Improvements in the US employment outlook and solid earnings from Halliburton and McDonald’s enticed the bulls back into equities this afternoon, pushing Wall Street higher on the open.
NABE survey expects pickup in hiring
A survey from the National Association of Business Economics (NABE) helped lift the mood on Wall Street this afternoon after saying that the employment outlook rose to a 12-year high. The NABE survey of 84 companies for the fourth quarter showed that 42% expect to increase jobs in the next six months, while only 7% said they predict job cuts. The difference between these two measures is the largest since the question was first asked in the survey in 1998.
‘It looks like the opening melody of a true recovery in the labor market’ said Shawn DuBravac, Chairman of the NABE.
The US has already been showing signs of improvement in the employment sector, with last week’s initial jobless claims falling to 404,000, while continuing claims were down to 3,861,000, both well below forecasts. The private sector added 103,000 jobs in December and the unemployment rate fell to 9.4%, all signs that conditions are moving in the right direction.
Of primary importance is restoring business confidence so managers start hiring again. The Fed’s bond-buying program and renewed efforts by President Obama to appease the business community are setting the foundations in place for a pro-growth business environment. If the momentum in the US economy can continue then unemployment will likely fall further. The issue of structural unemployment has been raised, and that will take many years to resolve, but in the medium term, if businesses do increase hires in the next six months as the NABE suggests then there could be a meaningful reduction in US unemployment by the end of the year.
US equities
By 3.30pm (London time) the Dow Jones Industrial Average was trading 47.11 points (+0.4%) higher at 11918.95, the S&P 500 gained 2.71 points (+0.21%) to 1286.06, while the Nasdaq 100 rose 9.48 points (+0.42%) at 2277.80.
Oilfield services provider Halliburton gained 0.87% to $39.53 after fourth-quarter profits topped analyst expectations. Net income more than doubled to $605 million, from $243 million a year earlier. Excluding costs from certain items, earnings per share was 68 cents, beating the 63 cents per share analysts were projecting. Revenue in the fourth-quarter rose from $4.7 billion to $5.2 billion. The company posted a loss from operations in their Gulf of Mexico operations due to the moratorium set earlier in the year. CEO and Chairman Dave Lesar said ‘We continue to believe that prospects for a recovery in the Gulf of Mexico will remain uncertain through the first half of 2011 and perhaps the full year’ However, the company will keep its infrastructure and headcount in the region for when operations in the area rebound.
Shares in McDonald’s, the world’s largest restaurant chain, fell 0.2% to $74.87 after fourth quarter results were in line with expectations. Net income for the quarter rose to $1.24 billion, or $1.16 a share, while revenue increased to $6.21 billion. The company has been trying to attract new customers by offering new menu items such as frappes, smoothies and small snack options. CEO Jim Skinner said that ‘We are off to a good start in 2011 - our momentum is continuing in January with global comparable sales expected to increase 4-5%.’
Retailer JC Penney rose 4.98% to $31.85 after the company announced it will be closing stores as part of its restructuring program. William Ackman, CEO of Pershing Capital Management, and Steven Roth, Chairman of Vornado Realty Trust, will join the company’s board of directors.
UK equities
The FTSE 100 was 49.83 points higher (+0.84%) at 5946.08 and the FTSE 250 climbed 39.47 points (+0.34%) to 11572.16.
Tobacco and pharmaceuticals were among the best-performing sectors this afternoon. British American Tobacco and Imperial Tobacco Group gained 3.46% and 2.17% respectively. In the pharmaceuticals, AstraZeneca rose 2.06% to 3024.5p, while GlaxoSmithKline climbed 1.6% to 1174.5p. According to Bloomberg median price estimates, AstraZeneca could reach 3200p while GlaxoSmithKline’s target is 1390p.
Political tensions in Ireland spooked the banking sector, with Lloyds losing 3.4%, Royal Bank of Scotland shed 3.34% and Standard Chartered fell 1.46%.
Software company Misys will be reporting tomorrow morning at 7am (London time). Details on what to look out for before the company reports can be found under our Shares Analysis section on the IG Index website.
Forex
The US dollar index was 0.38% lower at 77.917. The euro recovered from earlier losses to trade 0.23% higher at $1.36670 against the US dollar by 3.30pm (London time). The euro fell this morning after Ireland’s coalition party was thrown in disarray, with the minority Green party leaving the coalition, sparking concerns that the government’s budget may not be passed before the next general election. However, those concerns eased by the afternoon and confidence that EU officials will contain the region’s crisis supported the common currency. GBP/USD was down 0.12% to $1.5975 ahead of fourth-quarter GDP figures tomorrow. The Aussie dollar was among the best performing currencies today rising 0.54% against the US dollar to $0.9935. Official data released tomorrow could show inflation rising to 3% in the fourth quarter.
Looking ahead
American Express and Texas Instruments will be reporting after today’s close.
On Tuesday, Australia’s CPI will be announced at 12.30am (London time). Fourth-quarter UK GDP, which may fall to 2.6% from 2.7% the previous quarter, will be released at 9.30am (London time). In the afternoon, the S&P/Case-Shiller home price index is published at 2pm (London time), followed by the Richmond Fed manufacturing index at 3pm (London time). Bank of England Governor Mervyn King will be making a speech at 7.40pm (London time).
3M, Du Pont, Johnson & Johnson, AK Steel and Yahoo will be reporting tomorrow.
