In the U.S.: Stock-Index Futures Advance After Employment Report

3 August 2012

Take note: “The headline is good, but the details aren’t as good.”

U.S. stock futures advanced, indicating the Standard & Poor’s 500 Index will halt a four-day decline, as payrolls climbed more than forecast in July even as the jobless rate unexpectedly rose to a five-month high.

LinkedIn Corp. (LNKD), the biggest professional-networking website, surged 11 percent after forecasting sales that beat analyst estimates. Facebook Inc. (FB), which has tumbled 47 percent since the company went public in May, rose 1.1 percent. Knight Capital Group Inc. (KCG) advanced 5 percent after tumbling 75 percent in two days on losses from a trading breakdown.

S&P 500 futures expiring in September rose 1.4 percent to 1,381 at 9:09 a.m. New York time. Dow Jones Industrial Average futures added 158 points, or 1.2 percent, to 12,989. The number of shares changing hands in Stoxx Europe 600 Index’s companies was 13 percent lower than the 30-day average at this time of day, according to data compiled by Bloomberg.

“The jobs report is neither here nor there,” said Mark Luschini, chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC, which manages about $54 billion. “There’s not enough evidence for the Fed to act imminently. At the same time, the numbers are not so good, which means that Fed could still do something. It’s not something that one could look at and say: this is either an aberration or one should get enthused about it. On balance, the number was decent.”

Equity futures rose as payrolls increased 163,000 following a revised 64,000 rise in June that was less than initially reported, Labor Department figures showed today in Washington. The median estimate of 89 economists surveyed by Bloomberg News called for a gain of 100,000. Unemployment rose to 8.3 percent.

Uneven Hiring

Uneven hiring may hold back consumer spending, the biggest part of the economy, as a global slowdown and impending U.S. tax changes weigh on businesses. Job cuts at companies from Morgan Stanley to Cisco Systems Inc. mean unemployment may remain elevated, one reason the Federal Reserve this week said it is prepared to take new steps if needed to boost growth.

“It’s a relatively mundane jobs report: the headline is good, but the details aren’t as good,” said Michael Mullaney, who helps manage $9.5 billion as chief investment officer at Fiduciary Trust in Boston. “We haven’t seen an upside surprise in a while and that’s what the market is reacting to. It’s still not strong enough to make a real dent in the overall growth of the economy and it’s not weak enough to get the Fed acting.”

Stocks fell over the last four days as European Central Bank President Mario Draghi and Fed Chairman Ben S. Bernanke failed to reassure investors on immediate efforts to bolster the economy. Members of German Chancellor Angela Merkel’s coalition parties signaled they won’t stand in the way of the ECB’s plan to buy government bonds.

Earnings Season

Investors also watched second-quarter corporate earnings. About 73 percent of companies which reported quarterly results have beaten analysts’ estimates, according to data compiled by Bloomberg. Sales missed estimates at 59 percent of companies.

LinkedIn surged 11 percent to $103.47. Chief Executive Officer Jeff Weiner has lured subscribers and increased revenue from hiring services, the largest of the company’s three main product lines.

The first among social media companies to hold initial share sales since early 2011, LinkedIn has done a better job than consumer-focused peers Facebook and Zynga Inc. (ZNGA) at wringing sales from a growing user base. Facebook added 1.1 percent to $20.26. The shares yesterday dropped to a record low. The world’s largest social-networking service last week reported earnings that showed slowing growth.

P&G Results

Procter & Gamble Co. (PG) gained 1.9 percent to $64.70. The consumer products company targeted by activist investor Bill Ackman reported fourth-quarter profit that beat analysts’ estimates, helped by price increases.

Knight Capital rose 5 percent to $2.71. The company opened its books to potential buyers, including private-equity firms and at least one securities-industry rival, as it seeks an investment or takeover to survive after a $440 million trading loss, said two people with knowledge of the matter.

Knight is working with Goldman Sachs Group Inc. and Sandler O’Neill & Partners LP as advisers in the rescue talks, said one of the people, who spoke on condition of anonymity because the discussions are private. The company is under pressure to strike a deal within days, the people said.

“They need to do something fast,” said Peter Lenardos, an analyst at RBC Capital Markets in London. “There is a desperate need for capital, as Knight themselves acknowledge,” he said. “It might be private equity, it could be a big sell-side bank, it could be a peer like Citadel.”

Viacom Inc. (VIAB) slumped 2.9 percent to $44.50. The owner of the Paramount film studio and cable networks such as Nickelodeon and MTV reported third-quarter profit that missed analysts’ estimates after posting lower advertising sales.


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