MIDDAY ACTION, Feb. 2
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February 2, 2007
Stocks trade mixed in midday action following the January jobs data. The nonfarm payrolls figure came in below estimates, but there was more to this report than the headline figure. Earnings news continues to be a focus as well Friday with Amazon.com (AMZN) falling on its report as is Chevron (CVX). Overall, though stocks are treading water this afternoon, the data released today confirms a slowing in inflation and a soft landing for the economy.
The January jobs data showed that 111,000 nonfarm payrolls were added during the month. Though a solid number, it was well below estimates for gains of about 160,000 payrolls. However, both November and December were revised higher, adding a total of 99,000 payrolls. Besides gains in payrolls, inflation pressures eased with average hourly earnings up just 0.2 percent, a tenth below expectations. Overall, most economists see the recent bout of economic data as a “Goldilocks” situation, one where the economy isn’t too hot or too cold, but just right.
In other economic news, consumer sentiment fell slightly from the early month reading of 98.0, down to 96.9. However, this is still well above the December figure of 91.7. The fact that the expectations index was a bit stronger than current conditions points to some optimism. This data follows the Conference Board confidence data last Tuesday that also showed strength.
In earnings news, AMZN reported that earnings fell 51 percent due in large part to its shrinking margins. This occurred even though the company saw sales rise 34 percent. The company also had a $91 million income tax expense that hurt the bottom line. AMZN expects to see a continued rise in sales this year, predicting growth of 28 percent. Despite this news, the stock is down more than three percent in midday action.
Chevron had the unenvious task of following Exxon Mobil (XOM) with its earnings last night. XOM reported a decline in fourth-quarter earnings, but once again set a record for earnings in a year. CVX, which is the third-largest energy company, also saw a decline in quarter earnings. Profits fell to $3.77 billion as natural gas prices hurt the bottom line. CVX shares are down about half a percent in midday action. Overall, the AMEX Oil Index ($XOI) is off about three-quarters of a percent.
Overall, the major market indices are up nicely this week so some minor profit taking or consolidation Friday isn’t a major concern for the bulls. In fact, the bulls have to be pleased with how earnings have been and the state of the economy, which should bode well for stock prices as we move further into 2007.
Jody Osborne
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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