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Gearing up for payrolls
Stocks end mixed as oil rises but all eyes are turning to the February job report due Friday.
March 3, 2005: 6:56 PM EST
By Alexandra Twin, CNN/Money Staff Writer
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NEW YORK (CNN/Money) - While see-sawing oil prices kept stock investors on edge Thursday, investors now turn to what may be the most important economic news of the month, the February job report.

The Dow Jones industrial average (up 21.06 to 10,833.03, Charts) added about 0.2 percent and the broader Standard & Poor's 500 (up 0.39 to 1,210.47, Charts) index ended near unchanged.

The Nasdaq composite (down 9.10 to 2,058.40, Charts) lost just over 0.4 percent, pressured by weakness in chip stocks and a sell-off in Apple Computer.

The major gauges had see-sawed throughout the session Thursday as investors reacted to crude oil prices -- which briefly flirted with new all-time highs -- and geared up for the government's job report, due about an hour before the market opens Friday.

"I think a payrolls number that varies widely from estimates will shake up stocks," said Mark Bryant, senior vice president at Brean, Murray & Co. "But as long as we're roughly in line with forecasts, there probably won't be much stock reaction."

Economists estimate the economy created 225,000 new payroll jobs last month, according to a survey by Briefing.com. Employers added 146,000 last month. The unemployment rate, generated by a separate survey, is expected to have held steady at 5.2 percent.

"There's the potential for a positive surprise," said Michael Darda, chief economist at MKM Partners. "But anything around or above 200,000 is a positive for the economy."

"If we get anywhere close to the forecast, its going to be negative for bonds, cause that market has depended on a miss on payrolls in recent months," Darda added.

(For more on the Feb. employment report and what it means for stocks, bonds and the Federal Reserve policymakers, click here.)

Although less headline-grabbing than the payrolls report, news is also due Friday morning on consumer sentiment and factory orders.

The revised consumer sentiment index from the University of Michigan is due shortly after the open Friday. It is expected to have crept up to 94.3 in February from an earlier read of 94.2, according to estimates.

Factory orders for January are expected to be flat, after rising 0.3 percent in December, economists estimate.

Telecom stocks were likely to have a rough morning Friday.

After the close Thursday, Sonus Networks (Research) said it was delaying the release of its fourth-quarter results due to an audit. The company, which makes equipment for Internet phone service known as VoIP, also warned that fourth-quarter sales will miss current estimates.

The stock tumbled 20 percent in after-hours trading.

Thursday's market

Investors were cautious Thursday as they watched oil ahead of the job report, said Mark Bryant, senior vice president at Brean, Murray & Co.

U.S. light crude oil for April delivery gained 52 cents to settle at $53.57 on the New York Mercantile Exchange. Earlier, the commodity had spiked to $55.20, just shy of the all-time trading high of $55.67 a barrel hit in October.

On the technical side, a lot of traders are worried as the major gauges hover near multi-year highs, Bryant said.

The Dow and S&P 500 have both recently flirted with their December highs -- just below 3-1/2 year peaks.

However, the Nasdaq composite has lagged of late. Investors, worried that tech stocks have gotten too expensive relative to earnings projections, have shifted funds into stocks of commodities and basic materials producers, supporting the S&P 500.

Some tame morning economic reports helped cool recent inflationary worries. Reports included an upwardly revised read on fourth-quarter productivity, and reports on weekly jobless claims and the services sector of the economy.

Investors have been particularly attuned to signs of inflation in the recent economic news, amid fears that the Federal Reserve might step up the pace of its rate hiking campaign.

The bond market in particular has reflected that, with the yield on the 10-year note having surged sharply in recent weeks.

This heightened focus on inflation puts more gives weight to an already influential February employment report.

Productivity grows, claims steady

Among the morning's economic news: fourth-quarter productivity was revised upward to a 2.1 percent gain versus expectations for a rise of 1.5 percent and a previous read of 0.8 percent.

Jobless claims fell to 310,000 last week from a downwardly revised 311,000 the previous week, right in line with estimates.

The Institute for Supply Management released its February report on the services side of the economy around 30 minutes into the session. The index rose to 59.8 in the month, up from 59.2 in January, and just shy of forecasts for a rise to 60.

On Wednesday, fairly mild comments on inflation from Fed Chairman Alan Greenspan before a House Committee provided some comfort. However, stocks closed lower on the session as oil hit four-month highs.

For more market news, click here

On Thursday, bond prices were little changed, keeping the 10-year note yield at 4.38 percent, where it stood late Wednesday. That keeps the 10-year near its highest yield since Dec. 2, when it hit 4.42 percent during the session and finished the day at 4.41 percent, as per Reuters research.

On the move

Among stock movers, retailers were in focus as corporations reported February sales at stores open a year or more, or "same-store" sales. While the numbers were largely positive, they failed to spark a broader rally, with the S&P Retail (down $0.36 to $439.33, Research) index barely budging.

Among the highlights: Wal-Mart Stores (up $0.91 to $52.86, Research) said sales rose 4.1 percent from a year earlier, exceeding its own forecasts, Abercrombie & Fitch (down $0.88 to $55.69, Research) saw sales jump 19 percent and Starbucks (up $0.78 to $53.59, Research) saw sales jump 9 percent.

All three stocks gained, with Wal-Mart rising 1.6 percent.

Dow stock Boeing (up $2.12 to $57.42, Research) gained 4 percent on analyst optimism about improved demand for its commercial jets from airlines.

Among other movers, Express Scripts (up $7.29 to $84.50, Research) rallied in active Nasdaq trade. The pharmacy benefits manager reported higher-than-expected fourth-quarter earnings late Wednesday that rose from a year earlier, and also boosted its first-quarter earnings forecast.

Profit taking in the influential semiconductor sector sent the Philadelphia Semiconductor (down 5.59 to 434.42, Charts) index, or the SOX, down 1.25 percent.

Other big cap tech decliners included Apple Computer (down $2.33 to $41.79, Research), which lost more than 5 percent as investors cashed in following some recent profits. Rival Napster's projection of higher-than-expected revenue for its subscription-based music service raised concerns about the outlook for Apple's industry-dominant iTunes service.

Market breadth was mixed. On the New York Stock Exchange, advancers beat decliners eight to seven on volume of 1.61 billion shares. On the Nasdaq, losers edged winners eight to seven as just under 1.89 billion shares changed hands.

In currency trading, the dollar gained versus the euro and yen.

COMEX gold fell $3 to settle at $430.80 an ounce, slipping with other dollar-traded commodities.  Top of page

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