Gainers: Jobs and Coal Outlook

S&P futures popped 4 points as the December ADP Employment Change, which measure private sector job growth, was three times anticipated (297,000 vs. 100,000 consensus). If Friday's nonfarm payroll looks anything close to this, the improving trend in job growth will be undeniable. (Market Update: Stocks Fall as Commodities Slide; Disney Gains)

Most European indices are down 1 to 2 percent — there's plenty of renewed concerns about the ability of stressed government to borrow the large sums of money they will need in the coming months.

Commodities are again down 1 to 2 percent; the dollar is stronger for a second day.


1) The decline in commodity prices has one notable exception: coal. Talk overnight is that coal prices could go 20 percent higher due to the severe flooding in Australia. Companies like Massey were at new highs yesterday on a down day for commodities and commodity stocks.

2) The terrible breadth yesterday (small caps were hit especially hard) has created some notable short-term technical damage. Lowry, the nation's oldest technical analysis service, noted that the percentage of stocks below above their 10-day moving average dropped to 54 percent from 79 percent. "All this suggests very selective strength behind the recent advance," Lowry wrote.

3) The Santa Claus rally was a bit lighter than usual: the S&P 500 was up 1.1 percent for the last five trading days of the year and the first two. That is below the average of a 1.6 percent gain.

4) A busy week for analysts adjusting their ratings, with several downgrades based on valuation:

a) Alcoa downgraded to hold at Citigroup — reducing estimates below consensus of $0.19 "due to the negative cost impact of a weaker USD and an increase in certain input costs" and also valuation. Alcoa was upgraded to buy at Deutsche Bank on Monday; they report earnings on January 10.

b) Clorox downgraded to hold from buy at Deutsche Bank, also citing valuation.

5) Most retailers will report their December sales numbers tomorrow, and while sales were certainly strong before Christmas, the East coast blizzard after Christmas leaves a little uncertainty for results. Ahead of tomorrow, two retailers with earnings reports today are giving traders an early look at what might be in store. Aside from the blizzard, another problem that's evident…while traffic was up, customers weren't spending more per transaction.

a) Family Dollar drops 8 percent after its Q1 earnings missed estimates ($0.58 vs. $0.61 consensus). While comps rose 6.9 percent, the discounter's bottom line was pressured by higher transportation costs and lower margins. The retailer noted that although traffic rose in the month, the average transaction value remained flat.

Guidance for the current quarter also disappoints the Street ($0.92-$0.97 vs. $1.00 consensus).

b) BJ's Wholesale reported a 3.8 percent rise in December comps, far below the 4.7 percent gain in December 2009 and missing the Street's estimate of up 4.1 percent. Sales did slow in the last week of the month after much of the East coast was blanketed by a winter snowstorm. Just like Family Dollar, although overall traffic was up 2 percent on the month, its customers weren't spending more, with the average receipt unchanged from December 2009.

6) Speaking of the poor weather last week…despite snowstorms in Europe and on the East coast last month, U.S. Airways saw a 5.7 percent rise in December traffic. Meanwhile, the airline's flew fuller planes, as the carrier's load factor (percentage of planes full) rose 1.5 percent from the year-ago month.

7) Mosaic rises 3 percent after handily beating estimates ($1.01 vs. $0.98 consensus) as margins jumped 11 percentage points from last year. Fertilizer demand was strong — phosphate fertilizer sales rose 49 percent (!) in the quarter thanks to a 61 percent jump in prices and a 12 percent rise in volumes.

The company notes, "strong demand growth is expected to keep phosphate and potash markets tight until significant new capacity comes on line."

8) Walgreens' December same-store sales rose 2.8 percent, missing Wall Street estimates for a gain of 3.3 percent. Unlike Rite Aid , which reported holiday sales yesterday, Walgreens saw weaker-than-expected pharmacy comps (up 2.2 percent), but that was somewhat offset by higher-than-expected general merchandise comps (up 3.6 percent - its biggest gain in 14 months).

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