Major stock averages open in the red Thursday after equities surged in the previous session.
NEW YORK (TheStreet) -- Major stock averages opened in the red Thursday after a big surge in stocks the previous session over worries that U.S. lawmakers' last-minute budget agreement falls short of dealing with the country's deficit. The worries offset an encouraging employment change report for December.
The Dow Jones Industrial Average was falling more than 47.5 points, or 0.36%, at 13,364. The S&P 500 was down 4.02 points, or 0.27%, at 1458. The tech-heavy Nasdaq was behind by 7.28 points, or 0.23%, at 3105.
One of the next major deadlines is the very few weeks that Congress has left before it must raise the debt ceiling to avert a government default on bills and financial obligations. This means the Obama administration and Congress must tackle the sequestration issue that was pushed back for two months in the "fiscal cliff" deal.
Julia Coronado, chief North American economist at BNP Paribas, said the "two parties are yet again starting miles apart" on this issue, with Republicans having already indicated that they believe the tax side of fiscal policy has been addressed for now and their focus will be on spending.
The Democrats have indicated they will continue to demand a balanced approach with more tax increases for any agreed-to cuts in spending.
"Given the track record of the current Washington crew, we can be sure we will go right to the brink and flirt with default before we reach yet another piecemeal accord," said Coronado. "As in 2011, the battle over the debt ceiling will likely end with a downgrade of the U.S., this time from Fitch and Moody's sometime in Q2."
Major U.S. stock averages roared Wednesday, with the Dow soaring more than 300 points, as global risk appetite surged on the first trading day of the year after the House managed to pass the Senate's 11th-hour agreement on averting the fiscal cliff.
The International Monetary Fund said Wednesday that while it welcomes the actions by the U.S. Congress to avoid sudden tax increases and spending cuts, more needs to be done to put U.S. public finances back on a sustainable path without harming the still fragile recovery. Specifically, a comprehensive plan that ensures both higher revenue and containment of entitlement spending over the medium term should be approved as soon as possible, the IMF said.
The IMF also said it is crucial that the U.S. is able to raise the debt ceiling "expeditiously" and remove remaining uncertainties about the spending sequester and expiring appropriation bills.
Better-than-anticipated employment change data were released Thursday, pointing to upside risks to Friday's key government nonfarm payrolls report. Payroll processor Automatic Data Processing said that 215,000 jobs were added in December, compared with an upwardly revised 148,000 the prior month. Economists, on average, expected ADP to report a gain of 133,000 jobs in December.
"Private sector employment held up remarkably well in December, despite concerns over the fiscal cliff and the tax increases related to the Affordable Care Act," said Dan Greenhaus, chief global strategist at BTIG.
Greenhaus noted that in the December report, and since 2010, small businesses have been trailing large business in adding jobs perhaps in connection to the impact of the healthcare law, increased regulation and credit availability. "The lack of meaningful gains among this category (small business) partially speaks to why job growth has been relatively anemic."
The Labor Department reported that initial jobless claims for the week ended Dec. 29 increased by 10,000 to 372,000 from the prior week's upwardly revised 362,000.
The four-week moving average was 360,000, an increase of 250 from the previous week's 359,750.
Continuing claims for the week ended Dec. 22 rose 44,000 to 3.245 million, from the previous week's downwardly revised 3.201 million.
On average, economists were expecting initial jobless claims of 365,000 and continuing claims of 3.2 million.
"We have to be careful not to read too much into year-end/turn-of-the-year claims data because of volatility associated with shifting holidays and seasonality that is not necessarily adequately adjusted for by the usual statistical procedures," said John Ryding and Conrad DeQuadros, the founders of research firm RDQ Economics.
Minutes from the Dec. 12 Federal Reserve policy meeting are set to be released at 2 p.m.
Gold for February delivery was declining Thursday by $10.60 at $1,678.20 an ounce at the Comex division of the New York Mercantile Exchange, while February crude oil contracts were down 30 cents at $92.82 a barrel.
The benchmark 10-year Treasury was down 1/32, raising the yield to 1.842%. The dollar was up 0.35%, according to the U.S. dollar index.
Overseas markets were mixed as excitement over the "fiscal cliff" agreement waned and investors took profits. The FTSE 100 in London was up 0.09%, while the DAX in Germany was behind by 0.25%. Hong Kong's Hang Seng closed up 0.37% amid better than expected China non-manufacturing PMI data.
The Japanese market was closed and is scheduled to reopen on Friday.
In corporate news, Hormel Foods (:HRL) announced that it is buying Unilever's (:UL) Skippy peanut butter business for about $700 million.
Hormel shares were popping by more than 4.5% and Unilever American Depositary Receipts were slipping 1%.
Apple (:AAPL) has set its first-quarter earnings release for Jan. 23, with a conference call the same day to discuss the results.
Apple shares were down 0.76%.
Costco Wholesale (:COST) reported a December same-store sales increase of 9%, beating the consensus estimate of 6.5%.
Shares were rising more than 1%.
Gap (:GPS) is buying women's fashion boutique Intermix for $130 million to help the company gain exposure to the luxury apparel market.
Gap shares were rising more than 2.5%.
Advanced Micro Devices (:AMD) appointed Devinder Kumar as its chief financial officer after a four-month search.
Shares were down more than 1.5%.
Mellanox Technologies (:MLNX) on Wednesday reduced its revenue forecast for the fourth quarter.
The data-storage company said it expects fourth-quarter revenue in a range of $119 million to $121 million, down from previous guidance of $145 million to $150 million.
Shares were diving more than 17%.
Family Dollar Stores (:FDO) reported fiscal first-quarter earnings of 69 cents a share, missing the average analyst estimate of 75 cents a share. Revenue was in-line with forecasts amid what the company said was a challenging holiday shopping season.
Shares were tumbling more than 12%.
Quiksilver (:ZQK) co-founder Robert McKnight Jr reportedly will step down from his CEO post, effective Jan. 11. He has been with the surfing outfitter since 1991.
Former Walt Disney executive Andy Mooney will take over as CEO, according to The Wall Street Journal.
Shares were tacking on more than 2%.
Biogen Idec (:BIIB) shares were tumbling by nearly 3.5% after the biotech company said that its experimental ALS drug failed to meet its primary endpoint and that it will discontinue development of the treatment.
Buffalo Wild Wings (:BWLD) shares were up more than 2% as Steven Cohen's SAC Capital disclosed a 5% stake in the company.
-- Written by Andrea Tse in New York.
>To contact the writer of this article, click here: Andrea Tse.