U.S. Stocks Fall; Payrolls Decline 125,000

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

U.S. stocks trade sideways after weaker-than-expected payroll data. U.S. employment fell by 125,000 jobs and unemployment rate drops to 9.5% in June. Resource stocks rallied after Australia scraps the super profit tax proposal. Google agrees to buy ITA Software for $700 million.

[R]9:35 AM New York – U.S. stocks trade sideways after weaker-than-expected payroll data. U.S. employment fell by 125,000 jobs and unemployment rate drops to 9.5% in June. Resource stocks rallied after Australia scraps the super profit tax proposal. Google agrees to buy ITA Software for $700 million.[/R]

U.S. stocks fluctuate after disappointing payrolls data, Asian markets experienced mixed trends, and European markets rose led by miners. Fitch raises global growth outlook and feels global economic recovery is on track.

Employment showed a notable decrease in the month of June, according to a report released by the Labor Department today, although the loss of the jobs during the month was largely due to a steep drop in the number of temporary employees hired for the census.

The non-farm payroll employment fell 125,000 jobs in June following an upwardly revised increase of 433,000 jobs in May.

The unemployment rate fell to 9.5% in June from 9.7% in May, as people gave up looking for work and left the labor force.

Australia Prime Minister Julia Gillard announced an agreement with the country''s resources companies on a proposed mining tax.

The settlement announced by Gillard cuts A$1.5 billion from the expected revenues resulting from the tax, which will be capped at 30% and affect only iron ore and coal. The original proposal capped the tax at 40%. If enacted, the tax would take effect on July 1, 2012.

Fitch revised its global growth forecast for 2010 to 3.1% from 2.8% estimated previously, citing strong first quarter growth results of Japan, and BRIC economies.

The global economic recovery remains on track, despite the increase in volatility within sovereign debt markets, the rating agency said in its quarterly Global Economic Outlook report published on Thursday. The US, euro area, and the UK are performing in line with Fitch''s previous projections, the report said.

Fitch estimated global economy to grow 2.9% in 2011 and 3.3% in 2012.

American International Group Inc., the insurer is considering the sale of its two Japanese life insurance units, AIG Star Life Insurance and AIG Edison Life Insurance for about $5 billion.

The improving performance by the units and the continued interest from potential buyers could reportedly be seen as the reason for AIG to revisit the idea of selling the units.

In October 2008, AIG had put for sale its three life insurance companies in Japan, Alico Japan, AIG Edison Life and AIG Star Life as a sign of withdrawal by AIG from the life insurance business in Japan.

AIG is presently in the process of consolidation by selling assets and spinning off some subsidiaries to repay bailout loans received earlier from the federal government.

Google Inc., the search provider on Thursday signed an agreement to acquire ITA Software, Inc., a flight information software company for $700 million in cash. Both the companies have approved the transaction.

ITA provides technically advanced solutions for organizing flight information. The company also offers a new airline passenger reservation system to improve customer experience.

Commodities, Currencies and Yields

Dollar increased against euro to $1.2514 and increased against the Japanese yen to 87.62.

Crude oil decreased $0.02 to $72.93 a barrel for a front month contract, natural gas edged lower $0.02 cents to $4.84 per mBtu and gasoline decreased 0.440 cents to 199.32 cents.

Gold increased $4.70 in New York trading to close at $1,211.40 per ounce, silver closed higher $0.205 to $17.99 per ounce and copper for the front month delivery increased 5.250 cents to $2.92 per pound.

Yields on 10-year U.S. bonds increased to 2.94% and on 30-year U.S. bonds traded at 3.90%.

Stock Movers

Avanir Pharmaceuticals, Inc. surged 11.6% after the drugmaker was upgraded to “buy” in new coverage at Jeffries & Co.

Christopher & Banks Corporation surged 17.9% after the women’s clothing retailer reported first-quarter profit excluding some items of 18 cents a share.

Dendreon Corporation rose 0.4% after the agency supervising Medicare and Medicaid said it would review the effectiveness of the company’s Provenge prostate-cancer treatment.

Hawk Corporation gained 7.6% after the maker of products used in brakes and transmissions announced that its board of directors has commenced a process to explore and consider possible strategic alternatives, including a possible sale of the company.

Harte-Hanks, Inc. increased 7.4% after the advertising circular was upgraded to “market perform” from “underperform” at Bank of Montreal.

Isle of Capri Casinos, Inc. climbed 6.9% after the operator of 14 casinos in six states announced that it has postponed the proposed public offering of 9 million shares of its common stock due to recent market conditions.

Pinnacle Airlines Corp. added 5.5% after the holding company that it has acquired Mesaba Aviation, Inc. from Delta Air Lines paying a price of $62 million.

Earnings Review

Flow International Corporation ((FLOW)), the maker of industrial waterjet machines for cutting and cleaning said fourth quarter sales rose 11% to $48.6 million from $43.7 million a year ago. Net income in the quarter was $112,000 or breakeven per diluted share compared to net loss of $4.5 million or 12 cents per share a year ago.

Franklin Covey Co. ((FC)), the provider of execution, leadership, and personal-effectiveness training said third quarter sales rose 3.4% to $30.5 million from $29.5 million a year ago. Net income in the quarter was $135,000 or 2 cents per diluted share compared to net loss of $5.1 million or 41 cents per share a year ago.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 12.11 or 0.13% to 9,203.71, Hang Seng index in Hong Kong decreased 223.67 or 1.11% to 19,905.32 and CSI 300 index in China higher 8.03 or 0.32% to 2,534.10. ASX 200 index in Australia increased 1.20 or 0.03% to 4,238.70. The FTSE Bursa KL Composite index in Malaysia closed lower 1.32 or 0.10% to 1,307.44.

The Kospi Index in South Korea decreased 14.42 or 0.86% to close at 1,671.82. SET index in Thailand closed higher 5.26 or 0.66% to 802.57 and JSE Index in Indonesia decreased 2.69 or 0.09% to 2,871.55. The Sensex index in India decreased 48.38 or 0.28% to 17,460.95.

Europe Markets Review

In London FTSE 100 Index closed higher 27.52 or 0.57% to 4,833.27, in Paris CAC 40 Index increased 7.83 or 0.23% to 3,347.73 and in Frankfurt DAX index traded higher 12.19 or 0.21% to 5,869.62. In Zurich trading SMI decreased 18.79 or 0.31% to 5,962.87.