U.S. Stocks Stumble; Jobless Claims Rise

Arthi Gupta, Mayank Mehta and Sanjay Barot
01 Jul, 2010
New York City

U.S. stocks decline after disappointing manufacturing data from China and the possible downgrade of Spain

[R]9:35 AM New York – U.S. stocks decline after disappointing manufacturing data from China and the possible downgrade of Spain’s credit rating. U.S. weekly jobless claims rise 13,000 to 472,000. The U.S. House of Representatives passed financial reforms.[/R]

U.S. stocks and the Asian and European markets slumped after manufacturing growth slowed in China. Markets in Asia declined sharply after the release of China report and the benchmark index in Japan dropped 2% to a seven-month low.

China''s purchasing managers'' index fell to 52.1 in June from 53.9 the previous month, reinforcing the view that the Chinese economy may be slowing.

Moody''s Investors Service said yesterday that it has put Spain''s local and foreign currency government bond ratings on review for possible downgrade.

The rating agency said its decision was prompted by the deteriorating economic growth prospects, the challenges the government faces in achieving its fiscal targets and concerns over the impact of rising funding costs over the medium term.

After more than 18 months of negotiation and debate, the U.S. House of Representatives voted 237-192 on Wednesday to pass a sweeping package of reforms to the financial regulatory system, inching a step closer towards Obama administration''s goal of a more accountable Wall Street.

The ""Wall Street Reform and Consumer Protection Act of 2009"" Bill now goes to the Senate.

The bill also aims to strengthen consumer protection, make complex financial products more transparent and establish a new process for closing giant financial firms in trouble.

The Labor Department released a report today showing a much bigger than expected increase in first-time claims for unemployment benefits in the week ended June 26. The report showed that initial jobless claims rose to 472,000 from the previous week''s revised upwardly figure of 459,000.

Hurricane Alex, the first June Atlantic hurricane since 1995 affected oil giant BP''s clean-up efforts in the Gulf of Mexico.

The tropical storm, moving north-west through the Gulf of Mexico, generated strong winds and high waves forcing the BP response mission to suspend oil spill cleanup activities.

BP senior Vice-President Kent Wells said work on the first floating riser containment system to be connected to the Helix Producer vessel would also be temporarily shut down for a week due to adverse weather condition.

Google Inc. said that its Web search service in mainland China was partially blocked on Wednesday as Chinese authorities weighed whether to renew the Internet giant''s business license.

The company said the blockage appeared to affect only search queries generated by mainland China users of the company''s Google Suggest function, which automatically recommends search queries based on the first few letters a user types into the search box. The blockage affected only searches conducted from within mainland China and not from Hong Kong.

Boeing Co. called the World Trade Organization''s final ruling that billions of dollars in European launch aid subsidies used by Airbus to develop its commercial airplanes are illegal and must end, as a landmark decision. The decision also declares that a broad array of government funding for Airbus research and infrastructure development violated international trade agreements.

Under the decision, Airbus must repay the $4 billion in illegal launch aid it received for the A380 or restructure the A380''s financing to proven commercial terms. Also, Airbus must abandon its plans to finance the A350 through the use of such subsidies, Boeing said.

Commodities, Currencies and Yields

Dollar decreased against euro to $1.2328 and decreased against the Japanese yen to 88.18.

Crude oil decreased $0.85 to $74.78 a barrel for a front month contract, natural gas edged lower $0.04 cents to $4.58 per mBtu and gasoline decreased 2.180 cents to 203.86 cents.

Gold decreased $2.80 in New York trading to close at $1,243.10 per ounce, silver closed lower $0.053 to $18.65 per ounce and copper for the front month delivery decreased 4.300 cents to $2.90 per pound.

Yields on 10-year U.S. bonds increased to 2.95% and on 30-year U.S. bonds traded at 3.90%.

Stock Movers

Amazon.com, Inc. fell 0.1% after the Internet retailer today introduced the new latest generation Kindle DX and agreed to acquire full control of Web site Woot.

Pfizer Inc. fell 0.07% after the drugmaker announced the asset disposition program to sell auctions of surplus assets from Pfizer''s facilities across the United States.

Smith & Wesson Holding Corporation added 2.6% after the handgun manufacturer reported fourth-quarter adjusted earnings of 8 cents a share.

Tupperware Brands Corporation dropped 0.6% after the direct seller of plastic storage containers had its credit rating raised to BBB- from BB+ by Standard and Poor’s, according to Bloomberg report.

Yahoo! Inc. rose 1.0% after the Internet media company said its Board of Directors has authorized a program to repurchase up to $3 billion of the company''s stock over the next three years.

Earnings Review

Apollo Group, Inc. ((APOL)), the education company said third quarter revenues rose 27.6% to $1.34 billion from $1.05 billion a year ago. Net income in the quarter fell 11% to $179.3 million or $1.18 per diluted share compared to net income of $201.1 million or $1.26 per share a year ago.

Schnitzer Steel Industries, Inc. ((SCHN)), the recycler of ferrous and nonferrous metals said third quarter revenues rose 84% to $703.5 million from $382.0 million a year ago. Net income in the quarter was $40.5 million or $1.43 per diluted share compared to net loss of $1.5 million or 5 cents per share a year ago.

Xyratex Ltd. ((XRTX)), the data storage technology provider said second quarter revenues rose 134% to $455.9 million from $194.7 million a year ago. Net income in the quarter was $43.7 million or $1.39 per diluted share compared to net loss of $9.6 million or 33 cents per share a year ago.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 191.04 or 2.04% to 9,191.60 and CSI 300 index in China lower 37.00 or 1.44% to 2,526.07. ASX 200 index in Australia decreased 64.00 or 1.49% to 4,237.50. The FTSE Bursa KL Composite index in Malaysia closed lower 5.26 or 0.40% to 1,308.76. The markets in Hong Kong were closed today.

The Kospi Index in South Korea decreased 12.05 or 0.71% to close at 1,686.24. JSE Index in Indonesia decreased 39.44 or 1.35% to 2,874.25. The Sensex index in India decreased 191.57 or 1.08% to 17,509.33. The markets in Thailand were closed today.

Europe Markets Review

In London FTSE 100 Index closed lower 46.80 or 0.95% to 4,870.07, in Paris CAC 40 Index decreased 49.13 or 1.43% to 3,393.76 and in Frankfurt DAX index traded lower 40.55 or 0.68% to 5,924.97. In Zurich trading SMI decreased 71.74 or 1.17% to 6,056.32.