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Early indications point to market strength Friday despite data that showed the economy adding fewer jobs than predicted during the first month of 2007. Thirty minutes before the start of trading in New York, stock index futures indicated that the Dow Jones Industrials ($INDU) might add ten or fifteen points in early trading. The NASDAQ ($COMPQ) is expected to open a few points higher as well.

The US economy added 111,000 new jobs during the month of January, according to the latest statistics from the Commerce Department. That was below economist estimates that called for a 150,000 job increase. However, December numbers were revised higher, to show a 210,000 job gain, compared to the original report that showed a 167,000 increase.

The nation’s unemployment rate edged up to 4.6% from 4.5%. Economists were looking for the percent of unemployed to remain unchanged. Average hourly earnings rose .2%, below economist expectations for a .3% rise. The average workweek shortened to 33.8 hours, compared to 33.9 hours the previous month and economic predictions of 33.9.

Taken together, the overall payroll report is a mixed bag. While the January numbers came in below expectations, hourly earnings were a bit lower than expected, and the unemployment rate unexpectedly rose, the big revision to the December numbers is probably the biggest surprise. Consequently, after a big rally immediately following the news, bonds have reverted back to unchanged. The yield on the benchmark ten-year Treasury note hit a high of 4.87%, but now sits at 4.835%.  

Data on factory orders and consumer sentiment are due out a bit later today. Economists expect the report on Factory Orders (due out at 10:00 a.m. Eastern time) to show a 1.8% increase in December, up from .9% the month before. The University of Michigan consumer sentiment survey for January is due out at approximately the same time and expected to show a modest decline, to 97.8, from its initial reading of 98.   

The buck is rallying on the employment report, up to 121.27 on the yen and 1.2977 on the euro. Meanwhile, gold has lost some of its shine as the dollar rallies. Gold (April), which hit a high of $665 an ounce early in the session, has backed off to $657. Crude is trading up 50 cents to $57.80 a barrel this morning.

In stock news, Electronic Arts (ERTS) is up $3.30 to $53.84 after the company reported third quarter profits of 63 cents a share, which beat analyst estimates by 7 cents. Microsoft (MSFT) is expected to see early strength after Banc of America raised the rating on the stock to “buy” from “neutral.” Amazon.com (AMZN) is under pressure despite posting a better-than-expected 23 cents a share in quarterly earnings. Revenues also topped estimates. Yet, shares slipped 2.8% in overseas trading.  

Overall, the market’s main focus is on the economic data this morning. Since the unemployment report held no major implications for inflation or interest rate policy, stocks are not expected to make a big move in reaction to the news. In addition, the day’s earnings news is mostly positive. Therefore, no major moves are expected and the stock market is expected to see another morning of quiet trading early Friday. 

Frederic Ruffy 
Senior Writer 
Optionetics.com ~ Your Options Education Site

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