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U.S. Stock Futures Pare Gains as Payroll Growth Misses Estimates

Jan. 10 (Bloomberg) -- U.S. stock-index futures pared gains as data showed payrolls in December increased at the slowest pace since January 2011, indicating a pause in the recent strength of the labor market.

Gap Inc. rose 1.7 percent after the retailer said annual profit may reach the upper end of its forecast. Abercrombie & Fitch Co. surged 15 percent after increasing its full-year earnings prediction. Alcoa Inc. dropped 6.3 percent after posting fourth-quarter profit that missed analysts’ estimates.

Standard & Poor’s 500 Index futures expiring in March advanced 0.2 percent to 1,835.9 at 8:33 a.m. in New York, trimming an earlier gain of 0.5 percent. The S&P 500 has dropped 0.6 percent so far in 2014 after climbing 30 percent last year, the most since 1997. Dow Jones Industrial Average contracts added 23 points, or 0.1 percent, to 16,414 today.

The 74,000 gain in payrolls, less than the most pessimistic projection in a Bloomberg survey, followed a revised 241,000 advance the prior month, Labor Department figures showed today in Washington. The median forecast of 90 economists called for an increase of 197,000. The unemployment rate dropped to 6.7 percent, the lowest since October 2008, as more people left the labor force.

Fed Stimulus

The Federal Reserve, which next meets Jan. 28-29, in December announced a reduction of $10 billion in its monthly bond-buying program to $75 billion, citing a recovery in the labor market. Three rounds of stimulus from the central bank have helped push the S&P 500 higher by 172 percent from a 12- year low in 2009.

At the central bank’s December meeting, some members of the Federal Open Market Committee “expressed the view that the criterion of substantial improvement in the outlook for the labor market was likely to be met in the coming year if the economy evolved as expected,” meeting minutes showed Jan. 8.

The S&P 500 trades at 15.5 times estimated earnings of its members, more than the average multiple of 14.1 over the last five years, data compiled by Bloomberg show. Earnings for companies in the S&P 500 will climb 9.7 percent on average this year, almost twice the rate of 2013, while sales will probably increase 3.8 percent, according to analyst estimates compiled by Bloomberg.

Earnings Expectations

“Earnings expectations are quite ambitious this year so we have to see if these come through,” said Virginie Robert, co- founder and partner at Constance Associes in Paris. Her firm, founded in August 2013, oversees three mutual funds including one that tracks the S&P 500 Total Return Index. “The fourth quarter will probably be quite disparate. You can see that retailers who have done well with online sales are reporting better holiday results, but others probably had a terrible quarter.”

JPMorgan Chase & Co., Bank of America Corp. and Goldman Sachs Group Inc. will all report quarterly results next week.

Gap, which rallied 26 percent in 2013, added 1.7 percent to $40.09. Full-year earnings-per-share will probably be at the high-end of a $2.57 to $2.65 range forecast in November, Gap said in a statement.

Abercrombie & Fitch, which will post full-year results on Feb. 26, jumped 15 percent to $38.20. The teen-clothing retailer said adjusted EPS will be between $1.55 and $1.65 for its full financial year, up from a previous range of $1.40-$1.50 reaffirmed on Nov. 21.

Alcoa Slips

Alcoa dropped 6.3 percent to $10.02. Profit excluding a $1.7 billion goodwill impairment and other one-time items was 4 cents a share, trailing the 6-cent average estimate compiled by Bloomberg. The largest U.S. aluminum producer said profit at its rolled metal unit fell 73 percent from a year earlier to $21 million.

Sears Holdings Corp. tumbled 12 percent to $37.50. The retailer said it will post a fourth-quarter loss of $250 million to $360 million, or $2.35 to $3.39 a share. Sales for stores open at least a year fell 7.4 percent in the current quarter through Jan. 6, according to a statement.

Five Below Inc. sank 11 percent to $38.67. The chain that sells teens discounted items said fourth-quarter adjusted EPS will probably not exceed 46 cents, down from an earlier range of 49 cents to 51 cents forecast in December, after holiday sales fell. Analysts on average had predicted earnings of 51 cents a share for the period.

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