MarketView for March 6

Summary

The equity indexes were mixed on Thursday, with the S&P 500 closing at yet another record on better-than-expected jobless claims data and the European Central Bank's move to keep rates unchanged. Thursday's milestone marked the S&P 500's fourth record closing high over the past six sessions. However, the overall sentiment was cautious ahead of Friday's nonfarm payrolls report and the seemingly see-saw of tensions between Ukraine and Russia and Russia and the rest of the global community.

The CBOE Volatility Index ended up 2.3 percent at 14.21.The VIX generally moves inversely to the performance of the S&P 500 and is often used to hedge against a market decline.

Weekly applications for unemployment insurance fell by 323,000 claims, the lowest in three months and a sign of strength in a labor market that has been hobbled by severe weather. However, new orders for factory goods fell more than expected in January and factory shipments were lower, adding to signs of a slowdown in manufacturing activity.

Friday's nonfarm payrolls report, due at 8:30 a.m. tomorrow, could indicate that job growth picked up enough in February to encourage the Fed to continue scaling back its QE3 program. Yet, the gain was likely to be tepid given the unrelentingly harsh winter.

The day's largest gainers were stocks in basic materials, the financial and the industrial sectors, often associated with strong economic fundamentals.

Among those companies losing ground, Staples fell 15.3 percent to end the day at $11.35. The retailer forecast a decline in sales. Staples also said it would close up to 225 stores in the United States and Canada by 2015.

Costco was down 2.8 percent to $113.26 after the warehouse retailer reported a bigger-than-expected 15 percent decline in quarterly profit as unusually deep discounting in the holiday shopping season hurt margins.

Crimea's parliament voted to join Russia and its Moscow-backed government set a referendum for 10 days' time on the decision in a dramatic escalation of the crisis in the Ukrainian Black Sea peninsula.

An index of Moscow stocks lost more than 2 percent after the vote in Crimea, but pared the losses and closed down 1 percent. The ruble weakened 0.3 percent versus the U.S. dollar. A U.S.-traded Russian ETF fell 1.1 percent to $23.37.

The European Central Bank decided not to take any action at its meeting on Thursday because economic and monetary conditions had not changed enough to warrant it. The euro hit its highest level against the dollar since late December.

Trading volume was lower with about 6.4 billion shares changing hands on the major equity exchanges, a number that was below the daily average of about 7 billion shares in the past month according to data from BATS Global Markets.

Jobless Claims at 3-Month Low

The Labor Department reported Thursday morning that the number of new claims for jobless benefits hit a three-month low last week, indicating a continuing degree of strength in a labor market that has been adversely affected by severe weather. Initial claims for state unemployment benefits fell by 26,000 claims to a seasonally adjusted 323,000 claims, bringing that number to its lowest level since the end of November..

The decline in first-time claims exceeded Street expectations and suggested labor market fundamentals remain relatively strong, despite other data that have shown cold temperatures dampened hiring in recent months.

A closely watched government report on employment due on Friday is expected to show that the weather adversely weighed on job growth for a third straight month in February, although not as heavily as in the prior two months.

Nonfarm payrolls are forecast to have increased by 150,000 jobs in February, according to a Reuters’ survey, up from gains of 113,000 in January and 75,000 in December. The claims data has no bearing on that report as it fell outside the survey's reference period.

Another report showed a sharp downward revision to business productivity in the fourth quarter, suggested firms may need to step up hiring soon to maintain output. Productivity rose at a 1.8 percent annual rate instead of the previously reported 3.2 percent pace. It had increased at a 3.5 percent pace in the third quarter.

Unit labor costs - a gauge of the labor-related cost for any given unit of output - were revised to show them falling at a 0.1 percent rate in the fourth quarter, indicating no wage-related inflation pressures in the economy. They had previously been reported to have dropped at a 1.6 percent rate. They fell at a 2.1 percent rate in the third quarter.

Factory Orders Down

The Commerce Department reported Thursday morning that new orders for manufactured goods declined 0.7 percent in January, a lower number than had been expected. Shipments were also lower, adding to signs of a recent slowdown in manufacturing activity. At the same time, December's orders were revised downward to show a 2.0 percent drop instead of the previously reported 1.5 percent decline.

Factory activity is cooling as businesses place fewer orders while working through stocks of unsold goods. Unseasonably cold weather, which has weighed on activity ranging from home building to hiring, is also a drag on manufacturing.

Factory orders fell across most categories, with large declines in transportation, primary metals and electrical equipment, appliances and components. Orders for machinery also fell.

Meanwhile, orders excluding the volatile transportation category rose 0.2 percent, reflecting gains in defense capital goods and in computers and electronic products.

The Commerce Department also said orders for durable goods, manufactured products expected to last three years or more, fell 1.0 percent as reported last month. Durable goods orders excluding transportation were up 1.1 percent as previously reported.

Orders for non-defense capital goods excluding aircraft - seen as a measure of business confidence and spending plans - increased 1.5 percent rather than the previously reported 1.7 percent advance.

Household Wealth Reaches New High

The Fed reported on Thursday that household net worth reached to a new high at the end of last year, as the value of real estate and shareholdings rose along with the size of bank accounts. According to the Fed, household net worth increased by $2.95 trillion to a total of $80.66 trillion in the fourth quarter, eclipsing a previous record high.

The value of households' property, consumer goods, bank deposits and stocks all increased in the quarter. The Fed said household net worth rose 14 percent in the full year, driven by a $5.6 trillion rise in the value of shares and a $2.3 trillion increase in the value of real estate.

Increases in housing wealth make it easier for families to borrow against the equity in their homes, while overall wealth gains make consumers feel generally more comfortable spending their money. Many economists believe that consumers spend a few cents of every dollar they gain in wealth.

At the same time, the growth in household debt slowed to an annual rate of 0.4 percent in the fourth quarter, from 3.0 percent previously, while home mortgage debt fell. Net debt reached a level of $13.11 trillion.