MarketView for January 9

Summary

Stocks ended little changed on Thursday in a choppy session ahead of Friday's payrolls report, which may provide insights into whether the Federal Reserve will announce another cut in quantitative easing at its meeting this month.

Alcoa fell 2.8 percent in extended-hours trading after the U.S. aluminum producer reported a large quarterly loss as it took a $1.7 billion non-cash impairment charge on past smelter acquisitions. During the regular session, Alcoa was down 1.3 percent to close at $10.69.

Many large retailers cut their earnings forecasts because of steep discounts they offered during the holidays to persuade reluctant consumers to buy. Shares of Bed Bath & Beyond fell 12.5 percent to end the day at $69.75, a day after the company lowered its fourth-quarter and full-year earnings estimates.

Family Dollar reported earnings on Thursday as it discounted to win holiday shoppers. Its shares fell 2.1 percent to close at $64.97.

Shares of Five Below closed down more than 15 percent in extended-hours trading after reducing its earnings outlook. The stock ended the regular session at $43.59, down 3.2 percent.

AT&T and Verizon Communications saw their share prices fall a day after T-Mobile reported a fourth-quarter increase in customer growth and offered to pay customers to switch from rival services, escalating already intense competition within the wireless market. AT&T ended the day down 2 percent at $33.54, while Verizon's shares fell 2.1 percent to $47.50.

Macy's was a bright spot among retailers. Its shares ended the day up 7.6 percent to close at $55.80; a day after the department store operator reported strong holiday sales and gave a preliminary forecast for 2014 that suggests it will continue to outpace its rivals.

Costco was up 3.9 percent to $118.51 after the company's December same-store sales exceeded Street expectations.

The stock of Intercept Pharmaceuticals rose 281.1 percent to $275.87 after the company said an analysis by an independent safety committee showed its liver disease drug met the main goal of a mid-stage trial.

About 6.72 billion shares traded on U.S. exchanges, above the 6.34 billion average so far this month, according to data from BATS Global Markets.

The Economy Is Looking Up

The Labor Department reported Thursday morning that the number of new claims for unemployment insurance declined last week and planned layoffs hit a 13-1/2 year low for the month of December, adding to previous data indicating that the economy is improving.

Initial claims for state unemployment benefits fell by 15,000 claims to a seasonally adjusted 330,000 claims for the week ended January 4. Claims are typically volatile around this time of the year because of the weather and the difficulties adjusting the data for unusual and shifting layoff patterns around the holidays.

Nonetheless, they have been largely consistent with other labor market indicators that have painted an upbeat picture of the jobs market and the overall economy.

Separately, Challenger, Gray & Christmas said planned layoffs fell 32 percent during December to the lowest level since June 2000.

The jobless claims data for last week has no bearing on the government's closely watched employment report for December, given that it falls outside of the payroll survey period. The Labor Department is expected to report on Friday that non-farm payrolls increased by 196,000 last month after gaining 203,000 in November.

There is, however, a risk of a stronger number. Private-sector hiring hit its fastest pace in 13 months in December, while small businesses created the most jobs in nearly eight years, according to reports on Wednesday.

The claims data indicated that the number of people still receiving benefits under regular state programs after an initial week of aid rose by 50,000 to 2.87 million for the week ended December 28.

A total of 4.19 million people were receiving benefits under all programs in the week ended December 21. With benefits for the more than a million long-term unemployed having expired on December 28, that figure should decline sharply in the weeks ahead.

The logic being that the expiration of benefits will lower the unemployment rate as former aid recipients either accept jobs they previously would not have considered or drop out of the labor force.

Bernanke Continues Upbeat Outlook

Federal Reserve Chairman Ben Bernanke on Thursday offered an optimistic view on the U.S. economy's prospects to Democratic senators, but warned that "tough decisions" were ahead on dealing with long-term budget deficits and healthcare costs, according to lawmakers present.

Bernanke, whose term as chairman ends on January 31, told a private lunchtime meeting with senators that the reduction in federal budget deficits and the country's improving energy position were "all positives" contributing to a healthier U.S. economy, according to Senator Thomas Carper of Delaware.

Carper added that Bernanke said that "the next several years are more encouraging, but we can't forget those long-term challenges and they involve among other things programs that are concerned with healthcare."

An aging U.S. population will put increasing pressure on the federal government as it struggles to provide retirement and healthcare benefits to the elderly, poor and disabled.

Senate Majority Leader Harry Reid, arguing on the Senate floor that an extension of jobless benefits would boost the U.S. economy, quoted Bernanke as saying that the economy could do much better.

"He talked about the vibrancy of this economy now," said Reid, a Democrat. "He said ... it's not as good as it should be. But he said: 'With a little bit of help it would be on fire.'"

Senate Budget Committee head Patty Murray said Bernanke was "very astute, talking about how things are looking up and some of the things we need to be doing investing in infrastructure and research that will help our economy in the future."

Senator Charles Schumer emerged from the session declaring to reporters that the Fed chief "thinks over the next four or five years the deficit is in very good control but he's much more worried about middle-class incomes and growth of average families than he is about the deficit."

Schumer, the Senate's third-ranking Democrat and a senior member of the Senate Banking Committee, said Bernanke also discussed the issue of financial institutions that are deemed "too big to fail."

Asked how Bernanke addressed that issue, Schumer said: "One of the ways is to have market forces deal with the ability of closing banks when they're in trouble and he talked about how the credit rating agencies, realizing that the government might not come in and bail out these institutions anymore, have actually lowered their credit ratings, which is a market force."