Stocks Make Small Change

It's Jobs, Stupid

Earnings reports continue to beat expectations, but surprises have been the rule rather than the exception this season and stocks were caught in a tight range Tuesday with investors looking ahead to Friday's employment report.

The labor market has failed to reap the rewards of the burgeoning economy. In December, nonfarm payrolls disappointed severely, growing by only 1,000 with economists forecasting a 150,000 gain; most economists believe that payrolls need to add at least that many jobs simply to keep up with the growing labor force.

The stakes are even higher for January, with the consensus looking for payroll growth of about 170,000. Although December's carnage was severe and triggered a 134 point Dow decline, most experts are confident January's number will not be a letdown.

Ted Wieseman, an economist at Morgan Stanley, is far more bullish than the consensus and expects payrolls to grow by 275,000 in January. Although December's reading was very weak, "every other indicator points to improvement in the employment picture."

Initial jobless claims have been below the key 400,000 threshold for 17 straight weeks and the employment component of the Institute for Supply Management's manufacturing index has been above the benchmark level of 50 for three consecutive months. Weiseman also pointed out that hiring surveys have been strong and a seasonal bounce from the retail sector should add 100,000 jobs alone.

Cary Nordan, a fund manager at BB&T Asset Management, feels forecasts calling for payroll growth of 170,000 may be a little aggressive. "Companies are cautiously optimistic and are not willing to aggressively hire because there is still excess capacity and they want to be sure this is a cyclical recovery."

Movers

Tyco International(TYC Quote) said Tuesday that it earned 34 cents a share in its first quarter and that sales increased 8.7%. Analysts were expecting 32 cents a share. Shares of the company improved 72 cents, or 2.7%, at $27.82.

Colgate-Palmolive (CL Quote) said its quarterly earnings improved to 65 cents a share from 59 cents last year; analysts had expected the company to post a profit of 63 cents. The shares gained $1.49, or 3%, to $51.83.

Despite a 3.6% drop in revenue, Sprint (FON Quote) earned 39 cents a share in the fourth quarter, a 2-cent improvement over last year. Analysts had expected profit at the land-line operator to hold steady at 37 cents. The shares shed 6 cents, or 0.3%, to $17.94.

Sprint's wireless operation, Sprint PCS (PCS Quote), also beat expectations by 2 cents a share. The company posted a loss of 10 cents in the quarter, 8 cents better than a year earlier. The stock dipped 12 cents, or 1.5%, to $8.12.

Fourth-quarter earnings at First Data(FDC Quote) were 54 cents a share, matching analysts' estimate, on a 10.9% increase in total sales. The stock slipped 68 cents, or 1.7%, to $38.37.