Beyond the Number
Strong Payrolls Data May Create Euphoria
12/6/2013 9:08 AM
The major U.S. index futures are pointing to a higher opening on Friday, with sentiment reflecting notable strength, as the monthly non-farm payrolls data came ahead of expectations. The strong data is likely to create an initial euphoria, as traders look past the stimulus worries, and revel in the economy's strength. That said, it remains to be seen if the exuberance sustains through the session.
U.S. stocks jittery run continued on Thursday, as strong jobless claims data kept traders on tenterhooks. The major averages opened lower and remained mostly negative amid some volatility before ending the session moderately lower.
The Dow Industrials ended down 68.26 points or 0.43 percent at 15,822 and the S&P 500 Index closed 7.78 points or 0.43 percent lower at 1,785, while the Nasdaq Composite Index ended at 4,033, down 4.84 points or 0.12 percent.
Twenty of the thirty Dow components closed lower, with Cisco Systems (CSCO), Goldman Sachs (GS), JP Morgan Chase (JPM) and Microsoft (MSFT) among the biggest decliners of the session. On the other hand, Intel (INTC) and Boeing (BA) rose notably.
Gold, utility and banking stocks saw significant weakness in the session.
On the economic front, the Labor Department reported that jobless claims fell to 298,000 in the week ended November 30th from 321,000 in the previous week. The four-week average declined to a 2-month low of 322,250 from 333,000. Continuing claims calculated with a week’s lag fell 21,000 in the week ended November 23rd.
The preliminary third quarter GDP estimate released by the Commerce Department showed an upward revision to the advance estimate, with the economy currently estimated to have grown by 3.6 percent sequentially. This represented an upward revision to the advance estimate of 2.8 percent. A sharp revision to inventories was responsible for much of the revision. Inventories now added 1.7 percentage points to GDP, up from 0.8 points estimated earlier. At the same time, personal spending and trade were downwardly revised.
A separate report showed that factory orders fell 0.9 percent month-over-month in October, while the previous month’s growth was upwardly revised by 0.1 percentage points to 1.8 percent. The decline was slightly less than expected.
The Dow Industrials retreated further yesterday in the wake of some strong data, and with the declines in the previous five sessions the 14-day relative strength index of the average has dropped to 45.8. If the weakness continues, the index could drop down to a near support around 15,775, and further downward, the index also has support around 15,676. On the upside, the index has support around 15,874, its 21-day MA of 15,913, 15,967, 16,010 and 16,073. Commodity, Currency Markets
Crude oil futures are slipping $0.25 to $97.13 a barrel after rising $0.18 to $97.38 a barrel on Thursday. Gold futures are currently declining $16 to $1,215.90 an ounce. In the previous session, gold fell $15.30 to $1,231.90 an ounce.
Among currencies, the U.S. dollar is trading at 102.86 yen compared to the 101.79 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.3647 compared to yesterday’s $1.3667.Asia
The major Asian markets closed mixed, with the Japanese, Malaysian and Hong Kong markets closing higher, while the rest of the major markets retreated. Caution was the underlying mood, as traders in the region awaited the U.S. non-farm payrolls report.
Japan’s Nikkei 225 average showed volatility throughout the session before moving decisively higher in late afternoon trading. The index ended up 122.37 points or 0.81 percent at 15,300. Export stocks rebounded after their recent slide, led by Advantest.
Australia’s All Ordinaries languished below the unchanged line for a majority of the session before closing down 10.90 points or 0.21 percent at 5,186. Financial stocks retreated, while material, healthcare and real estate stocks also came under selling pressure. On the other hand, energy stocks gained ground.
Hong Kong’s Hang Seng Index closed at 23,743, up 30.53 points or 0.13 percent, while China’s Shanghai Composite Index ended 9.96 points or 0.44 percent lower at 2,237.
On the economic front, a report released by the Australian Industry Group showed that its index measuring the performance of the construction sector in Australia rose to 55.2 in November from 54.4 in October.
A Japanese Cabinet Office report showed that the leading economic indicators index for Japan rose 0.7 points to 109.9 in October, while economists expected a more modest improvement to 109.7. The coincident economic indicators index rose 1.2 points to 109.6, while the lagging economic indicators index slipped 0.9 points to 113.1.Europe
European stocks are rebounding following five straight sessions of losses. The major averages in the region opened higher and hovered in positive territory until the release of the U.S. Payrolls report. Although the averages saw momentary weakness, they have rebounded and are currently trading notably higher.
In corporate news, traffic figures released by Air France KLM showed a 0.9 percent year-over-year increase in traffic and a 2 percent increase in capacity for November. Nevertheless, load factor was down 0.8 points at 80.3 percent.
Air Berlin’s November traffic climbed 1.8 percent and capacity improved 4.2 percent. U.K. pizza delivery firm Domino’s Pizza announced the decision of its CEO Lance Batchelor to quit, effective April 30th, 2014.
On the economic front, a report released by France’s Customs Office showed that the French trade deficit narrowed to 4.69 billion euros in October from a 5.64 billion deficit in September. U.S. Economic Reports
The Labor Department's monthly jobs report showed that non-farm payroll employment rose by 203,000 jobs in November following a revised increase of 200,000 jobs in October.
Economists had been expecting employment to increase by about 180,000 jobs compared to the addition of 204,000 jobs originally reported for the previous month. With the stronger than expected job growth, the unemployment rate pulled back to 7.0 percent in November from 7.3 percent in October.
A Commerce Department showed that personal; income fell 0.1 percent month-over-month in October, defying expectations for a 0.3 percent increase. Disposable income was down 0.2 percent.
At the same time, personal spending climbed 0.3 percent, in line with estimates. The price consumption expenditure index was up 1.1 percent year-over-year, a slowdown from the 1.2 percent rate in September.
Reuters and the University of Michigan are scheduled to release preliminary results for their consumer sentiment survey for December. Economists expect the consumer sentiment index based on the survey to have improved to 75.5 in December from 75.1 in November.
Philadelphia Federal Reserve Bank President Charles Plosser is due to speak at the opening of the Philly Fed policy forum in Philadelphia at 10:15 am ET. Meanwhile, Chicago Federal Reserve Bank President Charles Evans will participate in a panel discussing the economy and monetary policy in Chicago at 3 pm ET.
The Federal Reserve is scheduled to release its consumer credit report for October at 3 pm ET. Outstanding consumer credit for the month is estimated to have grown by $15 billion in October after rising $13.7 billion in September.
Outstanding consumer credit rose by $13.7 billion month-over-month in September. Non-revolving credit tied to auto loans surged up by $15.8 billion, while revolving credit tied to credit cards fell by $2 billion. Stocks in Focus
Cooper Companies (COO) reported fourth quarter non-GAAP earnings of $1.48 per share on revenues of $411.9 million. For 2014, the company expects non-GAAP earnings of $6.70-$7 per share on revenues of $1.68 billion to $1.74 billion. The results trailed expectations and the guidance was weak.
Pacific Sunwear (PSUN) reported a third quarter loss from continuing operations of 5 cents per share on a non-GAAP basis, while net sales fell to $206.6 million from the year-ago quarter’s $215.5 million. The earnings were in line, while the revenues were ahead of estimates. For the fourth quarter, the company expects a non-GAAP loss from continuing operations of 12-17 cents per share on revenues of $216 million to $225 million. The earnings guidance was insipid, while the revenue guidance was in line.
Zumiez (ZUMZ) reported third quarter earnings of 39 cents per share on net sales of $191.1 million, up 6.2 percent year-over-year. The earnings included a charge of 7 cents per share. The earnings were in line and revenues were ahead of estimates. For November, the company reported net sales growth of 16.3 percent and comparable store sales growth of 1.7 percent. For the fourth quarter, the company expects net income of 60-66 cents per share, including 5 cents per share in charges, while comparable store sales are expected in to range between a drop of 1 percent and increase of 2 percent. The guidance was weak.
Big Lots (BIG) reported a third quarter loss from continuing operations of 17 cents per share, which includes a gain of 4 cents per share and a charge of 5 cents per share. Net sales rose 1.6 percent to $1.15 billion. The results missed estimates, while the company issued bleak guidance for 2013.
Gap (GPS) reported that its sales rose 8 percent year-over-year in November. Comparable store sales were up 2 percent compared to a 3 percent increase in the year-ago period.
Ecolab (ECL) announced a 20 percent increase in its quarterly cash dividend to $0.275 per share.
Esterline (ESL) reported fourth quarter earnings from continuing operations of $2.07 per share on sales of $534.16 million. The earnings exceeded estimates, while the revenues missed expectations. For the full year, the company expects earnings of $5.40-$5.70 per share on revenues of $2 billion to $2.1 billion. The guidance was soft.