Weekly Market Round-Up: Friday, 8 January 2010

4:30 pm : (a) The latest monthly payrolls report and (b) a raft of analyst rating revisions made up for a lack of corporate headlines this session. Though the general reaction to those reports was negative, stocks still managed to make their way higher.

The early tone to trade was negative as participants pressured stocks upon learning that December nonfarm payrolls dropped by 85,000, which took many by surprise since the consensus called for no change to payrolls. However, nonfarm payrolls for November were revised upward to show an increase of 4,000 jobs. That marked the first payroll increase in two years and helped keep the unemployment rate at 10.0%, which was expected.

(i) Financials caught the brunt of the early selling effort and trailed for most of the session, but trimmed their losses to finish 0.5% in the red. News that analysts at Citigroup cut their estimates for Goldman Sachs (GS 174.31, -3.36), Morgan Stanley (MS 32.25, -0.67), and JPMorgan Chase (JPM 44.68, -0.11) triggered some profit taking after the financial sector had climbed 6.4% during the previous four sessions. Financials still netted a weekly gain of nearly 6%.

(ii) Analysts at JP Morgan hit Coca-Cola (KO 55.15, -1.04), Colgate-Palmolive (CL 81.51, -1.49), and Alberto-Culver (ACV 29.14, -0.55) with downgrades, which weighed on the defensive-oriented consumer staples sector and sent it to a 0.5% loss.

(iii) Retailers had to contend with some downgrades, too, but they were able to cut their loss for the session to 0.1%. Still, Macy's (M 16.92, -0.57) wasn't so fortunate; news of a downgrade by analysts at Goldman Sachs sent the company's shares sharply lower, which reversed the gains that came when the company increased its earnings outlook in the previous session.

(iv) Tech stocks bounced back from a recent fit of weakness. Tech was the best performing sector in 2009, booking a 60% annual gain, but it has lagged in the new year. However, renewed support for large-cap issues helped drive the sector to a 0.8%gain this session. They also helped the Nasdaq outperform its counterparts.

(v) Industrial stocks made up this session's best performing sector. Their 1.5% advance added to the 1.3% gain that they booked in the previous outing. Despite the move, the sector lacked the influence to make it a legitimate leader for the broader market.

Bottom line, a worse-than-expected nonfarm payrolls number resulted in a significant sell-off in the dollar, with after-effect on materials and resources as follow:

(a) Strength among steel stocks combined with gains from other raw materials stocks, thanks partly to a 0.6% drop by the dollar, to drive the materials sector to a 1.0% gain.

(b) Precious metals were trading lower this morning as the dollar index was higher. Then, Non-Farm disappointed; Gold and silver futures soared. Although the dollar index attempted to pare losses, it ended the session 0.5% lower, allowing gold and silver futures to end in positive territory. February gold finished 0.5% higher at $1139.90 per ounce and March silver finished 0.7% higher at $18.47 per ounce.

(c) Natural gas futures opened the pit trade moderately lower and traded relatively flat for most of the session. February natural gas closed down 1.2% at $5.74 per contract.

(d) Crude oil futures finished marginally higher at $82.75 per barrel. After opening the pit trade lower, February crude oil spiked mid-session as the dollar weakened. After reaching the $83.48 per barrel mark, the February contract sold off and dipped into negative territory before closing slightly higher.

(e) Orange juice futures closed limit-up for the third time this week on concerns that unseasonably cold weather will hurt this year's harvest. The March orange juice futures closed 7.1% higher at $1.512 per pound.

Still, the stocks were able to catch a late bid that helped the broader market break free from an afternoon of sideways chop. The support helped stocks finish higher for the fifth straight session and gave the stock market a weekly gain of 2.7%, which marks its best weekly performance in two months.

Advancing Sectors: Industrials (+1.5%), Materials (+1.0%), Tech (+0.8%), Energy (+0.5%), Health Care (+0.3%)

Declining Sectors: Financials (-0.5%), Consumer Staples (-0.5%), Telecom (-0.5%), Utilities (-0.1%)

Unchanged: Consumer Discretionary

DJ30 +11.33 NASDAQ +17.12 NQ100 +0.9% R2K +0.4% SP400 +0.6% SP500 +3.29

Earlier in the morning, the mood and pre-opening started out this way

09:05 am : S&P futures vs fair value: -4.00. Nasdaq futures vs fair value: -5.00.
U.S. stock futures continue to trade with weakness in the wake of some disappointing monthly payroll numbers. Europe's major bourses have also retreated in the wake of the data, unhelped by news that unemployment in the euro zone hit 10% for the first time in the history of the euro currency, according to reports. The EuroStoxx is down 0.2% and the FTSE is currently down 0.5%.

Some banks and miners have gained, though.

Barclays (BCS) has been helped by an upgrade from analysts at UBS.

In Germany, the DAX is down 0.6% at the moment, though Deutsche Bank (DB) has shown strength, thanks partly to an upgrade from analysts at UBS. Its shares are at their highest level since October.

In France, the CAC is currently off by 0.2%. Banks are also limiting losses there.

In Asia, the MSCI Asia Pacific Index added 0.6%, but Japan's Nikkei climbed 1.1% to hit a 15-month high. Carmakers were boosted with help from a weaker yen. However, the yen had actually pared losses from a four-month low against the dollar after Japan's Prime Minister Hatoyama said rapid moves in the currency market were "not good." Japan Airlines continued to flounder amid bankruptcy worries. In Hong Kong, the Hang Seng eked out a 0.1% gain, but that was good enough to erase early losses. In mainland China, the Shanghai Composite also closed just 0.1% higher.

08:35 am : S&P futures vs fair value: -3.00. Nasdaq futures vs fair value: -1.80.
Both stock futures and the dollar have pulled back as a result of some disappointing monthly payroll figures. Specifically, nonfarm payrolls for December decreased by 85,000, which is worse than the flat reading that had been expected. However, nonfarm payrolls for November were revised upward to reflect an increase of 4,000 jobs -- that marked the first increase in two years. The unemployment rate still stands at 10.0%, as expected. Average weekly hours worked also went unchanged at 33.2, as expected.

08:00 am : S&P futures vs fair value: -0.80. Nasdaq futures vs fair value: +3.30. The dollar has modestly extended its gain from the previous session, but stock futures remain flat. The tepid tone among premarket traders precedes the official December payrolls report, which is due at the bottom of the hour. Economists, on average, expect nonfarm payrolls to be flat for the month and that the unemployment rate will remain unchanged at 10.0%. Wholesale inventory data for November follows at 10:00 AM ET, then November consumer credit at 2:00 PM ET, but for broader market concern those reports are secondary to the jobs report.