Payrolls may steer US stocks


NEW YORK: Payrolls could give the US stock market some direction this week as investors comb through the key report on one of the economy’s weakest areas.

More news on Greece’s debt problems could also fire up investors after a week of little movement in stocks, with the market ending Friday’s choppy session slightly higher in light trading volume due to a heavy winter snow storm that hit New York City and much of the US Northeast, forcing businesses, schools and transportation systems to close. It was New York City’s second major snow storm last month.

The Institute for Supply Management will give Wall Street vital information on manufacturing and services this week when it releases its February indexes on those sectors.

But February’s non-farm payrolls report from the US Labour Department will be the main event as job losses continue to give investors reason to question the sustainability of the economy’s recovery.

”The market is looking to move off centre ... and the employment report is probably going to be the most important of the week,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

”If that number comes in weak, it really confirms the strong unemployment claims data we’ve seen. If it comes a little bit better, it would indicate maybe we’re creating jobs at a fast enough pace to offset the claims,” he said.

Besides payrolls, Wall Street will have a flurry of other numbers to mull over, including January personal income and spending, as well as February domestic car and truck sales.

Fourth-quarter earnings reports are winding down, but investors will see results from a handful of Standard & Poor’s 500 companies, including natural gas producer and pipeline operator El Paso Corp and major US office supplies retailer Staples.

While all three indexes finished slightly lower for the past week, the stock market capped its best month since November.

For the month of February, the Dow Jones industrial average was up 2.6%, the S&P 500 was up 2.9% and the Nasdaq Composite Index was up 4.2%.

Although February was sweet, the final week of the month went down in the loss column. For the week, the Dow slid 0.8%, while the S&P 500 shed 0.4% and the Nasdaq slipped 0.3%. Lingering concerns about Greece’s fiscal deficit problems and its effects on the euro were among factors keeping investors on edge.

The S&P 500 has climbed as much as 70% from its lows in early March 2009, largely because of stronger-than-expected economic data and earnings, but it has since retraced some of those gains.

Recent snow storms and other harsh winter weather may contribute to the weaker February jobs picture and make the data even harder to forecast, analysts said.

But, they said, the numbers remain among the most important for the economic outlook.

”You can’t describe the economy as in a recovery until you have job growth,” said Charles Lieberman, chief investment officer of Advisors Capital Management, LLC in Paramus, New Jersey.

For Friday’s jobs report, the consensus forecast, according to economists polled by Reuters, calls for a loss of 50,000 jobs in February, compared with a decline of 20,000 in January. The US unemployment rate is forecast to rise to 9.8% in February from 9.7% in January.

”Productivity has gone through the roof, and so have earnings, and that’s likely to translate into hiring” at some point, Lieberman said.

More than 70% of S&P 500 companies have beaten earnings estimates so far for the fourth quarter, well above the 61% in a typical quarter, according to Thomson Reuters, which began tracking data in 1994.

With 96% of S&P 500 fourth quarter results already in, earnings are expected to increase 201.3% from a year ago, when the economic downturn took a big toll on corporate results.

Investors may need to keep the virtual snow shovels handy as they cope with piles of economic data this week, starting with today’s personal income and consumption, or spending, report for January. Personal consumption is forecast up 0.4% in January, twice December’s 0.2% gain.

The ISM also will give its February snapshot of manufacturing activity today. The forecast from the Reuters poll: An ISM manufacturing index at 57.5 in February, down from 58.4 in January. Construction spending for January also will be released today.

Monthly car and truck sales will be reported tomorrow. The consensus forecast indicates a slight decline in total vehicle sales to an annual rate of 10.50 million units in February from 10.78 million in January.

Wednesday will bring the ISM non-manufacturing index, which will give a reading of how the important US services sector is faring. A private sector report on national employment in February from ADP is also due that day.

And while Wall Street’s skies may be a hazy winter gray, the trendy shade will be beige for market professionals. The Federal Reserve’s Beige Book, a collection of anecdotal reports on the US economy from the Fed’s 12 district banks, will be released on Wednesday.

Thursday’s economic indicators will include the latest weekly jobless claims, revised fourth quarter data on productivity and unit labour costs, and the January pending home sales index. — Reuters

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