Wall Street higher on jobs data

Wall Street stocks crept higher on Thursday after news of a modest increase in private sector employment and a larger-than-expected rise in new factory orders cheered cautious investors.

Traders also welcomed strong results from Monsanto (NYSE:MON), the agribusiness, which helped to allay concerns about US corporate earnings.

Equities rebounded from a sharp sell-off the previous day, prompted by soaring commodity prices and a contraction in the manufacturing sector.

At midday, the S&P 500 was up 0.4 per cent at 1,453.45. However, stocks lacked a firm foundation, with almost half of the 500 stocks trading to the downside amid weakness in homebuilders, chipmakers and car companies.

The Nasdaq Composite rose 0.1 per cent to 2,612.84 while the Dow Jones Industrial Average rose 0.5 per cent to 13,110.94.

The Commerce Department said new factory orders increased 1.5 per cent in November, much greater than an expected 0.4 per cent rise.

However traders remained cautious in spite of the positive data as it came only a day after a sharp contraction in the December ISM manufacturing index.

Investors reacted favourably to news that the private sector added 40,000 jobs in December. Although modest, the figure prompted stock futures to rally as some traders had feared the number would be negative.

Weekly jobless claims fell 21,000 to 336,000, below an expected level of 345,000 but the four-week moving average rose slightly.

US markets remain acutely sensitive to employment news with many analysts pointing to jobs as the key indicator of whether the US economy will fall into recession. The Labor Department is on Friday due to release keenly awaited data on US non-farm payrolls.

"Going into the key employment data, the latest ADP number will fit with the idea that growth continues to lose momentum helped by pending softer employment income, but not to the point where it resolves the debate about whether the economy tips into recession or simply records a period of very soft growth," Alan Ruskin, chief international strategist at RBS Greenwich Capital, said.

State Street (NYSE:SBZ) on Thursday became the latest financial company to reveal exposure to the troubled US mortgage market. The money manager said it would take a $279m charge for the fourth quarter to set up a reserve to deal with legal exposure arising from bad subprime mortgage bets.

However, the stock rose 6.9 per cent to $84.28 after State Street's 2007 operating profit outlook, which excludes the charge and other costs, beat Wall Street estimates while the company forecast revenue growth of 30 per cent for 2007.

In the biotechnology sector Monsanto beat Wall Street estimates after reporting fiscal first-quarter net income of $256m, almost treble last year's figure. The company also raised its 2008 earnings guidance and the shares rose 7.4 per cent to $119.74.

Sciele Pharma rose 12.9 per cent to $22.40 after it received regulatory approval for four new varieties of a drug to treat high blood pressure. Onyx Pharmaceuticals (NASDAQ:ONXX), the top performing US stock in 2007, rose 6.1 per cent $59.16. The stock made a return of 425 per cent for investors last year.

Drug retailers sector lagged on Thursday after last month's pharmacy same-store sales disappointed analysts.

CVS Caremark fell 7.2 per cent to $36.50 after the company said same-store sales were "lighter than anticipated". Rite Aid (NYSE:RAD)fell 10.8 per cent to $2.40 after same-store sales fell 0.5 per cent and Walgreen (NYSE:WAG), shed 6.4 per cent to $34.97 after it said said same-store sales rose only 2.6 per cent.

Carmakers were also in focus ahead of the release of December's car sales figures. Analysts expect a 4 per cent decline. General Motors (NYSE:GM) fell 4.3 per cent to $23.37 after its chief executive warned of a flat US car market in 2008.

The transport sector, seen as an economic bellwether by many investors, continued to struggle amid sharply elevated crude oil prices. YRC Worldwide, the trucking company, fell 9.3 per cent to $14 after Wachovia downgraded the shares to "underperform" because it expects negative investor sentiment to continue.

Gold miners were among the best performers as the precious metal held near record highs. Barrick Gold (NYSE:ABX) rose 5.9 per cent to $48.75 while Yamana Gold (AMEX:AUY) rose 6.9 per cent to $14.83.

Technology, one of last year's most bankable sectors, continued to lag amid concerns about earnings growth. Chipmakers were sold again after Banc of America Securities downgraded the shares of several companies citing limited upside potential. Intel (NASDAQ:INTC) fell 2.5 per cent to $24.72 while AMDdeclined 3.6 per cent to $6.88.