Jobless Claims Fall; Deficit Rises

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

U.S. stocks gain after the release of better-than-expected economic reports from China and Japan and weekly jobless claims. U.S. weekly jobless claims edge down to 456,000 and trade deficit widens to $40.3 billion in April. The strengthening of the euro also lifted market sentiment.

[R]9:35 AM New York – U.S. stocks gain after the release of better-than-expected economic reports from China and Japan and weekly jobless claims. U.S. weekly jobless claims edge down to 456,000 and trade deficit widens to $40.3 billion in April. The strengthening of the euro also lifted market sentiment.[/R]

Asian and European markets rose after China reported exports soared 48.5% and imports surged 48.3% in May. World Bank warns of delays in global recovery if European crisis persists. The ECB left its key interest rate unchanged at a record low of 1%.

First-time claims for unemployment benefits saw a modest decrease in the week ended June 5, according to a report released by the Labor Department today. Initial jobless claims edged down to 456,000 from the previous week''s revised figures of 459,000.

The U.S. trade deficit in April was slightly wider than the trade deficit in March with the value of exports decreasing at a faster pace than the value of imports. The report from the Commerce Department showed that the trade deficit widened to $40.3 billion in April from a revised deficit of $40.0 billion in March.

According to the World Bank, the global recovery is moving into a more mature phase led by growing domestic demand, but conditions in Europe may derail the recovery. Nevertheless, the multilateral agency raised its outlook for global growth.

""The global economic recovery continues to advance, but Europe''s debt crisis has created new hurdles on the road to sustainable medium term growth,"" the bank said in its latest Global Economic Prospects 2010.

The bank raised its global growth outlook for 2010 to 3.3% from the 2.7% growth forecast in January. The world economic growth is predicted to stay at 3.3% next year, but accelerate to a 3.5% rate in 2012.

Developing economies are expected to grow at a faster pace of 6.2% compared to the 5.2% growth projected previously. The outlook for high income countries also brightened, with growth seen at 2.3%, up from a 1.8% expansion forecast earlier.

Country-wise forecasts showed 0.7% growth for euro-zone this year, 2.5% for Japan and 3.3% for the U.S. Among the developing countries, China is expected to log the fastest growth of 9.5% followed by India with an 8.2% expansion.

The U.S. Federal Reserve''s Beige Book report released on Wednesday showed that economic activity continued to improve in all twelve Fed districts since the release of the last report in April; it noted that many districts described the pace of growth as ""modest.""

The European Central Bank left its key interest rate unchanged at a record low of 1% for the thirteenth straight month today. The central bank also retained its interest rate on the marginal lending facility at 1.75% and that on the deposit facility at 0.25%.

RealtyTrac, an online marketplace for foreclosure properties, said that foreclosure filings on U.S. properties declined 3% from the previous month, but grew less than 1% from the prior-year period.

Default notices were issued on 96,462 U.S. properties in the month, down 7% from the previous month and 22% from the previous year. RealtyTrac noted that this was the fewest default notices since November 2008 and down 32% from the peak of 142,064 default notices in April 2009.

Commodities, Currencies and Yields

Dollar edged lower against euro to $1.2052 and decreased against the Japanese yen to 91.24.

Crude oil increased $0.34 to $74.72 a barrel for a front month contract, natural gas edged higher $0.04 cent to $4.72 per mBtu and gasoline increased 0.030 cents to 204.00 cents.

Gold decreased $6.00 in New York trading to close at $1,223.90 per ounce, silver closed lower $0.184 to $18.00 per ounce and copper for the front month delivery increased 0.250 cents to $2.85 per pound.

Yields on 10-year U.S. bonds increased to 3.21% and on 30-year U.S. bonds traded at 4.13%.

Stock Movers

American Eagle Outfitters, Inc., the teen retailer added 1.1%.

The Men’s Wearhouse, Inc. advanced 5.5% after the retailer of men’s suits and attire said total company sales increased 2.0% for the quarter.

The Procter & Gamble Company fell 1.0%. The consumer products company was upgraded “outperform” in new coverage at Credit Agricole Securities.

The Walt Disney Company fell 0.6% after the ESPN network has convinced three major advertisers to produce expensive 3-D commercials for its new sports channel debuting Friday with the 2010 World Cup broadcast.

ZymoGenetics, Inc. fell 1.2%. The developer of treatments for cancer and autoimmune diseases was upgraded “outperform” in new coverage William Blair & Co.

Earnings Review

Analogic Corporation ((ALOG)), the medical and security technology provider said third quarter sales rose 14.5% to $107.2 million from $93.6 million a year ago. Net income in the quarter rose 108.7% to $4.8 million or 38 cents per diluted share compared to net income of $2.3 million or 18 cents per share a year ago.

The Men’s Wearhouse, Inc. ((MW)), the retailer of men’s apparel said first quarter sales rose 2% to $473.5 million from $464.1 million a year ago. Net income in the quarter rose 156.6% to $13.6 million or 26 cents per diluted share compared to net income of $5.3 million or 10 cents per share a year ago.

Spartech Corporation ((SEH)), the plastic products maker said second quarter sales rose 24% to $268.5 million from $216.4 million a year ago. Net income in the quarter rose 16% to $4.4 million or 14 cents per diluted share compared to net income of $3.8 million or 12 cents per share a year ago.

Synutra International, Inc. ((SYUT)), the baby formula maker said fourth quarter sales rose 13.3% to $82.4 million from $72.7 million a year ago. Net income in the quarter was $9.1 million or 17 cents per diluted share compared to net loss of $17.1 million or 32 cents per share a year ago.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 103.52 or 1.10% to 9,542.65, Hang Seng index in Hong Kong increased 11.46 or 0.06% to 19,632.70 and CSI 300 index in China lower 32.11 or 1.15% to 2,750.02. ASX 200 index in Australia increased 50.00 or 1.14% to 4,435.30. The FTSE Bursa KL Composite index in Malaysia closed higher 1.23 or 0.10% to 1,291.31.

The Kospi Index in South Korea increased 4.48 or 0.27% to close at 1,651.70. SET index in Thailand closed higher 3.95 or 0.52% to 768.16 and JSE Index in Indonesia decreased 15.01 or 0.54% to 2,770.79. The Sensex index in India increased 264.19 or 1.59% to 16,922.08.

Europe Markets Review

In London FTSE 100 Index closed higher 19.80 or 0.39% to 5,105.66, in Paris CAC 40 Index increased 27.10 or 0.79% to 3,473.87 and in Frankfurt DAX index traded higher 22.43 or 0.37% to 6,007.18. In Zurich trading SMI increased 30.44 or 0.48% to 6,349.62.