MarketView for December 6

Summary

Stocks closed modestly higher on Thursday, a day ahead of the key monthly jobs report, as a rebound in shares of Apple added some momentum to technology shares. Nonetheless, traders were reluctant to bet heavily a day before the Friday release of the November employment report.

Investors are also keeping watch on the "fiscal cliff" negotiations in Washington to see if lawmakers can reach a deal to avoid a series of spending cuts and tax hikes beginning in January.

Apple closed up 1.6 percent to $547.24, reversing losses incurred at the open. The stock was coming off its biggest one-day drop in four years on Wednesday, which occurred on concerns about higher capital gains taxes in 2013 and the company's tablet computer market share.

Semiconductor stocks rallied a day after Broadcom forecast fourth-quarter revenue at the high end of its target range. Broadcom's stock ended the day up 3.2 percent to close at $33.36.

Monthly payroll numbers, which will be released by the Labor Department before the market opens on Friday, are expected to show a sharp slowdown in jobs growth, though that is largely due to the impact of Sandy, which devastated the Northeast in late October and early November. The unemployment rate is seen holding steady at 7.9 percent.

Broader moves were limited, however, as traders focused on the "fiscal cliff" debate. About three weeks remain before higher tax rates would go into effect, which economists worry would dampen economic growth. Legislators are trying to come up with a deal to avoid some of the negative effects on the economy while still reducing the budget deficit.

While Republican leaders in the U.S. House of Representatives insist that raising tax rates on the rich is not negotiable, some GOP lawmakers now see it as inevitable to avoid the fiscal cliff. Without action from Congress, tax cuts on capital gains and dividends will expire at the end of 2012. This has given investors a reason to sell certain stocks such as Apple that have done extremely well in recent years.

The CBOE Volatility Index rose 0.7 percent, a reflection of the anxiety people have about the jobs report and skepticism over the cliff.

An S&P index of consumer discretionary shares gained 0.6 percent, lifted by Starbucks shares' advance of 5.7 percent to $53.70 after Baird upgraded the stock to "outperform."

H&R Block rose 5.1 percent to $18.26 after the company reported a quarterly loss that was narrower than expected.

Sirius XM Radio saw its share price jump 0.7 percent to $2.79 after its board approved a $2 billion stock repurchase and declared a special dividend that gave a big payout to its largest shareholder, Liberty Media. As a result, shares of Liberty closed up 2.7 percent at $109.24.

Garmin gained 5.7 percent to end the day at $41.99 after Standard & Poor's said it would add the navigation device maker to the S&P 500 index. Garmin will replace R.R. Donnelley & Sons after the close of trading on December 11.

Just 5.62 billion shares changed hands on the three major equity exchanges, a number that was well behind the 6.48 billion daily average this year.

Unemployment Claims Fall

According to a report released by the Labor Department on Thursday, the number of new claims for unemployment benefits fell for a third straight week last week, falling back to their pre-Sandy range coming in at a seasonally adjusted rate of 370,000 new claims for the week ended December 1, a decline of 25,000 claims.

Last week's drop brought the claims number back to its pre-storm's 360,000-370,000 range, which economists said suggested there had been no marked weakening in the labor market. They had forecast claims falling to 380,000.

The four-week moving average for new claims, a better measure of labor market trends, rose 2,250 to 408,000, reflecting the impact of the late October storm. That was the highest level since October last year.

The claims report showed the number of people still receiving benefits under regular state programs after an initial week of aid dropped 100,000 to 3.21 million in the week ended November 24.

Last week's claims data has no bearing on Friday's employment report. Economists estimate the monster storm, which slammed into the densely populated East Coast, could subtract between 25,000 and 75,000 jobs from November's nonfarm payrolls.

A Labor Department official said there was nothing unusual in the state-level data, but noted claims tend to post their largest percentage increase in the last week of November, catching up from the Thanksgiving holiday. In addition, seasonal layoffs in sectors like construction start picking up this time of the year. This will make claims a less useful gauge of labor market conditions in the weeks ahead.

A separate report from consultants Challenger, Gray & Christmas showed planned layoffs at U.S. firms rose nearly 20 percent in November to their highest level in six months.

ECB Leaves Rates Unchanged

ECB President Mario Draghi took the stage at the ECB press conference after the Governing Council voted to leave rates unchanged earlier this morning. The main focus was on the ECB's new staff projections for growth and inflation in the Eurozone over the coming years.

The ECB downgraded its 2012 GDP forecast to a range of -0.6 percent to -0.4 percent from -0.6 percent to -0.2 percent previously, its 2013 GDP forecast to a range of -0.9 percent to 0.3 percent from -0.4 percent to 1.4 percent previously, and said its 2014 GDP forecast was for a range of 0.2 percent to 2.2 percent growth in the euro area.

On inflation, the ECB forecasts 2.5 percent inflation in 2012 versus a range of 2.4 percent to 2.6 percent previously. 2013 inflation forecasts were lowered to a range of 1.1 percent to 2.1 percent from 1.3 percent to 2.5 percent previously. In 2014, the ECB sees inflation in a range of 0.6 percent to 2.2 percent.

The considerable downgrades to both growth and inflation forecasts perhaps pave the way for more easing measures down the road.

During the Q&A that followed the ECB statement, Mario Draghi fielded questions from reporters on the banking union, the Greek debt buyback, a Spanish bailout request, today's bout of financial market turmoil in Italy, the Irish budget, and soaring euro-area unemployment, among other things.