York at 12 pm ET.
The Federal Reserve is due to release its consumer credit report for January at 3 pm ET. Economists estimate outstanding consumer credit to have increased by $14 billion.
Outstanding consumer credit rose by $18.8 billion month-over-month in December, with revolving credit rising by $5 billion, while non-revolving credit tied to auto loans surged up by $13.7 billion. Stocks in Focus
H&R Block (HRB) reported a third quarter adjusted net loss from continuing operations of 77 cents per share on revenues of $200 million. The results were notably below estimates.
Cooper Companies (COO) reported fourth quarter earnings of $1.47 per share, ahead of the $1.46 per share consensus estimate. Net sales rose 7 percent to $404.98 million, also exceeding estimates. The company’s 2014 guidance was in line.
Quiksilver (ZQK) reported a first quarter adjusted loss from continuing operations of 10 cents per share on revenues of $393 million, down 2 percent. The results were below estimates.
Gap (GPS) reported net sales of $929 million for February, down from $966 million last year. Comparable store sales were down 6 percent versus a 3 percent increase in the year-ago period.
Novatel Wireless (NVTL) reported a fourth quarter non-GAAP net loss of 16 cents per share on revenues of $65.3 million. For the first quarter, the company expects a non-GAAP loss of 15-22 cents per share on revenues of $50 million to $54 million. The results trailed expectations and the guidance was weak.
Thor Industries (THO) reported second quarter earnings from continuing operations of 32 cents per share on sales from continuing operations of $635.3 million. The results trailed estimates.
Progress Software (PRGS) announced preliminary first quarter results and expects non-GAAP earnings of 27-28 cents per share on revenues of $74 million to $75 million. This represents a downward revision to the guidance it issued in January, with the company attributing the weakness to lower license sales where the timing of deal closures shifted out of the first quarter.
Horace Mann (HMN) said its board approved an 18 percent increase in its dividend to 23 cents per share.
Piedmont Natural Gas (PNY) reported first quarter net income of $1.26 per share on operating revenues of $657.73 million. The company raised its 2014 earnings guidance to $1.89-$1.90 per share. The results exceeded estimates and the guidance was positive.