Stocks Move Higher
Stocks opened sharply higher Wednesday after a better than expected reading on a key gauge of service-sector activity. Market players were also weighing data on U.S. employment, productivity and labor costs, and factory orders.
Lingering hopes for a fruitful solution to bond insurer Ambac Financials («www.businessweek.com») liquidity troubles continued to provide some support to the market after boosting shares late Tuesday, reports Action Economics.
Networking giant Cisco («www.businessweek.com») offered a more upbeat assessment of its growth prospects. Discounter Costco («www.businessweek.com») enjoyed strong earnings.
Bonds were mixed before the release later Wednesday of the Federal Reserves Beige Book report on the U.S. economic outlook. The dollar index was seesawing higher. Gold futures reached a record high, while oil futures soared as OPEC left output quotas unchanged.
On Wednesday, the Dow Jones industrial average was higher by 71.64 points, or 0.59%, at 12,285.44. The broader S&P 500 index added 9.71 points, or 0.73%, to 1,336.46. The tech-heavy Nasdaq composite index gained 19.84 points, or 0.88%, to 2,280.12.
Trading was active, with telecom and oil stocks gaining; biotechs were lower. On the New York Stock Exchange, 17 shares were advancing in price fro every 9 that declined. Nasdaq breadth was 13-8 positive.
According to a report on CNBC, a consortium of banks looking to bail out Ambac was working to finish deal on Wednesday.
The ADP National Employment Report private sector employment index fell 23,000 in February. The estimated change in employment from December 2007 to January 2008 was revised down 11,000 to 119,000. February’s decline of 23,000 signals a deceleration of employment growth across businesses of all sizes. ADP said employment in the service-providing sector of the economy grew 47,000, while employment in the goods-producing sector declined 70,000, the 15th consecutive monthly decline. Manufacturing
employment fell 40,000 in February after declining a revised 3,000 in January.
Challenger, Gray & Christmas said planned corporate job reductions numbered 72,091 in February, down by about 4% from January’s announced cuts and “well below” recessionary levels.
Productivity growth in the non-farm business sector in the fourth quarter was revised to 1.9% in the 2007 fourth quarter from the original estimate of 1.8%, according to a government report. The consensus was for no revision. Unit labor costs were revised upward to 2.6% because of an upward revision to hourly compensation. The data are highly volatile on a quarterly basis, says S&P Economics; over the last four quarters, productivity is up 2.9% and unit labor costs are up 0.9%, indicating little inflationary pressure from the labor market.
U.S. factory orders fell 2.5% in January after a revised 2.0% jump in December (2.3% previously). The previously reported 5% decline in January durable goods orders was revised to -5.1%. Excluding transportation, factory orders were down 0.4%.
The U.S. composite ISM-nonmanufacturing index rose to 49.3 in February, after plunging almost 9 points to 44.6 in January. The business activity index climbed back to expansionary territory at 50.8 from 41.9. The employment index rebounded to 46.9 from 43.9. New orders were up 49.6 from 43.5. Prices paid surprisingly fell to 67.9 from 70.7. The data are much better than expected, according to Action Economics.
Oil futures were higher after OPEC ministers agreed to leave quotas unchanged, which was no real surprise. The market was awaiting weekly Energy Dept. inventory data. April WTI crude futures up 85 cents to $100.37.
Among Wednesdays stocks in the news, Pfizer («www.businessweek.com») reaffirmed its $1.78-$1.93 2008 EPS (reported) guidance range, $2.35-$2.45 adj. EPS, on revenue in the range of $47-$49 billion. PFE says it expects its pipeline of drugs in Phase III trials to grow to 24-28 programs by the end of 2009.
BJ’S Wholesale («www.businessweek.com») posted fourth-quarter EPS of 80 cents, vs. 18 cents one year earlier, (including items) on 5.4% higher same-store sales (incl. gas and pharmacy) and 1.9% higher total sales. Separately, the company reported a 5.9% gain in same-store sales for February.
Saks («www.businessweek.com») posted fourth-quarter EPS of 26 cents, (including a 7-cent gain) vs. 14 cents one year earlier on 9% higher same-store sales. The company expects same-store sales percentage growth in the mid-single digits for fiscal 2009. The company posted 3.4% higher February same-store sales.
European indexes were higher Wednesday. In London, the FTSE 100 index gained 1.17% to 5,835.00. In Paris, the CAC 40 index rose 1.83% to 4,761.69. Germanys DAX index added 1.92% to 6,670.83.
Asian indexes ended with modest losses. Japans Nikkei 225 index fell 0.126% to 12,972.06. In Hong Kong, the Hang Seng index declined 0.02% to 23,114.34.
