MarketView for February 2

Summary 

It was an uneventful day on Wall Street as technical measures suggested a five-month rally was growing long in the tooth. Furthermore, many on the Street were reluctant to commit to large positions despite a report indicating that private employers added more jobs than expected during the month of January.

The S&P 500 started to look overbought again after reaching 2 1/2-year highs on Tuesday. The index is more than one standard deviation above its 50-day moving average and the weekly relative strength index is above 70. At the same time, the PHLX semiconductor index was running into resistance around 450 after back-to-back closes above that level for the first time since November 2007.

The PHLX semiconductor index closed up 0.5 percent at 453.91. The 450 area coincides with the 23.6 percent retracement of the slide from the index's historic highs in 2000 to the low hit in November 2008. The 23.6 percent retracement has been a breaking point in the index's trading at least five times in the past decade. The semiconductor industry is considered to be a leading indicator of both economic and market strength.

Whirlpool fell 2.1 percent to close at $83.60 after its earnings missed estimates. Meanwhile, Time Warner and Mattel moved higher after both companies reported better than expected earnings numbers. Time Warner ended the day up 8.6 percent to cl;ose at $35.10, while Mattel closed up 0.9 percent at $24.37.

The Street kept an eye on protests in Egypt as violent street clashes erupted. Concerns that protests could spread to other countries in the region have pressured equities in recent sessions. The Market Vectors Egypt Index ETF, which consists of shares of companies in Egypt, fell 3.7 percent after rising for two consecutive days.

After a pullback late last week, the S&P 500 has started to look overbought by some measures.

Trading volumes were not seriously affected by a harsh winter storm that brought parts of the U.S. Midwest to a standstill. The story was different for futures traders in Chicago, which took much of the brunt of the storm.

Volume on the three major exchanges was approximately 7.26 billion shares, as compared to last year's daily average of about 8.47 billion. Option volume, approaching the close, was about 15.3 million contracts, slightly below the recent average daily volume.

Job Gains Surprise on the Up Side

ADP Employer Services released a report on Wednesday indicating that employers added more jobs than expected in January, the 12th consecutive month that companies took on staff, adding to hopes that the labor market is continuing to improve. Specifically, the private sector added 187,000 jobs in January, compared with a downwardly revised 247,000 jobs in December.

The ADP figures come ahead of the government's more comprehensive January labor market report on Friday, which includes both public and private sector employment. However, the ADP figures for December, both initial and revised, were much stronger than the government report showed, adding to doubts about the reliability of ADP as a predictor of payrolls. Meanwhile, the January ADP figure was above expectations.

Even though most indicators lately have suggested that the economy is gaining momentum, job creation has been slow since the end of the recession in June 2009. Friday's Labor Department report is expected to show a rise in overall nonfarm payrolls of 145,000 in January.

Keep in mind that severe snow storms could result in a figure that is downwardly biased.

Macroeconomic Advisers LLC Chairman Joel Prakken said the ADP data was not significantly affected by the weather and he did not see an impact on Friday's payrolls data either. Macroeconomic Advisers develops the report with ADP.

"When I look at these two months together (December and January) ... I see a clear pattern of strengthening and acceleration here, that I think is very encouraging," Prakken told reporters.

A separate report on Wednesday showed the number of planned layoffs in January rose 20 percent from December, to 38,519, but the total was still the lowest for a January since at least 1993. Noting that January was typically a month of large job cuts, global outplacement company Challenger, Gray & Christmas said the slowdown in job cuts that began in the latter half of 2010 appeared to be continuing.

But in a sign that employers are reluctant to increase full-time hiring, Manpower, which provides temporary services, posted results that beat estimates, saying demand was "exceptional" in Europe and had increased for technology workers.