MarketView for January 8

Summary 

Share prices were slightly higher once again on Friday after trading in the negative territory for most of the day after the Street decided that the weak December jobs data wouldn't interrupt a trend of steady economic recovery. Both the Dow Jones industrial average and the S&P 500 indexes reached new 15-month highs while the Nasdaq climbed to its highest level in 16 months. What this meant is that Friday closed out a strong week for equities with the S&P 500 hitting higher closing numbers for all five sessions. For the week the Dow rose 1.8 percent, the S&P added 2.7 percent, while the Nasdaq rose 2 percent.

Unfortunately, the economy still saw a loss of 85,000 jobs in December, according to the Labor Department. However, an occasional loss on the way to recovery is not inconsistent with a slowly recovering economy as the pace of monthly jobs losses have declined sharply since the height of the recession. In addition, November's payrolls report was revised to a gain in jobs, bolstering that view. The weaker report is also supportive of the view that Federal Reserve will keep interest rates low for a prolonged period, which is favorable for stocks.

Helping out the markets was an announcement by United Parcel Service indicating that the company had raised its fourth-quarter outlook but that it planned to reduce employment by 1,800 jobs. Its shares rose nearly 5 percent and increased the expectation that we will see another quarter of strong corporate earnings when Alcoa Inc kicks off the reporting season on Monday. The news from UPS also helped out Fedex, whose shares rose 2.5 percent to $84.99, and sent the Dow Jones Transportation average to a gain of 1.8 percent. Both UPS and FedEx are economic bellwethers because they reflect trends in business and consumer spending.

Biotechnology companies were among top gainers on the Nasdaq. Teva Pharmaceutical Industries Ltd gained 4.4 percent to $59.34 a day after the world's largest generic pharmaceutical company set a revenue target for 2015 of $31 billion, more than double its current annual amount.

Genzyme advanced for a second day on rumors that billionaire investor Carl Icahn was considering a proxy battle at the biotech company. Genzyme closed up 5.2 percent at $53.81 after a 4.4 percent rise on Thursday.

Morgan Stanley began following the healthcare services sector with an 'attractive' view. Part of that call included an 'overweight' rating for Express Scripts, which rose 3.4 percent to $91.65.

Wall Street will now turn its attention to reports on fourth-quarter earnings, which starts with Alcoa after the bell on Monday. Since the start of the year, the Street has revised upward its earnings estimates for seven out of ten S&P sectors.

Unemployment Rate Unchanged

Employers unexpectedly cut 85,000 jobs in December, cooling optimism on the labor market's recovery and keeping pressure on President Barack Obama to find ways to spur job growth. According to the Labor Department said on Friday that November payrolls were revised to show the economy actually added 4,000 jobs rather than losing 11,000 as initially reported, breaking a streak of consecutive losses that dates back to December 2007. With revisions to October, however, the economy lost 1,000 more jobs than previously estimated over the two months.

The unemployment rate was unchanged at 10 percent in December, but that reflected a surprisingly large number of people leaving the labor force. High unemployment is one of the toughest domestic challenges facing Obama. The administration's success in getting people back to work will shape prospects for Obama's political future.

"We're going to have to work harder to create more jobs," Labor Secretary Hilda Solis told Bloomberg TV. "The president will outline more tax credits for small business because they are the engine of growth."

Unemployment remains the Achilles heel of the economic recovery, which started in the third quarter of 2009 following the worst recession in 70 years. Creating jobs is critical to sustaining the economic recovery when government stimulus fades.

For the whole of 2009, the economy shed 4.2 million jobs, according to the Labor Department's survey of employers. The department's survey of households offered an even gloomier assessment of the job market, showing that 661,000 people left the work force last month. So it was no surprise that the broadest measure of unemployment, which includes discouraged workers and those working part-time for economic reasons, rose to 17.3 percent from 17.2 percent in the prior month.

The payrolls report, which is viewed by most economists as the more reliable gauge of the labor market's health, suggested a broad trend toward improvement was still intact. Professional and business services added 50,000 positions, while education and health services increased payrolls by 35,000.

Temporary help employment rose 47,000, continuing an upward trend that shows a reluctance among employers to hire full-time workers but that suggests they may need to soon.

Manufacturing payrolls fell 27,000 after dropping 35,000 in November. The construction sector lost 53,000 jobs, while the service-providing sector shed only 4,000 workers. The average workweek was unchanged at 33.2 hours, while average hourly earnings increased by $18.80 from $18.77 in November.

The state of the job market is among the key factors that will determine the timing of the Fed's first interest rate increase since cutting benchmark overnight borrowing costs to near zero percent in December 2008. The Fed has vowed to keep rates low for an extended period.

2.3 Billion In Clean Energy Tax Credits to Help Unemployment

President Barack Obama unveiled a $2.3 billion tax credit on Friday to help reduce the unemployment situation by promoting clean energy, as new data showed the country's unemployment rate remained in double digits.

Obama said the credit, from funds earmarked under a $787 billion stimulus package he signed last February, would create 17,000 jobs and be matched by an additional $5 billion in private capital.

"Building a robust clean energy sector is how we will create the jobs of the future, jobs that pay well and can't be outsourced," Obama said. "This initiative is good for middle-class families. It is good for our security. It is good for our planet," he said.

"The jobs numbers that were released by the Labor Department this morning are a reminder that the road to recovery is never straight," Obama said. Climate change, alongside healthcare and financial regulation reform, is a core goal of Obama's White House.

The tax credits have been granted to 183 projects across the country involved in technologies that include solar, wind and other initiatives to improve energy efficiency.

On top of the employment resulting directly from the tax credit, Obama said it would lead to "tens of thousands" of additional new jobs.

According to the White House the previously allocated stimulus money have helped to prevent the deepest recession in 70 years from getting any worse. The White House has also renewed its push to increase job creation, which certainly warrants additional public spending.

The House of Representatives has approved an additional $155 billion jobs package to boost hiring, although the Senate has yet to take up its version of the legislation and will first tackle healthcare reforms.

Companies that will benefit from the clean energy tax credit include Itron in Liberty Lake, Washington, PPG Industries in Pittsburgh, Pennsylvania and TPI Composites in Scottsdale, Arizona.