U.S. Markets Track Losses in Europe

Arthi Gupta, Mayank Mehta and Sanjay Barot
04 Jun, 2010
New York City

U.S. stocks fall after employment increases by 431,000 and unemployment rate declined to 9.7% in May on census jobs. The euro declined after comments from Hungarian officials. Finance ministers of G-20 nations meet in Korea to determine new capital requirements for banks.

[R]9:45 AM New York – U.S. stocks fall after employment increases by 431,000 and unemployment rate declined to 9.7% in May on census jobs. The euro declined after comments from Hungarian officials. Finance ministers of G-20 nations meet in Korea to determine new capital requirements for banks.[/R]

The U.S. indices track declines of the European market after Hungarian officials warn of fiscal woes and possible debt default. The euro sank to a new four-year low.

Hungarian officials said the country''s budget was in ""much worse"" condition than the previous government had stated, raising new fears about sovereign debt burdens in Europe. Hungary''s fiscal situation is grave because the previous government “manipulated” figures and “lied” about the state of the economy, said Peter Szijjarto, spokesman for Prime Minister Viktor Orban.

Payroll employment in the U.S. increased in the month of May, according to a report released by the Labor Department today, although the increase in jobs was largely due to the hiring of temporary employees to work on the census.

The report showed that non-farm payroll employment increased by 431,000 jobs in May following an unrevised increase of 290,000 jobs in April.

The Labor Department said that the unemployment rate slipped to 9.7% in May from 9.9% in April.

The underemployment rate remains flat at 19.1% for May, according to a survey conducted by Gallup.

Kansas City Federal Reserve President Thomas Hoenig said on Thursday that the Federal Reserve should aim to raise interest rates from near-zero levels to 1% by the end of the summer and then assess the economic outlook before raising them further.

Speaking at the Bartlesville Federal Reserve forum in Bartlesville, Oklahoma, Hoenig outlined the normalization of policy in a two-step process.

First, he said, the Fed would continue to unwind extraordinary policy actions and eliminate the phrase in its monetary policy statements indicating that interest rates are likely to remain at exceptionally low levels for an extended period.

He continued, ""Second, with these steps taken, with the improvements in market conditions and liquidity, and with an improving outlook, the FOMC would be prepared to raise the funds rate target to 1% by the end of summer.""

After an assessment of the economic outlook, he said that interest rates should be raised from 1% to above 3% ""reasonably quickly.""

""The final steps would take rates to between 3.5% and 4.5% as economic growth approaches long-run potential,"" Hoenig said.

According to a private survey conducted by Gallup on Thursday the underemployment rate was nearly unchanged in May and rose to 19.1% from 18.9% in April.

Commodities, Currencies and Yields

Dollar edged higher against euro to $1.2138 and decreased against the Japanese yen to 92.41.

Crude oil decreased $0.02 to $74.59 a barrel for a front month contract, natural gas edged higher $0.00 cent to $4.69 per mBtu and gasoline increased 0.440 cents to 208.56 cents.

Gold decreased $10.70 in New York trading to close at $1,199.30 per ounce, silver closed lower $0.181 to $17.75 per ounce and copper for the front month delivery decreased 0.550 cents to $2.94 per pound.

Yields on 10-year U.S. bonds increased to 3.34% and on 30-year U.S. bonds traded at 4.25%.

Stock Movers

Krispy Kreme Doughnuts, Inc., the doughnut chain increased 9.2%.

Martek Biosciences Corporation, the maker of nutritional oils for foods and baby formula gained 6.8%.

Quiksilver, Inc. surged 11.4%. The surfer-themed apparel maker said net revenues from continuing operations for the second quarter of fiscal 2010 decreased 5% to $468.3 million from $494.2 million a year ago.

RCM Technologies, Inc., the provider of business and technology solutions surged 42.5%.

Earnings Review

SAIC, Inc. ((SAI)), the defense contractor said first quarter revenues rose 1.5% to $2.69 billion from $2.65 billion a year ago. Net income in the quarter rose 8% to $125.0 million or 32 cents per diluted share compared to net income of $116.0 million or 28 cents per share a year ago.

The company said its first quarter profit rose from last year, helped by higher revenue and a lower effective tax rate.

The Cooper Companies, Inc. ((COO)), the eye care and surgical product maker said second quarter sales rose 11% to $289.3 million from $260.6 million a year ago. Net income in the quarter fell 81.7% to $4.5 million or 10 cents per diluted share compared to net income of $24.6 million or 54 cents per share a year ago.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 13.00 or 0.13% to 9,901.19, Hang Seng index in Hong Kong decreased 6.64 or 0.03% to 19,780.07 and CSI 300 index in China higher 8.32 or 0.30% to 2,744.39. ASX 200 index in Australia decreased 36.60 or 0.82% to 4,449.40. The FTSE Bursa KL Composite index in Malaysia closed lower 0.05 or 0.00% to 1,294.39.

The Kospi Index in South Korea increased 2.29 or 0.14% to close at 1,664.13. SET index in Thailand closed higher 5.52 or 0.72% to 771.48 and JSE Index in Indonesia increased 12.27 or 0.44% to 2,823.25. The Sensex index in India increased 95.36 or 0.56% to 17,117.69.

Europe Markets Review

In London FTSE 100 Index closed higher 10.54 or 0.20% to 5,221.72, in Paris CAC 40 Index increased 1.14 or 0.03% to 3,558.48 and in Frankfurt DAX index traded higher 27.43 or 0.45% to 6,082.06. In Zurich trading SMI increased 25.02 or 0.39% to 6,443.84.