Recent economic data suggesting the economy is on a slow but steady path to recovery has helped fuel a rally in stocks. Today’s non-farm payrolls report, which is expected to show the improving labour market trend remained intact in January, will be a key test of the rally.
The optimism over the labour market was reinforced as new claims for jobless benefits dropped more than expected in the latest week, according to data released yesterday.
“A decent number, and I would expect equities to continue their advance; a not decent number and we’ll have a correction. It’s that simple,” said Frank Lesh, a futures analyst and broker at FuturePath Trading in Chicago.
US employment growth probably slowed in January as temporary workers hired during the busy holiday shopping season were laid off, but the underlying picture is expected to remain relatively positive, say economists.
Non-farm payrolls likely rose by 150,000 after increasing 200,000 in December, according to a Reuters survey. The unemployment rate is seen holding steady at a near three-year low of 8.5 per cent.
Technology shares outperformed the broader market. Qualcomm Inc hit its highest level in 12 years after first-quarter profit trounced estimates. Its shares gained 2 per cent to US$60.73 after hitting a high of US$61.95.
The Dow Jones industrial average dropped 11.05 points, or 0.09 per cent, to 12,705.41. The Standard & Poor’s 500 Index gained 1.45 points, or 0.11 per cent, to 1,325.54. The Nasdaq Composite Index rose 11.41 points, or 0.40 per cent, to 2,859.68.
MasterCard Inc rose 6.7 per cent to US$381.57 after the payment processor beat analysts’ estimates for the seventh straight quarter.
Healthcare shares were among the losers. Drug maker Merck & Co Inc, the No. 2 US drug maker, said profit would be little changed in 2012. The shares fell 0.5 per cent to US$38.44.
Insurer Cigna Corp posted a lower than expected fourth-quarter profit, hurt by performance in its disability and life coverage business and international plans. Cigna also forecast 2012 earnings below Wall Street’s target, sending shares down 3.4 per cent to US$44.13.
Boston Scientific Corp reported lower quarterly earnings as sales declined in its two biggest businesses, cardiac rhythm management and interventional cardiology. Its shares fell 4.1 per cent to US$5.84.
The S&P 500 gained 4.4 per cent in January, its best month since October. The index is now up over 23 per cent since lows in October. Besides signs of an improving economy, gains have also been made on optimism that Europe’s debt crisis is under control.
Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston, expects the uptrend for the S&P 500 to take it to 1,370 in the first half of the year, but the index could pull back before then at around 1,330.
The wait-and-see approach was reflected in light volume. There were 6.92 billion shares traded on the NYSE, Amex and Nasdaq compared with the 200-day moving average of about 7.76 billion shares.
Green Mountain Coffee Roasters Inc soared 23.9 per cent to US$66.42 a day after its first-quarter earnings far exceeded expectations.
The third warmest January in 50 years hurt same-store sales at department stores and apparel retailers. But discounters such as Target and Costco as well as high-end stores beat estimates.
Target Corp rose 1.2 per cent to US$52.00 while Abercrombie & Fitch Co slumped 13.8 per cent to US$40.37, and Costco Wholesale Corp was up 2.8 per cent at US$85.51.
Facebook could raise as much as US$10 billion (RM30.4 billion) in the biggest-ever Internet initial public offering, according to a filing on Wednesday. In 2011, Facebook said net income rose 65 per cent to US$1 billion on revenue of US$3.71 billion. — Reuters
