Mixed Earnings, Steady Jobless Claims

Today, investors will be weighing favorable headlines out of Europe following successful bond auctions in Spain and Italy, against a mixed earnings picture on the home front as a number of major companies came out with underwhelming results. And in the run-up to tomorrow’s January non-farm payroll report, we got a better-than-expected Initial Jobless Claims reading, highlighting the steadily improving labor market trend.

Initial Jobless Claims dropped a better-than-expected 12K last week to 367K. The four-week average, which smooths out the week-to-week fluctuation, dropped by 2K to 375.8K, maintaining its downtrend of recent weeks. This key data series witnessed some sharp volatility in recent weeks, but appears to be back on its downtrend. The favorable jobless claims reading today is welcome, but everybody’s focus is on Friday’s government jobs report, which is expected to show gains of about 130K in January.

This morning’s earnings reports present a mixed picture, with numerous negative surprises from major companies offsetting the strong reports. On the positive side, Cummins ( ( CMI - Analyst Report ) handily beat earnings and revenue expectations and reaffirmed guidance. Cereal maker Kellogg ( ( K - Analyst Report ) also came ahead of EPS and revenue expectations. Drug maker Merck ( ( MRK - Analyst Report ) beat EPS expectations, but came short on the revenue side.

We also have weaker-than-expected results from Dow Chemicals ( DOW - Analyst Report ) , with the nation’s largest chemicals company citing inventory de-stocking and weakness offsetting continued strength in emerging markets and a rebound in the U.S. International Paper ( IP - Analyst Report ) also missed EPS and revenue expectations on weakness in its printing paper unit. Ambercrombie & Fitch ( ANF - Analyst Report ) issued a negative pre-announcement, citing weak sales and subsequent markdowns weighing heavily on margins. Peer specialty retailer Ann ( ( ANN - Snapshot Report ) , previously known as Ann Taylor, also issued a similar negative pre-announcement.

Chipotle Mexican Grill ( ( CMG - Analyst Report ) modestly came short of earnings expectations after the close on Wednesday as high input costs offset better-than-expected top-line gains and double-digit same-store growth. Qualcomm ( ( QCOM - Analyst Report ) handily beat expectations and raised its outlook on the back of resilient demand for the company’s chips in the smartphone space.