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Wednesday's business news highlighted mixed employment data and a sour service sector report. After the bell though, Cisco Systems (Nasdaq: CSCO), a barometer of global capital investment, reported super results. While Asia moved lower up to the late hour of publishing here, Cisco's news offers the market a chance to recover on Thursday morning. That said, Thursday's business news schedule includes a slew of economic reports in the pre-market that carry the ability to derail any gain from Cisco's news. Over the longer term, and this is not the first time I've said this (neither lately nor over the course of the life of this blog), China / US relations threaten.
ADP National (Private) Employment Report
ADP produced its monthly National Employment Report Wednesday, and it showed the smallest jobs decline since February 2008. Private Nonfarm Payrolls only declined by 22,000 in January, better indeed than the 61,000 net jobs lost in December (revised from 81K). This was uplifting news for sure, especially as the federal government moves in earnest to initiate job creation.
Jobs were lost in both large and small sized businesses, though mid-sized operations managed to add 9K positions. Medium-sized companies are defined as those employing between 50 and 499 people. Large-sized business, or those employing 500 or more folks, experienced a net job shedding of 19K. Meanwhile, the sector targeted most by the Obama Administration, small-sized operations employing less than 50 individuals, declined by 12K. Don't you worry though, here comes Super-Bama with his 2011 budget full of incentives for small businesses to take the leap and hire some folks... if those stubborn reds will just let it pass into law (I'm Independent!).
Goods producing businesses continued bleeding jobs in January, with 60K lost. Manufacturing shed 25K jobs by itself, but that was the lowest such figure since January of 2008. Construction businesses dropped another 37K employees, taking that total sector loss to over 1.8 million from the industry peak in January of 2007.
The service sector added 38K jobs in January, with 16K in small and 22K in medium sized operations. Large businesses saw no change in employment. We would expect the service sector to add jobs over the holidays, but January's gain cannot be attributed to the same catalyst. Retail Trade lost ground in January, according the same-day release of the ISM Non-Manufacturing Index. We might also have speculated that with the great erosion of jobs in the financial sector through this crisis, and with the commercial banks making money again, Wall Street might be hiring anew. That argument is pretty well crushed though by the ISM report, which shows contraction in the broader finance and insurance sector. We know the public sector is hiring for the census, but where on earth did these gains come from...
ISM Non-Manufacturing Report
Speaking of the service sector, the Institute for Supply Management reported its Non-Manufacturing Index (NMI) Wednesday. However, the reading for January fell short of economists' forecasts. ISM's NMI was measured at 50.5, short of economists' 51.0 estimate, though up from the 49.8 measure taken in December. The measure reflects economic expansion when marking above 50.0, and so with this most important segment of the American economy yet lagging, the stock market found it bitter news.
Within the measure, the New Orders Index increased 2.7 points to 54.7. We already know that inventory restocking is playing a role in order growth, as is the growth of Asia; domestic demand though has a hard road ahead as long as unemployment remains so high. While the Employment Index improved a point, it only reached 44.6. The Business Activity Index stuck above 50, but lost a point in marking at 52.2.
"Only four service sector industries reported growth in January, while 11 noted contraction."
As we studied the details of the report, it became even more clear why the market generally viewed it negatively. Only four service sector industries reported growth in January, while 11 noted contraction. The four growers included Utilities, Information, Wholesale Trade and Other Services. Shall we speculate utilities are already adding jobs on alternative energy advances?
If that was not bad enough for you, well the Price Index serves to provide the last nail. Based on the data, prices rose. The index moved 1.6 points higher to 61.2, as respondents noted concern about an unexpected and "unexplained" rise in fuel prices through the month.
Challenger Job-Cuts Report
Planned layoffs increased versus December's check up, hitting a five-month high no less. Announced corporate layoffs amounted to 71,482, comparing against December's 45,094. John Challenger attributed the weakness to typical and seasonal patterns. He noted that employers base budgets greatly on the year just passed, and that a good number of retail trade jobs are lost every January. John said that a number here below 100K is actually a good sign. Well, we don't know about that, but we do understand the difference between this January's 71K and 2009's 242K.
The market did not even give a damn about the renewal of Ben Bernanke's Fed Chairmanship and his low-rate plan last week, so when he was sworn in on Wednesday, we were not surprised that the Dow still slipped 0.26%. In other news, the EIA reported Petroleum Status, noting a 2.3 million barrel increase in crude inventory; a 1.3 million barrel drop in gasoline; and a 1.0 million barrel decline in distillate fuel inventories.
After the Bell
Cisco Systems (Nasdaq: CSCO) reported earnings after the bell Wednesday, and the shares moved up 3.6% in after-hours trading as a result. Excluding one-time charges, Cisco earned $0.40 a share, easily beating the analysts' consensus view for $0.35. Revenues also shot past the company's forecast, and its new outlook exceeds the analysts view. US order growth increased 17%, though the company's legendary CEO tempered enthusiasm, cautioning forecasters to stay conservative. Basically, Cisco played the quarter perfectly. And oh by the way, CSCO is going to hire 2K to 3K new employees over the next couple quarters.
The remainder of Wednesday's earnings reporters included Yum! Brands (NYSE: YUM), Actions Semiconductor (Nasdaq: ACTS), Adept Technology (Nasdaq: ADEP), Affymetrix (Nasdaq: AFFX), Agilysys (Nasdaq: AGYS), Akamai (Nasdaq: AKAM), Alexander & Baldwin (Nasdaq: ALEX), Alvarion (Nasdaq: ALVR), AMERCO (Nasdaq: UHAL), Ameriprise Financial (NYSE: AMP), Ameristar Casinos (Nasdaq: ASCA), Arrow Electronics (NYSE: ARW), Assurant (NYSE: AIZ), ATMI (Nasdaq: ATMI), Atwood Oceanics (NYSE: ATW), AudioCodes (Nasdaq: AUDC), Avalonbay Communities (NYSE: AVB), Beacon Roofing (Nasdaq: BECN), Black & Decker (NYSE: BDK), Blackboard (Nasdaq: BBBB), Breeze-Eastern (AMEX: BZC), Brightpoint (Nasdaq: CELL), Bristow Group (NYSE: BRS), Broadcom (Nasdaq: BRCM), Cadence Design Systems (Nasdaq: CDNS), Cardiovascular Systems (Nasdaq: CSII), Carlisle Companies (NYSE: CSL), C.B. Richard Ellis (NYSE: CBG), ClickSoftware Tech (Nasdaq: CKSW), Comcast (Nasdaq: CMCSA), CommVault (Nasdaq: CVLT), Concur Tech (Nasdaq: CNQR), Consolidated Graphics (NYSE: CGX), Cytokinetics (Nasdaq: CYTK), Diebold (NYSE: DBD), Dolby Laboratories (NYSE: DLB), Double-Take Software (Nasdaq: DBTK), DynCorp (NYSE: DCP), Entropic Communications (Nasdaq: ENTR), Equifax (NYSE: EFX), Equity Residential (NYSE: EQR), Exponent (Nasdaq: EXPO), FEI Co. (Nasdaq: FEIC), Fidelity National Financial (NYSE: FNF), Forestar Group (NYSE: FOR), Furniture Brands (NYSE: FBN), Genomic Health (Nasdaq: GHDX), Headwaters (NYSE: HW), Health Net (NYSE: HNT), Hill-Rom Holdings (NYSE: HRC), Honda Motors (NYSE: HMC), IDEX (NYSE: IEX), Infospace (Nasdaq: INSP), Int'l Paper (NYSE: IP), Investment Technology Group (NYSE: ITG), ITT Corp. (NYSE: ITT), Kimco Realty (NYSE: KIM), Lazard (NYSE: LAZ), M/I Homes (NYSE: MHO), Magellan Midstream (NYSE: MMP), MarketAxess (Nasdaq: MKTX), Mastech (NYSE: MHH), Mattson Tech (Nasdaq: MTSN), Measurement Specialties (Nasdaq: MEAS), MEMC Electronic Materials (NYSE: WFR), Mitsubishi UFJ Financial (NYSE: MTU), Monster Worldwide (NYSE: MWW), National Oilwell Varco (NYSE: NOV), Ness Technologies (Nasdaq: NSTC), Neurocrine Biosciences (Nasdaq: NBIX), New Jersey Resources (NYSE: NJR), Newport Corp. (Nasdaq: NEWP), Novellus (Nasdaq: NVLS), O2 Micro (Nasdaq: OIIM), ON Semiconductor (Nasdaq: ONNN), OneBeacon Insurance (NYSE: OB), Open Text (Nasdaq: OTEX), Opnet (Nasdaq: OPNT), Parlux (Nasdaq: PARL), PennantPark Investment (Nasdaq: PNNT), Pericom Semi (Nasdaq: PSEM), Pfizer (NYSE: PFE), Polo Ralph Lauren (NYSE: RL), Powell Industries (Nasdaq: POWL), Primus Guaranty (NYSE: PRS), Radvision (Nasdaq: RVSN), Regency Centers (NYSE: REG), RightNow Tech (Nasdaq: RNOW), Roper Industries (NYSE: ROP), Ryder (NYSE: R), Sangamo BioSciences (Nasdaq: SGMO), Savvis (Nasdaq: SVVS), Selective Insurance (Nasdaq: SIGI), Silicon Labs (Nasdaq: SLAB), Silicon Storage Tech (Nasdaq: SSTI), Siliconware Precision (Nasdaq: SPIL), Spartan Stores (Nasdaq: SPTN), Spherion (NYSE: SFN), Sport Supply (NYSE: RBI), Standard Pacific (NYSE: SPF), Star Gas Partners (NYSE: SGU), Telefonos De Mexico (NYSE: TMX), The Brinks (NYSE: BCO), The Hanover Insurance Group (NYSE: THG), Thermo Fisher Scientific (NYSE: TMO), THQ (Nasdaq: THQI), Time Warner (NYSE: TWX), Triumph Group (NYSE: TGI), TrueBlue (NYSE: TBI), United Microelectronics (NYSE: UMC), United Rental (NYSE: URI), Virage Logic (Nasdaq: VIRL), Visa (NYSE: V), Walter Energy (NYSE: WLT), Western Union (NYSE: WU), WGL Holdings (NYSE: WGL), Willis Group Holdings (NYSE: WSH) and Wolverine World Wide (NYSE: WWW).
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