Jobs Data Give Stock Futures a Boost

Elena
09 Mar, 2007
New York City

U.S. stock market futures shot steeply higher on Friday, boosted by in-line-with-expectations employment figures and continued narrowing in the trade deficit. Nonfarm payrolls rose 97,000 in February, in line with the average economist estimate of a gain of 100,000. The unemployment rate fell to 4.5%, vs. expectations of rate at 4.6%. According to another economic report, the U.S. trade deficit narrowed by 3.8% in January to $59.1 billion.

[R]9:00AM U.S. stock futures pointed higher on positive jobs data.[/R]
U.S. stock market futures shot steeply higher on Friday, boosted by in-line-with-expectations employment figures and continued narrowing in the trade deficit. Nonfarm payrolls rose 97,000 in February, in line with the average economist estimate of a gain of 100,000. The unemployment rate fell to 4.5%, vs. expectations of rate at 4.6%. According to another economic report, the U.S. trade deficit narrowed by 3.8% in January to $59.1 billion. The U.S. dollar rallied on the back of the economic data, rising 0.8% vs. the yen and 0.2% vs. the euro.

Positive news in the semiconductor sector also generated upward mood. National Semiconductor ((NSM)) rallied 4.8% in pre-open trading after its 45% profit drop came in above analyst estimates. Also in the sector, Texas Instruments ((TXN)) rose 2.4% to $32.45 following un upgrade to buy from hold on the belief that the chip industry's inventory correction close to an end. Philips Electronics ((PHG)) said that it would make a staged exit from its 16% stake in Taiwan Semiconductor ((TSM)) through sales to Taiwan investors, U.S. shareholders and company share buybacks.

Outside the sector, New Century Financial ((NEW)) dropped 5.7%. The company said that it stopped accepting loan applications because some of the subprime-mortgage specialist's financial backers refuse to provide access to financing. S&P 500 futures erased earlier losses to trade up 7.30 points at 1,424.50 and Nasdaq 100 futures climbed 9.00 to 1,784.00. Dow industrial futures ran up 49 points to 12,425.

[R]Non-farm payrolls increased 97,000 in February.[/R]
Friday morning, the Labor Department released its highly anticipated report on employment in the month of February, showing that job growth during the month came roughly in line with economist estimates. The report showed that non-farm payroll employment increased by 97,000 in February following an upwardly revised increase of 146,000 in January. Economists expected an increase of about 100,000 jobs compared to the increase of 111,000 jobs originally reported for the previous month. The Labor Department said that the increase in employment came as job growth in service-providing industries more than offset a sharp decline in construction employment and a continued drop in manufacturing employment. Service-providing industries added 168,000 jobs in February following an increase of 120,000 jobs in January. The increase reflected job growth throughout much of the sector.

At the same time, the report also showed that goods-producing industries lost 71,000 jobs in February after adding 26,000 jobs in the previous month. Construction employment fell by 62,000 jobs, while manufacturing employment fell by 14,000 jobs. The Labor Department also said that the unemployment rate unexpectedly edged down to 4.5 percent in February from 4.6 percent in January. The decrease came as a surprise to economists, who had expected the unemployment rate to remain unchanged. The unexpected drop in the unemployment rate was partly due to a decrease in the size of the labor force, which fell by 190,000 in February after increasing by 199,000 in January. The report also showed that average hourly earnings increased by $0.06 or 0.4 percent to $17.16 in February. This increase followed gains of $0.03 in January and $0.08 in December. Average hourly earnings were up 4.1 year-over-year.


[R]8:30AM Asian markets ended mixed with Tokyo higher and HK lower.[/R]
Asian markets closed mixed on Friday. Japan's benchmark Nikkei 225 index added 0.43% to finish at 17,164.04. Daiei gained 9.8% and Aeon ended up 4.6% as the two retailers agreed on an alliance. Nikko Cordial advanced 3.1% on growing demand for Citigroup to raise its tender-offer price for the Japanese brokerage firm.

The benchmark index Hang Seng in Hong Kong shed 0.2% to 19,134.88. China Life added 0.5%. ICBC, China biggest lender by assets, finished 0.2% higher. China Mobile fell 1.7%. The Shanghai Composite Index, which tracks both Class A and Class B shares, closed up 0.3% at 2,937.91. Bank of China closed up 3.3%, Industrial & Commercial Bank of China rose 2.6% and midsize Shanghai Pudong Development Bank advanced 2.8%.

The Korea Composite Stock Price Index, or Kospi, settled down 0.02% at 1,423.58. The stock market finished flat after losses in banks and shipbuilders were countered by robust gains in transportation stocks. The Weighted Price Index of the Taipei Stock Exchange slid 0.07% to 7,568.20 and Australian benchmark S&P/ASX 200 index rose 0.1% to close at 5,830.2.


[R]8:00AM NY-7:00PM Mumbai Sensex tumbles on higher inflation, cement prices.[/R]
The Sensex on BSE closed 164.36 points, or 1.26%, lower at 12,884.99. The market-breadth was negative as 1,308 stock declined, 1,098 advanced and 60 were unchanged. Of the 30 stocks in the Sensex 6 advanced, while the rest declined. The turnover on BSE was Rs 4,339.08 crore. The turnover on NSE was Rs 9,641.18 crore, higher than Rs 7,954.06 on Thursday.

Economic news

The annual inflation rate was just above 6% in late February, thus keeping alive the prospect of another hike in interest rates. Data on Friday showed wholesale price index rose 6.10% in the 12 months to Feb. 24, little changed from the previous week annual increase of 6.05%. Wholesale price-based index inflation rate stood at 4.18% during the corresponding week last year.

Morgan Stanley, Citigroup and Actis have agreed to buy a total of 6% in NSE for an undisclosed amount. While Morgan Stanley will purchase 3% equity stake in NSE, Citigroup and Actis will buy 2% and 1%, respectively. The Bombay Stock Exchange Ltd announced on Wednesday, February 7, that it was selling a 5% stake to Singapore Exchange.

The cement companies today promised to keep prices stable for a year even if the costs of inputs go up. The companies, however, refused to roll back the recent hike which has been done because of rise in excise on 50-kg bags costing Rs 190 or more.

The government said that there is no ceiling on export credit given by public sector banks to small-scale companies. Finance Minister P Chidambaram said that banks usually sanction the working capital, including export credit, after assessing individual customer performance.

IPO

Idea Cellular, a leading mobile operators in India, made a strong debut on the bourses today, opening at Rs 85, with 13.33% premium and touched an intraday high of Rs 92 supported by strong buying interest from investors despite volatility in the markets. It ended at Rs 85.70, up 14.27%.

Trading highlights

Debutant Idea Cellular was the most-active stock with a turnover of Rs 559.20 crore followed by Century Textiles and MindTree.

Advancers

NTPC led the gainers, up 2.7%, to Rs 140. The company is planning to float a subsidiary for its international operations and build a 700 Mw gas-based power plant in Nigeria and 500 Mw thermal plant in Sri Lanka. Hero Honda was up 2.5% to Rs 690, Tata Steel gained 1.5% at Rs 434. Tata Steel surged after it acquired 100% stake in Rawmet Industries Private, a company having its registered office in Kolkata, for an enterprise value of Rs 101 crore.

Decliners

Cement shares were down sharply after India''s cement companies agreed to hold prices of the key building material for a year. Grasim slumped 7.5% to Rs 2,069, ACC tumbled over 6% to Rs 781, and Gujarat Ambuja shed 2.6% to Rs 110. India Cements plunged over 8% to Rs 153, and UltraTech Cement plummeted 4.8% to Rs 780.

Other decliners included BHEL and ITC declining around 3.5% each to Rs 2,095 and Rs 154, respectively. Cipla shed 3.2% to Rs 229 and Hindalco tumbled 3.1% to Rs 128. Hindustan Lever was down 0.14% to Rs 183.55, after rallying close to 10% on huge volumes by Thursday. Cigarette large-cap ITC was down 3.44% to Rs 154.35. Index heavy Reliance Industries shed 2% to Rs 1,308.05. Reliance Comms, L&T and Dr.Reddy''s declined 2.5% each to Rs 423, Rs 1,482 and Rs 660, respectively.


[R]6:30AM Europe was lower Friday on weak metal, drug and mining sectors.[/R]
European markets were off to a weak start on Friday. By mid morning, Frankfurt Xetra Dax fell 0.5% to 6,677.11, the CAC 40 in Paris shed 0.8% to 5,482.19 and London FTSE 100 lost 0.4% to 6,203.8.

Advancers

Thales, the French defence electronics group, topped the earnings table after posting a better-than-expected 4.5% increase in full-year operating profit, while guiding strong revenue growth for the next two years. Thales shares added 4.1%. Sanofi-Aventis advanced 0.1% after Goldman upgraded it to buy, saying concerns over Plavix and Lovenox are now priced in. Ahold, the Dutch retailer, was up 1.6% as bids circulated in for the company US Foodservice division, valued at around $6 billion.

Decliners

EADS, the European aerospace group, fell 1.8% after losses at its Airbus unit were largely resposible for an 86% drop in 2006 operating profits. The pharmaceuticals sector was led lower after Goldman Sachs lowered its rating on the UK GlaxoSmithKline from neutral to sell. GlaxoSmithKline dropped 1.7%. Meanwhile Novartis, the Swiss drugmaker, fell 2.1% as investors took profits on its recent strong performance.

Oil and gold

Oil prices were almost flat in Asian trading Friday as market participants looked for trading cues from U.S. jobs data due later in the day. Crude oil for April delivery dropped 6 cents to $61.71 a barrel in electronic trading on the New York Mercantile Exchange, mid-afternoon in Singapore. Brent crude for April delivery fell 3 cents a barrel on London ICE Futures Exchange. Gold opened Friday at a bid price of $652.90 a troy ounce, up from $651.20 late Thursday.

Currencies

The euro gained slightly against the U.S. dollar on Friday before US expected release of key economic data. The euro bought $1.3147 in morning European trading, up from $1.3135 the night before in New York. The British pound dropped slightly to $1.9290 from $1.9293 the night before, while the dollar rose to purchase 117.43 Japanese yen from 117.14 in New York.