Wall Street set to edge higher on jobs data

US stocks were set for a cautious start on Thursday as fears about a US economic slowdown and soaring commodity prices continued to weigh on investor sentiment but as the private sector jobs market showed a modest increase last month.

Less than an hour before the opening bell, S&P 500 futures were up 4.1 points at 1,462.50, Nasdaq futures were up 2.5 points at 2,072.50 but futures for the Dow Jones Industrial Average were flat at 13,136.

A monthly employment report showed the US economy added 40,000 jobs in December and, although modest, the figure prompted US Treasuries to pare early gains while stock futures rallied.

Economists had forecast a figure of 50,000 new jobs but some traders had feared the number would be negative. However the ADP Employer Services report revised the number of jobs created in November down to 173,000 from 189,000.

The Labor Department is due to release monthly data on US payrolls on Friday.

"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 near stall speed at close to one per cent," said Alan Ruskin, chief international strategist at RBS Greenwich Capital.

Weekly jobless claims fell 21,000 to 336,000, below an expected level of 345,000. Claims for the prior week were revised up to 357,000 from the originally reported 349,000 level.

The four-week moving average was 343,750, slightly above the previous week's level of 343,500. Continuing claims rose 46,000 to 2.761m.

Stocks fell sharply on Wednesday after an index of manufacturing activity contracted sharply, increasing fears that the US economy is heading toward a recession.

Crude oil hit a record $100 a barrel while gold soared to a record high above $850 an ounce, treasuries rose sharply and the dollar fell against major currencies.

State Street (NYSE:SBZ) on Thursday became the latest financial company to reveal exposure to the troubled US mortgage market.

The asset manager said it would take a $279m charge for the fourth quarter because of legal and other costs related to subprime mortgage bets.

However, the shares rose 3 per cent to $81.25 in the pre-market after the company's 2007 operating profit outlook, which excludes the charge and other costs, beat Wall Street estimates. State Street also forecast 30 per cent revenue growth for 2007.

In earnings news Monsanto (NYSE:MON), the biotechnology firm, beat Wall Street estimates when it reported fiscal first-quarter net income of $256m, compared with $90m last year. Sales rose 36 per cent to $2.1bn, beating consensus estimates and the company also raised its 2008 earnings guidance. The shares rose 3.5 per cent in the pre-market.

European stocks were mixed ahead of the open on Wall Street. The FTSE Eurofirst 300 index was down 0.5 per cent but the FTSE 100 rose 0.2 per cent. Asian equity markets closed mainly lower led by a 2.4 per cent fall on the Hang Seng.

Bond prices rose sharply early on Thursday pushing short-dated yields to their lowest level in more than three years, as traders looked to position themselves more defensively. However prices weakened following the ADP jobs data.

The yield on the two-year Treasury note was down 8 basis points at 2.79 per cent but later traded 3bp lower at 2.85 per cent. The 10-year Treasury note was flat at 3.91 per cent from 3.88 per cent earlier.

The dollar fell against major currencies early in New York. The US dollar slipped 0.2 per cent to a one-month low against a basket of major currencies. The US currency fell 1 per cent against the yen to Y108.50, while against the euro the dollar eased 0.2 per cent to $1.4755.

Gold hit a record high for a second consecutive day reaching $866.10 an ounce.

Meanwhile oil prices hovered near the $100 a barrel mark early in New York. US crude prices were trading 28 cents lower at $99.34.

US blue chips stocks on Thursday recorded their worst start to a new trading year since 1983

The Dow Jones Industrial Average fell 1.7 per cent to 13,043.96 points, the S&P 500 closed 1.4 per cent lower at 1,447.16 and the Nasdaq Composite shed 1.6 per cent to 2,609.63.