As 2007 starts, mild jobs may lift stocks

When Wall Street returns to work after New Year's Day, stock investors will be in the mood to buy - that is if manufacturing and jobs data show modest growth.

After the US stock market's surge in 2006, there may be an inclination to sell some shares and take profits this week, said Muriel Siebert, the founder and president of Muriel Siebert & Co., a discount brokerage based in New York.

"It's only a three-day week. Since we've had such a powerful market, you could see people taking profits," said Siebert, who was the first woman to own a seat on the New York Stock Exchange.

Some clients who are retired have said they will examine their portfolios over the weekend to see which stocks to sell "so they start the year off with a cushion," she said.

But Siebert believes that pension funds and other investors will be shopping for equities next week.

"There's fresh money that comes in at this time of year," she said. "There's just so much money sloshing around. The hedge funds and the private equity people have put so much money into this market."

The US stock market was closed yesterday and will be closed today as well to observe a national day of mourning for former President Gerald Ford, who died earlier last week.

US stock exchanges will resume trading tomorrow. The Institute for Supply Management will release its December manufacturing index tomorrow at 10 a.m. EST (1500 GMT).

"The best-case scenario for the market would be for it to continue to get data that is moderate - not too slow, to bring the economy into recessio - and not too strong, to bring the Fed back into tightening mode," said Keith Hembre, chief economist for First American Funds, a Minneapolis-based mutual fund group with about $70 billion in open-end funds.

"You're talking about data that's walking the line," Mr Hembre said, adding that an ISM reading of 51 or above for December manufacturing activity would be "negative for the market because it would put growth back to a level that's too strong".

A reading below 49 would worry Wall Street because it would indicate the economy is weaker than expected, he added.

Economists polled by Reuters see the ISM's December manufacturing index at 49.9, just above November's 49.5 and a tick below the 50 threshold that separates expansion and contraction.

December nonfarm payroll growth is estimated at 110,000, according to economists participating in the Reuters poll. That would fall below November's reading of 132,000. The unemployment rate is forecast at 4.5 per cent, unchanged from November, while average hourly earnings are pegged to go up 0.3 per cent, not far above November's gain of 0.2 per cent.

"If we get about 100,000 jobs in December, or maybe just a touch below, and a stable unemployment rate, that's a pretty favourable number," Mr Hembre said. "That could stimulate trading.

"A lot of people will be coming back from vacation and they will be eager to put money to work," he added.

On Friday, the blue-chip Dow Jones industrial average closed at 12,463.15 - up 16.3 per cent for the year. On the day, the Dow was down 0.31 per cent, though it finished the week up one per cent. The Standard & Poor's 500 Index ended at 1,418.30 - up 13.6 per cent for 2006. The S&P 500 slipped 0.45 percent on Friday, but ended the week up 0.5 per cent.

The Nasdaq Composite Index finished at 2,415.29, up 9.5 per cent - or roughly 10 per cent, if you're a double-digit fan - for 2006. The Nasdaq declined 0.42 per cent on Friday, but closed out the week with a 0.6 per cent gain.

"Before you can talk about 2007, you've got to talk about 2006. The way its ending is beautiful. Everything is rising toward its highs," said Ralph Acampora, managing director and technical analyst for Knight Capital Group, a Nasdaq market maker and electronic trading powerhouse in Jersey City, New Jersey.

Earlier in the week, the Dow closed above 12,500 for the first time. On Thursday, it hit an all-time intraday peak at 12,529.88.

Acampora, whose Wall Street career spans 40 years, is famous for accurately predicting the Dow's rise to 10,000 in 1999 when he was with Prudential Securities.