MarketView for February 2

Summary 

The major equity indexes closed out the day on Thursday with little to show for their efforts as the Street awaits Friday's key employment report. The wait-and-see approach was reflected in the day’s light volume. Approximately 6.92 billion shares changed hands on the three major exchanges, as compared to the 200-day moving average of about 7.76 billion shares.

The only real activity came from the technology sector after Qualcomm reported some excellent earnings numbers. Qualcomm hit its highest level in 12 years gaining 2 percent to $60.73 after reaching a high of $61.95.

Recent economic data suggests the economy is on a slow but steady path to recovery, which has in turn aided the recent rally among equities.  Friday's nonfarm payrolls report, which is expected to show the improving labor market trend remained intact in January, will be a key test of whether the markets can extend their upward reach. The optimism over the labor market was reinforced as new claims for jobless benefits dropped more than expected in the latest week, according to data released on Thursday.

Employment growth probably slowed in January as temporary workers hired during the busy holiday shopping season were laid off, but the underlying picture is expected to remain relatively positive. Therefore, the Street is betting that non-farm payrolls likely rose by 150,000 after increasing 200,000 in December, according to a Reuters survey. The unemployment rate is seen holding steady at a near three-year low of 8.5 percent.

MasterCard ended the day up 6.7 percent to close at $381.57 after the payment processor exceeded estimates for the seventh straight quarter. Healthcare shares were among the day’s losers. Merck fell 0.5 percent to close at $38.44 after the company indicated that its earnings would be relatively unchanged in 2012.

Cigna posted a lower-than-expected fourth-quarter earnings number, with much of the damage coming from its disability and life coverage business and international plans. To make matters worse, Cigna also provided 2012 earnings guidance that was below the Street’s target, sending shares down 3.4 percent to $44.13.

Boston Scientific reported lower quarterly earnings as sales declined in its two biggest businesses, cardiac rhythm management and interventional cardiology. Its shares fell 4.1 percent to $5.84.

Green Mountain Coffee Roasters rose 23.9 percent to $66.42 a day after its first-quarter earnings far exceeded expectations.

The third warmest January in 50 years hurt same-store sales at department stores and apparel retailers. But discounters such as Target and Costco as well as high-end stores still managed to exceed Street expectations. Target rose 1.2 percent to close at $52.00, while Abercrombie & Fitch fell 13.8 percent to close at $40.37.  Costco was up 2.8 percent to close at $85.51.

Facebook could raise as much as $10 billion in the biggest-ever Internet initial public offering, according to a filing Wednesday. In 2011, Facebook said net income rose 65 percent to $1 billion on revenue of $3.71 billion.

Jobless Claims Fall

New claims for unemployment insurance fell more than expected last week, pointing to further healing in the nation's battered jobs market. Initial claims for state unemployment benefits slid 12,000 last week to 367,000, the Labor Department said on Thursday. Job growth has gained momentum in recent months and the unemployment rate dropped to 8.5 percent in December, its lowest level in nearly three years.

The investment community is looking for guidance to an employment report for January to be released on Friday to get a firmer fix on the health of the labor market. The report is expected to show the jobless rate held steady while payroll growth slowed a bit from December. While Thursday's claims data has no direct bearing on the payroll report, the trend in claims was nonetheless positive.

The four-week moving average for initial filings fell by 2000 claims to 375,750 claims and has  been lower than 400,000 for eight of the last 10 weeks. That is considered a dividing line between an improving and a deteriorating labor market.

The number of people still receiving benefits under regular state programs after an initial week of aid fell 130,000 to 3.437 million in the week ended January 21, the lowest since September 2008.

A separate Labor Department report showed growth in non-farm productivity slowed in the fourth quarter. Some still suggest that companies might be closer to squeezing all they can out of their current staff.

The Fed last week acknowledged some improvement in the labor market but said the jobless rate remained too high and that it would likely keep overnight lending rates near zero until at least late-2014. Fed policymakers' central forecast expects unemployment will end this year between 8.2 and 8.5 percent.

The report on jobless claims showed the number of Americans on emergency unemployment benefits rose 100,392 to 3.022 million for the week ended January 14, the latest week for which data is available. A total of 7.67 million people were claiming benefits during that period under all programs, little changed from the prior week.