Morning Update

Bulls Failing to Exit the Stall as Nonfarm Payrolls Fall

Stocks have turned lower in morning action as the highly-anticipated labor report showed an unexpected drop in nonfarm payrolls, overshadowing the favorable revision to November's data, which showed the first increases since the end of 2007. Treasuries quickly erased early losses and moved lower following the employment report and the subsequent decline in the equity markets. Equity news is light in early action, with Apollo Group posting better-than-expected earnings but a government review of its student loan procedures is weighing on the for-profit education firm's shares. Overseas, Asian markets finished higher, led by Japan, and stocks in Europe are modestly higher amid a flood of economic data, and after paring gains following the aforementioned US labor data.

As of 8:50 a.m. ET, the March S&P 500 Index Globex future is 4 points below fair value, the Nasdaq 100 Index is 4 points below fair value, and the DJIA is 38 points below fair value. Crude oil is down $0.14 at $82.52 per barrel, and the Bloomberg gold spot price is higher by $4.93 at $1,136.53 per ounce. Elsewhere, the Dollar Index-a comparison of the US dollar to six major world currencies-is down 0.3% at 77.66.

For-profit educator Apollo Group (APOL $64) reported fiscal 1Q EPS ex-items of $1.47, two cents above the consensus estimate of Wall Street analysts, while revenues jumped 31% versus last year to $1.3 billion, slightly above the $1.2 billion Street forecast. The company said the growth in revenues was helped by an 18.4% year-over-year (y/y) increase in University of Phoenix total degreed enrollment. However, shares are under pressure after the company said it received a report from the US Department of Education, which contained "six findings and one concern" in regard to student loans.

Nonfarm payrolls drop unexpectedly but jobs growth comes in November

Nonfarm payrolls fell by 85,000 jobs in December, a surprising drop as the Bloomberg estimate called for an unchanged reading of nonfarm payrolls. Also, November was favorably revised to the first positive reading since December 2007, to a gain of 4,000 from -11,000, but October was unfavorably revised from -111,000, to -127,000. The unemployment rate remained at 10.0%, matching the consensus forecast. Average hourly earnings rose 0.2%, also matching the Street's forecast, while average weekly hours remained at 33.2, which was also expected. Treasuries erased early losses and moved higher after the report.

Later this morning, the economic calendar will yield November wholesale inventories just after the opening bell, forecasted to decline 0.3%, following a 0.3% rise in October, and in the final hour of trading, consumer credit will be released and is expected to fall by $5.0 billion.

Europe moves higher amid full slate of economic data

Stocks in Europe are higher in afternoon action, led by financials and utilities issues, as traders digest a plethora of economic data, including the unexpected deterioration in the employment report out the US, which pared gains in the region. Employment data out of the Eurozone was also in focus as the unemployment rate rose to 10% in November, from 9.9% in October, reaching the highest level in more than 11 years. Economists surveyed by Bloomberg expected the jobless rate to come in at 9.9%. Reports out of Germany-Europe's largest economy-also made up the economic calendar across the pond, headlined by a report that showed industrial production increased 0.7% month-over-month (m/m) in November, versus October's 1.7% decline, but short of the consensus forecast, which called for output to increase 1.0%. Other reports out of Germany included a larger-than-expected positive trade surplus, with exports rising more than forecasted. The German DAX is modestly higher. In other economic news, producer prices in the UK rose more that double the forecasts of economists, and the UK's FTSE 100 Index is off 0.1%. Rounding out the busy economic day, the final revision to Eurozone GDP was left unchanged at a 0.4% quarter-over-quarter (q/q) gain for 3Q, as expected, and the y/y rate was revised slightly better, to a 4.0% contraction, versus the previous reading of a 4.1% decline. Elsewhere, France's CAC-40 is 0.5% higher. In equity news, Dutch car maker Spyker Cars announced that it has submitted a sweetened bid to acquire General Motors' Swedish car unit Saab, but it said it has not heard back from GM.

Asia mostly higher, led by Japan and South Korea

Stocks in Asia were mostly higher following yesterday's slump on concerns about the potential for growth in China, which has led the global economy out of the recession, being hampered by efforts by the Chinese central bank to stem liquidity, exacerbated by yesterday's action in which it increased interest rates on a three-month bill auction. Japanese stocks were among the best performers, with the Nikkei 225 Index rising 1.1%, led by exporters on profit optimism as the yen touched a four-month low versus the dollar. However, the yen did make a modest move into positive territory as the Asian markets wrapped up trading after Japan's newly-appointed finance minister backed off from his comments yesterday that he would like to see the yen weaken further, as he clarified today that the markets should set currency rates, but noting that he must be aware that he can intervene in emergency situations. In equity news in Japan, struggling air carrier Japan Airlines (JALSY $5) came under pressure amid continued bankruptcy concerns as the nation's finance minister said, "We need to carefully consider how to rehabilitate JAL," while the Nikkei newspaper reported that the government has decided that the airline should go through a bankruptcy procedure, without citing a source, adding that a government decision could come as soon as January 12th with JALSY filing for bankruptcy as soon as January 19Th. JALSY did not comment on the matter.

Elsewhere, South Korea's Kospi Index also rose, gaining 0.7%, following the South Korea's central bank decision to keep its benchmark lending rate unchanged at a record low of 2.0% for the 11th consecutive month, which was widely expected. In other action in Asia, China's Shanghai Index and Hong Kong's Hang Seng Indexes both rose 0.1%, Australia's S&P/ASX 200 index increased 0.3%, and Taiwan's Taiex Index rose 0.5%, while India's BSE Sensex 30 Index declined 0.4%.