Originally created 10/04/04

Jobs report could set direction of market



NEW YORK - The stock market that meandered through September could gain some direction in the week ahead as the Labor Department releases its latest report on job creation.

For all the economic data that Wall Street parses and analyzes every day, the jobs report, scheduled for release Friday, is one of the few that seem to encapsulate the economy as a whole. If job growth is strong, it shows that companies are willing to spend to expand, and thus they feel their long-term prospects are good. Strong job growth also means that more people are working, and that generally means more consumer spending.

Economists are estimating that 153,000 jobs were created in September, up from the 144,000 created in August. That's certainly better than the meager growth seen in June and July - 96,000 and 73,000, respectively - but far from April's 324,000 or May's 208,000.

Should the September report come in relatively close to 153,000, Wall Street will likely have little reaction, as that number would be considered decent, but not great. A stronger reading would likely boost stocks and lend credence to Federal Reserve Chairman Alan Greenspan's assertion that the economy is finally emerging from its summer "soft patch."

A substantially lower number, however, would cause a selloff that even strong third-quarter earnings - which aren't expected to be that strong - would be hard pressed to correct.

Last week, stocks posted strong gains, especially in the long-oversold technology sector. The Dow was up 1.5 percent, the Nasdaq surged 3.3 percent and the S&P 500 rose 1.9 percent.

ECONOMIC NEWS:

In addition to job creation figures, the Labor Department is also expected to release the unemployment rate for September Friday. Unemployment fell to 5.4 percent in August from 5.5 percent the previous month. Economist expect the rate to remain steady, though a strong minority expect it to rise to 5.5 percent once again, as inclement weather and disappointing earnings may have kept hiring down.

Other than the jobs report, there are few economic releases expected during the week. The Commerce Department will release data on August factory orders on Monday. Economists expect a modest 0.3 percent increase in orders, far from the 1.3 percent hike in July, the result of lower consumer and business spending.

On Tuesday, the Institute of Supply Management will release its services index reading for September, a measure of economic strength in the service sector. The index is expected to climb to 59.0 for the month, up slightly from the 58.2 reading in August. The index stood at 64.8 in July; any reading above 50 represents economic growth in the sector.

EARNINGS:

The third-quarter earnings season gets its unofficial start Thursday, when Dow component Alcoa Inc. announces its earnings after the close. The aluminum manufacturer disappointed Wall Street with its second-quarter earnings, and has fallen 12 percent year-to-date. Wall Street forecasts earnings of 37 cents per share, up from 33 cents a year ago.

General Electric Co. will announce its earnings Friday before trading begins, with Wall Street expecting profits of 38 cents per share, down 40 cents from a year ago. The stock is up 8 percent for the year.

Other notable companies issuing earnings reports in the week ahead include Yum! Brands Inc., operator of Pizza Hut, Kentucky Fried Chicken and Taco Bell restaurants, due Tuesday after the close; agricultural company Monsanto Co. on Wednesday before the markets open; and warehouse retailer Costco Wholesale Corp. before the opening on Thursday.

EVENTS:

The Fed's Greenspan will speak at a Fed conference in St. Louis on Friday. Should the jobs report disappoint Wall Street, Greenspan's comments could inject some reassurance into the markets. Greenspan has remained upbeat about the economic recovery, but his comments are closely watched on Wall Street regardless.