Stocks rebound from European worries

Updated: 11:15 p.m. ET

For the second day in a row, U.S. stocks opened badly, thanks to worries about European stocks. And for the second day in a row, the worries faded -- and the major American averages mostly rebounded into the black -- once European markets closed.

The European concerns were set off when an auction of French debt didn't go as well as hoped and Italy reported an increase in its unemployment rate to 8.6%. It topped 30% for teens for the first time.

But U.S. jobless claims fell for the fourth time in five weeks, and the ADP National Employment Report, which measures private-sector employment, said some 325,000 private-sector jobs were created in December. The report is watched as a hint of the direction of Friday's big nonfarm payrolls and unemployment report.

At the same time, retailers' December sales overall weren't as strong as hoped, and many companies' shares were lower. Barnes & Noble (BKS) shares fell $2.31 to $11.24 after falling to as low as $9.35. The company cut its guidance for its fiscal-third quarter and said it may spin off its Nook electronic-reader business to shareholders. Also losing today: J.C. Penney (JCP), Gap (GPS) and Target (TGT).

The Dow Jones industrials ($INDU) closed down just 3 points to 12,416; the blue chips had been down as many as 135 points at 10 a.m. and up as many as 18 points around 2:10 p.m. The Standard & Poor's 500 Index ($INX) gained 4 points to 1,281. The Nasdaq Composite Index ($COMPX) had gained 22 points to 2,670, and the Nasdaq-100 Index ($NDX), which tracks the largest stocks, had gained 19 points to 2,349.

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The jobs report will come out at 8:30 a.m. ET Friday before U.S. markets open. The consensus estimate is for payrolls to grow by some 150,00, while the unemployment rate holds at the 8.6% reported for November. The rate may move up slightly, economists say.

Futures trading suggests stocks will open off slightly, but the jobs report will change that.

The market's rebound today was due in part to the face that Europe's markets closed, allowing optimism building about the U.S. economy grow. But it's important to note that much of the rebound itself was short-covering by investors who had bet the market would go down. They either booked profits on that trade or were forced to cover by their brokers.

The Nasdaq was helped by gains for Seagate Technology (STX) and Sirius XM Radio (SIRI) as well as strength in such giants stocks as Oracle (ORCL), Apple (AAPL), Amgen (AMGN) and Microsoft (MSFT). (Microsoft is the publisher of MSN Money.)

Seagate was up $1.08 to $17.90. The company reported preliminary second-quarter revenue of $3.1 billion to $3.2 billion. Analysts were looking for $2.79 billion.

Apple finished up $4.59 to $418.03 after Walter Piecyk, an analyst with BTIG, told The Wall Street Journal that the company's fiscal-first-quarter​ iPhone sales might top 35 million units. He made the estimate after Verizon Wireless said it had sold 4.2 million iPhones in December. The gain contributed nearly four points to the Nasdaq-100's gain.

Bank of America (BAC), up 50 cents to $6.31, and Merck (MRK) were the Dow leaders. Home Depot (HD) and Merck both hit 52-week highs today. Only 12 of the 30 stocks were higher. Gains for JPMorgan Chase (JPM), Caterpillar (CAT) and Walt Disney (DIS) were offset by declines in Chevron (CVX), IBM (IBM) and Boeing (BA). 

Meanwhile, 207 S&P 500 stocks were higher, led by Bank of America, LSI Logic (LSI) and home builder PulteGroup (PHM).

And 78 Nasdaq-100 stocks were higher, led by Sirius XM Radio (SIRI), up 21 cents to $2.04, and Marvell Technology (MRVL), up $1.04 to $15.23.

Meanwhile, SodaStream International (SODA), one of the hot products this year, finished up 1.79 to $39.54 after reaching as high as $41.88. The producer of soda makers reached a deal to market flavors from Kraft Foods (KFT) for use in its devices.

PepsiCo (PEP) was off 52 cents to $66.22. The company is considering cutting roughly 4,000 jobs, or about 1.3% of its 300,000 global payroll, in order to boost earnings, according to the New York Post. The soft-drink giant is also mulling ending its 401k match, the paper said. The company later conceded that it is looking at efficiencies but would communicate layoff and other news to employees first.

Why Bank of America moved higher
Bank of America closed above $6 for the first time since mid-November, apparently on speculation that the Obama administration may introduce a nationwide loan refinancing program. Bloomberg News said that White House apparently has denied such a program is in the works.

Bank of America had fallen to as low as $4.92 on Dec. 19 because of all the problems inherited with its ill-fated acquisition of Countrywide Financial.

The mortgage idea, originally created by Columbia University economists Glenn Hubbard and Christopher Mayer, would let all homeowners with a mortgage owned by Fannie Mae (FNMA) or Freddie Mac (FMCC) can refinance with a new mortgage at a fixed rate of 4.2% or less if they have been current on their payments for at least three months.

There's more for Bank of America's gain. Bank stocks are up nearly 6% this week. As Avi Salzman wrote at Barron's, analysts generally "have grown slightly more bullish with the turning of the calendar."

Dollar rises; so does gold
Stocks had rebounded despite a 1.2% decline in the euro against the dollar; normally, a rising dollar hurts stocks. Interest rates fell as the dollar rose, a signal that investors still favor safety at all costs. The 10-year Treasury fell to 1.993% from Wednesday's 1.995%.

In New York, gold (-GC) settled up $7.40 to $1,620.10 an ounce, after falling to as low as $1,597.70. Silver (-SI) had risen to $29.35 an ounce, up 25.3 cents. Copper (-HG) was off 4.5 cents at $3.43 a pound.

Crude oil (-CL) in New York settled down $1.41 to $101.81 a barrel, its first decline in three days, after the Energy Department reported larger-than-expected​ domestic oil supplies. Also, the worries about Europe generated fears energy demand will decline on the continent. Brent crude was down $1.35 to $112.35 a barrel.

The retail price of gasoline jumped to $3.319 a gallon, according to AAA's Daily Fuel Gauge Report. That's up 1.3% since Dec. 31 and 3% since a bottom was reached on Dec. 19.

Energy prices -- New York close
			Thur.			Wed.			Month chg.			YTD chg.
Crude oil (-CL)			$101.81			$103.22			3.02%			3.02%
(per barrel)
Heating oil (-HO)			$3.0388			$3.0899			4.28%			4.28%
(per gallon)
Natural gas (-NG)			$2.9800			$3.0960			-0.30%			-0.30%
(per mil. BTU)
Unleaded gasoline (-RB)			$2.7365			$2.7852			2.98%			2.98%
(per gallon)
Brent crude			$112.74			$113.70			4.99%			4.99%
(per barrel)
Retail gasoline			$3.3190			$3.2880			1.53%			1.53%
(per gallon; AAA)

Jobs picture may look a little better
New U.S. claims for unemployment benefits fell by 15,000 last week in the latest sign the labor market was improving and could help the country resist the effects of a likely eurozone recession.

Initial claims for state unemployment benefits dropped to a seasonally adjusted 372,000, the Labor Department said. The prior week's claims data was revised up to 387,000 from the previously reported 381,000.

Better-than-expected​ numbers on the ADP employment report are another encouraging sign for the U.S. economy -- albeit one to be taken with a grain of salt, according to John Ryding and Conrad DeQuadros at RDQ Economics. The problem, they said in a note to clients, is that the ADP report tends to vary wildly at the end of the year with the Labor Department's December report.

But the the Institute for Supply Management’s index of U.S. nonmanufacturing industries, which account for about 90% of the economy, rose to 52.6 in December from 52 a month earlier, trailing the median forecast of economists for a reading of 53.

Discounts rule; retail sales
Many retailers had to discount more than they wanted to draw customers over the holidays, cutting into profits even as December sales came in slightly better than expected overall.

Retailers such as J.C. Penney, Gap, Limited Brands (LTD), American Eagle Outfitters (AEO) and Children's Place (PLCE) all called the holiday season highly promotional.

 

If shoppers turned out, they did so on condition of getting good deals, something experts said would continue into 2012.

 

"The consumer is in the driver's seat -- they have the power," David Bassuk, head of AlixPartners global retail practice, told Reuters. "We'll still see aggressive promotions in the next six months." 

Nordstrom (JWN), Macy's (M), Limited (LTD) and Buckle (BKE) beat estimates. Zumiez (ZUMZ) shares were up $4.51 to $30.84 after the teen retailer reported a 10% December sales gain. Analysts had projected a 5.1% gain,.

J.C. Penney, Kohl's (KSS), Gap and Target missed estimates.

A big issue for many retailers in northern climates was that winter-apparel sales dropped because of unseasonably warm weather.

Short hits from the markets -- New York close
			Thur.			Wed.			Month chg.			YTD chg.
Treasury yields
13-week Treasury bill			0.0500%			0.050%			400.00%			400.00%
5-year Treasury note			0.883%			0.889%			6.39%			6.39%
10-year Treasury note			1.93%			1.995%			6.52%			6.52%
30-year Treasury bond			3.065%			3.043%			6.09%			6.09%
Currencies
U.S. Dollar Index			81.25			80.425			0.90%			0.90%
British pound			1.5494			1.5618			-0.28%			-0.28%
(in U.S. $)
U.S. $ in pounds			£0.645			£0.640			0.28%			0.28%
Euro in dollars			$1.28			$1.29			-1.28%			-1.28%
(in U.S. $)
U.S. $ in euros			€ 0.782			€ 0.773			1.30%			1.30%
U.S. $ in yen			77.34			76.75			0.31%			0.31%
U.S. $ in Chinese			6.34			6.30			0.15%			0.15%
yuan
Canada dollar			$0.982			$0.000			0.09%			0.09%
(in U.S. $)
U.S. dollar			$1.019			$1.013			-0.09%			-0.09%
(in Canadian $)
Commodities
Gold (-GC)			$1,620.10			$1,612.70			3.40%			3.40%
(per troy ounce)
Copper (-HG)			$3.427			$3.435			-0.28%			-0.28%
(per pound)
Silver (-SI)			$29.2960			$29.0970			4.95%			4.95%
(per troy ounce)
Wheat (-ZW)			$6.2925			$6.5000			-3.60%			-3.60%
(per bushel)
Corn (-ZC)			$6.4350			$6.59			-0.46%			-0.46%
(per bushel)
Cotton			$0.9448			0.9572			3.05%			3.05%
(per pound)
Coffee			$2.2230			2.2945			-3.20%			-3.20%
(per pound)
Crude oil (-CL)			$101.81			$103.22			3.02%			3.02%
(per barrel)