Jobless Claims Fall; GDP Revised Up 1.7%

Arthi Gupta
30 Sep, 2010
New York City

U.S. stocks rose after weekly jobless claims fell 16,000 to 453,000 and second quarter GDP growth was revised to 1.7%. AIG agreed to sell Japan-based life insurance units to Prudential for $4.8 billion. Covance and Sanofi-Aventis agreed on 10-year R&D alliance.

[R]9:35 AM New York – U.S. stocks rose after weekly jobless claims fell 16,000 to 453,000 and second quarter GDP growth was revised to 1.7%. AIG agreed to sell Japan-based life insurance units to Prudential for $4.8 billion. Covance and Sanofi-Aventis agreed on 10-year R&D alliance.[/R]

Asian markets traded mixed and European markets declined. The House of Representatives approved bill authorizing tariffs on imports from China.

The U.S. Labor Department released a report today that first-time claims for unemployment benefits showed a modest decrease in the week ended September 25. The initial jobless claims fell to 453,000 from the previous week''s revised figure of 469,000.

The U.S. Commerce Department released a report today showing an unexpected upward revision to its estimate for second quarter GDP growth with private inventory investment and consumer spending increasing by more than previously estimated.

The Commerce Department said that second quarter GDP increased at an annual rate of 1.7% compared to the 1.6% growth estimated last month.

The House of Representatives on Wednesday approved a controversial bill authorizing additional tariffs on imports from China. The House vote was 348 to 79 for the bill targeting China''s policy of refusing to revalue its currency.

The low valued yuan gives Chinese exporters the ability to sell their goods overseas at prices which many in the U.S. consider uncompetitive low prices.

In another development, three members of the Federal Reserve offered conflicting opinions regarding additional quantitative easing.

Philadelphia Fed President Charles Plossser spoke against the Fed making additional purchases of longer-term bonds, stating little prospective impact on unemployment.

Boston Fed President Eric Rosengren stated that further quantitative easing action could help the economy, calling growth prospects as ""anemic.""

Minneapolis Fed President Narayana Kocherlakota said he sees modest improvement in growth next year with little chance of significant inflation despite record low interest rates.

Moody''s Investor Services downgraded Spain''s government debt by one notch to Aa1 from Aaa, citing considerable deterioration in financial strength of the economy as the primary reason. The rating agency, however, maintained the stable outlook for the economy.

The Irish central bank raised its estimate of the total costs of bailing out troubled lender Anglo Irish Bank to €34 billion. The costs would fall by €5 billion if Anglo Irish avoided further losses under a ""stressed"" scenario, the central bank said. The government had previously estimated total costs to prop up the nationalized lender at around €25 billion and already raised €23 billion of taxpayer money to rescue it.

American International Group, Inc. announced an agreement to sell its Japan-based life insurance subsidiaries, AIG Star Life Insurance Co., Ltd. and AIG Edison Life Insurance Co. to Prudential Financial, Inc. for a total purchase price of $4.8 billion, comprising $4.2 billion in cash and $0.6 billion in the assumption of third-party debt.

AIG said it will retain and continue to grow its general insurance business in Japan. The company also said that the sale of AIG Star and AIG Edison represents another step in its program to repay U.S. taxpayers and a key milestone in achieving a complete exit of government support over time.

As a result of the sales agreement, AIG expects to take a non-cash pre-tax goodwill impairment charge of about $1.2 billion in the third quarter.

Covance Inc., the drug development services company signed agreements with French diversified pharmaceutical company Sanofi-Aventis to become Sanofi-Aventis’ Research & Development partner. Over the next ten years, Covance expects to provide drug development services to Sanofi-Aventis, with estimated payments ranging from approximately $1.2 billion to $2.2 billion.

Sanofi-Aventis will utilize Covance''s global R&D portfolio of discovery support, toxicology, chemistry, clinical Phase I - IV, central laboratory, and market access services with annual commitments for these services increasing over the next decade.

Rolls-Royce Group plc said that its Chief Executive Sir John Rose will retire at the end of March 2011 and appointed John Rishton to succeed. Rishton is currently the Chief Executive of Dutch retail group Royal Ahold.

Wal-Mart Stores, Inc., the world''s largest retailer said that Charles Holley will assume the role of Chief Financial Officer on November 30, when the company''s current CFO Tom Schoewe retires.

Earnings Review

CRA International, Inc. ((CRAI)), the global consulting firm said third quarter revenue fell 5.3% to $84.6 million compared with $89.3 million for the third quarter of fiscal 2009. Net income in the quarter declined 21% to $2.07 million or 19 cents per diluted share, compared with net income of $2.62 million or 24 cents per share last year.

McCormick & Company, Incorporated ((MKC)), the manufacturer and distributor of spices, seasonings and other flavorings stated third quarter net sales grew 0.4% to $794.6 million, from $791.7 million in the prior-year quarter. Net income in the quarter gained 36.4% to $102.4 million or 76 cents per diluted share, compared with net income of $75.1 million or 57 cents per share a year ago.

Omnova Solutions Inc. ((OMN)), the provider of emulsion polymers said third quarter sales increased 22.5% to $227.9 million from $186.1 million in the prior-year quarter. Net income in the quarter plunged 65.3% to $3.5 million or 8 cents per diluted share compared to net income of $10.1 million or 23 cents per share in the prior-year quarter.

Satyam Computer Services Limited, ((SAY)), now Mahindra Satyam, a global business and information technology services company reported fiscal year 2010 total revenue, including ''other operating income'', declined 38% to Rs.5,481 crore from the Rs.8,812.60 crore last year. Consolidated net loss, after adjusting for exceptional items, narrowed 98% to Rs.124.60 crore or Rs.1.14 per share, compared with a net loss of Rs.8,176.80 crore or Rs.121.49 per share in 2009.

Senesco Technologies, Inc. ((SNT)), the development-stage biotechnology company stated fiscal year 2010 revenue slumped 48% to $0.14 million from $0.27 million last year. Net loss for the period widened 134% to $13.38 million or 67 cents per diluted share compared to a net loss of $5.72 million or 30 cents per share a year ago.

Synnex Corporation ((SNX)), the business process services company reported third quarter revenue increased 9.0% to $2.18 billion, compared to $2.0 billion for the comparable quarter last year. Net income in the quarter climbed 44% to $30.9 million or 86 cents per diluted share, compared with net income of $21.5 million or 62 cents per share in the prior-year quarter.

Worthington Industries, Inc. ((WOR)), the steel maker said first quarter net sales increased 48% to $616.8 million from $417.5 million in the prior-year quarter. Net income in the quarter gained 248% to $23.3 million or 30 cents per diluted share, compared to net income of $6.7 million or 8 cents per share in the year-ago quarter.

Xyratex Ltd. ((XRTX)), the enterprise-class data storage solutions provider reported third quarter revenues surged 74.7% to $430.24 million from $246.29 million a year ago. Net income in the quarter soared 377% to $37.23 million or $1.19 per share from $7.81 million or $0.26 per share in the previous year.