The Day Ahead: Jobs Take Center Stage

 | Sep 02, 2011 | 8:16 AM EDT  | Comments
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In the Headlines

Futures headed lower Friday, as traders awaited the eagerly anticipated Labor Department's nonfarm payrolls report for August.

The jobs report has been one of the most eagerly anticipated monthly releases for quite some time, as the market eyes the stubbornly high unemployment rate. For August, economists have their hopes pinned on 75,000 new jobs, down from the prior reading of 117,000. A significant divergence from the expectation, in either direction, has potential to affect stocks.

The jobs report, which, along with a slew of other employment-related data from the Labor Department, is the only significant U.S. economic release slated for today. Part of the data package is the unemployment rate, seen coming in at 9.1%, unchanged from last month.

Weekly trading volume on Wall Street appears on pace to finish lower than average, and lower than last week. Generally, the Friday before the Labor Day holiday brings tepid levels of trade.

Gold, which edged higher Thursday as equities fell, advanced early Friday, gaining $31.50 to $1,860.60 per ounce.

West Texas Intermediate Crude fell $1.06 per barrel to $87.87.

Global Trade

Globally, investor sentiment turned sour Friday. Asian stocks finished lower, snapping a six-day win streak. Worries about falling exports to the U.S. and Europe sent the region's manufacturers tumbling. Honda (HMC) dropped 2% in Japanese trade, following disappointing U.S. sales results on Thursday.

In Europe, indices skidded, with Greece news putting a dent in trading. Talks between the nation's finance officials and representatives from the EU and IMF have been put on ice for 10 days, following reports that negotiations so far had not been especially fruitful.

European banks were big decliners in the session. Prior to Wall Street's open, the euro retreated vs. the dollar.

Bank Brouhaha

Other news hurting stocks Friday came from the Federal Housing Financing Agency, which overseas Freddie Mac and Fannie Mae. The agency plans to sue more than a dozen large banks, alleging that they misrepresented the quality of mortgage securities sold during the real estate bubble.

Bank of America (BAC), JPMorgan Chase (JPM) and Goldman Sachs (GS) are among the targeted banks.

B of A shares dropped 0.11%, 1.39%, to $7.80 in premarket trade. JPMorgan chase shed $0.50, 1.38%, to $35.80. Goldman Sachs fell $0.66, 0.59%, to $111.50.

Earnings

Earnings news is almost nonexistent today, with the only significant report coming from Campbell Soup (CPB), which said fourth-quarter income was $0.43 per share, ex-items, topping views of $0.38.

Sales were also ahead of expectations, coming in at $1.61 billion.

Market Movers

Price movers ahead of the open included Netflix (NFLX), which plunged $19.77, 8.48%, to $213.50. The tumble follows Thursday's news that Starz would not renew its contract with Netflix to supply streaming movie and TV content.

Chip designer Advanced Micro Devices (AMD) slipped $0.18, 2.69%, to $6.50 early Friday. The stock has suffered along with many others in the chip sector in recent months. It's showing a year-to-date decline of 18.34%, prior to today's opening bell.

Gold miner Newmont (NEM) climbed $0.23, 0.37%, to $62.70 in the premarket. Shares of the Colorado-based company rallied 12.6% last month, but failed to regain their all-time high of $65.50, reached nearly a year ago.

Upside volume in Newmont was strong last month, a potentially bullish signal.

Analyst Actions

An early analyst action came from Robert W. Baird, which upgraded clothing retailer Quiksilver (ZQK) to Outperform from Neutral. Baird cited valuation, and a strengthening portfolio of brands at Quiksilver.

Credit Suisse offered opposing views on two bellwether shipping companies. The bank upgraded UPS (UPS) to Outperform from Neutral, and downgraded FedEx (FDX) to Neutral from Outperform. Credit Suisse cited UPS' lower operating leverage, which it said would be an advantage in a weakening economy.

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