MarketView for December 2

Summary

The Nasdaq composite index managed to end the day in the black as strong online holiday sales pushed the shares of retailers, including Amazon.com and relieved some concerns regarding the consumer’s propensity to spend. Amazon rose 2.7 percent to $142.25 and during the session, the stock hit a split-adjusted all-time high of $142.67.

The Dow edged lower as falling oil prices prompted a sell-off in energy shares, while the S&P 500 index finished flat. Worries that bank profits could be hurt by derivatives legislation under consideration also curbed enthusiasm about the broader market.

Amid continued questions about retailers' strength in the holiday shopping season, online vendors turned out to be strong performers after analytics firm comScore said that Cyber Monday sales rose 5 percent from the previous year.

An ADP National Employment private-sector survey indicated that private employers shed 169,000 jobs in November. That data got Wall Street's attention because weakness in the labor market is one of the biggest headwinds facing a recovery. While the number was fewer than the 195,000 jobs cut in October, the ADP report was worse than expected. The U.S. government's key monthly employment report is due out Friday morning.

In other economic data, the Federal Reserve said in a report the economy is improving modestly with little upward pressure on wages and finished goods. An unexpected increase in energy resulted in a selloff of some energy companies' shares. Occidental Petroleum fell 1.2 percent to $81.21. Exxon Mobil closed down 0.3 percent to $75.79. January crude oil futures settled down $1.77 per barrel at $76.60 government inventory data showed a surprising build in crude and gasoline stockpiles.

Bank of America saw its share price rise 3.5% on volume of 8.3 million shares, the most active stock in the after-hours session, after the bank said it would repay $45 billion it borrowed under the Troubled Asset Relief Program. It will use $26.2 billion in excess liquidity and $18.8 billion from the sale of "common equivalent securities." It also plans to increase equity by $4 billion through asset sales.

Labor Market Improves

The labor market improved in November, with private sector job losses declining for the eighth straight month and employers planning fewer layoffs, separate reports showed on Wednesday. While it is true that many employers are still cutting positions, the figures suggest that we are on-track to start adding jobs next year. A recovery in the labor market is considered key to a revival in consumer spending.

The Federal Reserve also saw glimmers of hope in the labor market in its latest Beige Book region-by-region assessment of the economy. The Fed said on Wednesday the economy is improving modestly, with little cause to worry about inflation, and said labor markets are stabilizing, although they remain weak.

According to the ADP Employer Services report released on Wednesday, private employers shed 169,000 jobs in November, down from 195,000 in ADP's revised October figure. ADP's report is jointly developed with Macroeconomic Advisers LLC.

The ADP figures are considered to be a proxy for the Labor Department’s closely watched monthly report on non-farm payrolls, which is due out on Friday. That report on both private and public employment is also expected to show fewer job losses, though unemployment is seen remaining above 10 percent.

In another sign that corporate work force cuts are tapering off, the number of planned layoffs shrank in November to the lowest level in nearly two years, according to a report Challenger, Gray & Christmas Inc.

Employers announced 50,349 planned job cuts in November, the fewest number of planned job cuts since 44,416 in December 2007, according to the report. November planned job cuts were down 72 percent from November 2008, which at 181,671 was the worst month of 2008, according to the report. Since July 1, employers have announced an average of 69,252 job cuts per month, compared with a monthly average of 149,446 in the January through June period.

The Federal Reserve's overview of the economy on Wednesday was largely positive, but gave it little reason to move off from its ultra-low interest rates designed to stimulate growth. The Fed, in its Beige Book report, said eight of its 12 districts reported some pick-up in economic activity since the last report on October 21. The remaining four -- Philadelphia, Cleveland, Richmond and Atlanta -- reported conditions little changed or mixed, the Fed said.

Commercial real estate and construction, however, ran counter to the trend of moderate pick-up, the Fed reported. Residential real estate markets, on the other hand, were somewhat improved from very low levels, though house prices were flat or declining modestly, contacts told the Fed.

In other data on the housing market on Wednesday, mortgage applications nudged higher last week as interest rates fell, according to the Mortgage Bankers Association.

Interest rates on 30-year fixed-rate mortgages, the most widely used loan, fell for a sixth straight week, remaining below the 5.0 percent level that is widely viewed as a psychological tipping level, the trade group said. Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.79 percent, down 0.03 percentage point from the previous week, the lowest since the week ended May 15.

The rate remained above the all-time low of 4.61 percent set in late March and well below the year-ago level of 5.47 percent. Last month the Obama administration extended an $8,000 first-time home buyer credit into next year and added a $6,500 credit for home owners buying a new residence.

Crude Falls Slightly

Crude futures pared gains in post-settlement trading on Tuesday after industry data showed that domestic crude stocks were up by much more than expected last week. Heating oil futures trimmed gains as the data from the American Petroleum Institute showed that distillate stocks --which include heating oil and diesel fuel came in higher than expected.

Gasoline futures' gains shrank as the API data showed stocks increased much more than forecast. The API said that in the week to Nov. 27, crude stocks rose 2.9 million barrels for a 400,000 barrel increase. Distillate stocks rose 1.1 million barrels, while gasoline stocks were 3.4 million barrels.

Earlier, crude futures settled higher as the dollar weakened further and worries about Dubai's debt faded. Oil markets also got a lift from forecasts of stronger growth in China and economic data raising more hopes for a U.S. economic recovery.

At this point, we appear to be amply supplied with petroleum products. Temperatures continue to be warm, and should we get some real cold weather we have enough heating oil on hand. However, the Energy Information Administration will issue its own data on Wednesday, at 10:30 a.m. EST.

On the New York Mercantile Exchange at 5 p.m., January crude was up 55 cents, or 0.71 percent, at $77.83 per barrel. It earlier settled up $1.09, or 1.41 percent, at $78.37. *

In London, January Brent crude LCOF0 was up 39 cents, or 0.5 percent, at $78.86 per barrel. It had settled up 88 cents, or 1.12 percent, at $79.35. January heating oil was up 1.41 cents, or 0.69 percent, at $2.0620 per gallon. It had settled up 3.01 cents, or 1.47 percent, at $2.0780, trading $2.0435 to $2.0968.