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Stocks Seek Direction After Earnings, Data

U.S. Market
Stocks were choppy this morning after data and earnings.

The U.S. private sector added 213,000 jobs in January according to the ADP report. The report was well below the 245,000 jobs that economists had expected to be added. December’s reading was revised upward to 253,000 from 241,000.

The ISM nonmanufacturing index, which measures the strength of the U.S. services sector,rose to 56.7 in January from 56.5 in December. However, the employment gauge fell to the lowest level in 11 months indicating that hiring plans are being scaled back.

At midday the Dow was up 0.4%, the Nasdaq was 0.1% higher while the S&P 500 was flat.

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Stocks on the Move
After rumors of a deal emerged yesterday, Staples (SPLS) confirmed today that is has agreed to buy rival Office Depot (ODP) for $6 billion. The deal needs to be approved by regulators and Staples can walk away from the deal if major divestments would be required to get the transaction closed. Staples shares were down 10% on the report while Office Depot gained 1.7%.

Disney’s (DIS) first-quarter revenue grew 9% over last year to $13.4 billion, above our estimate of $12.9 billion. The revenue growth at three of four largest segments (media networks, parks and resorts, and consumer products) offset a slight expected decline at studio entertainment as F1Q14 included the oversized impact of Frozen. EBITDA increased 18% to $3.7 billion, well above our $3.2 billion estimate, as margins improved at three of four largest segments (studio entertainment, parks and resorts, and consumer products). Shares rose over 8% on the report.

Shares of Chipotle (CMG) fell over 7% after the firm reported results late Tuesday. Fourth-quarter comps of 16.1%, lending support to the intangible asset behind our narrow moat rating, while a 100-basis-point increase in restaurant operating margins to 26.6% demonstrates the leverage inherent in its model. The shares were under pressure due to management’s conservative outlook of low- to mid-single-digit comps in 2015.

Gilead Sciences (GILD) reported fourth-quarter results and 2015 guidance that were ahead of our expectations, and the new quarterly dividend and aggressive $15 billion share-repurchase program give us an answer for how the firm will use the tremendous cash flow from its HIV and hepatitis C portfolio (almost $13 billion in operating cash flow in 2014). Despite the upbeat results, shares were down over 7% at midday.

Foreign Markets
European markets were mixed today. In late trading, the FTSE 100 was down 0.2%, the Paris CAC was up 0.4% while Germany’s DAX was 0.2% higher.

Asian shares were also mixed. The Shanghai Composite was down 1%, the Nikkei 225 was up 2% while the Hang Seng gained 0.5%.