U.S. Jobless Claims Soar; Rates on Hold in Europe, UK

Arthi Gupta
13 Jan, 2011
New York City

U.S. stocks fell after weekly jobless claims surged, producer prices rose more than estimated and trade deficit unexpectedly narrowed. Spain and Italy successfully completed bond auctions. U.S. foreclosure filings rose 2% in 2010. Rates on hold in UK and Europe.

[R]9:10 AM New York – U.S. stocks fell after weekly jobless claims surged, producer prices rose more than estimated and trade deficit unexpectedly narrowed. Spain and Italy successfully completed bond auction. U.S. foreclosure filings rose 2% in 2010. Rates on hold in UK and Europe.[/R]

U.S. stocks fell after disappointing jobs data and wholesale prices rose more than expected, Asian markets gained and European markets rose after Spain and Italy successfully completed bond auction today. Bank of England and ECB left rates on hold.

Spain’s index rose 5% yesterday and gained further after the completion of bond sale.

Spain raised €3 billion or $3.9 billion on Thursday in a debt auction. The average yield on the 5-year bonds rose to 4.54% compared with 3.58% at the last auction on Nov. 4. The auction was 2.1 times oversubscribed, compared to 1.6 times last time.

Italy raised €6.0 billion or $10.2 billion in bonds today at unexpectedly high rates. The Treasury issued €3.0 billion in five-year bonds and €3.0 billion n 15-year bonds, the Bank of Italy said in a statement.

The yield was 3.67% for five-year bonds compared to 3.24% at the last sale, and 5.06% for the 15-year bonds compared to 4.81%. The auction was over-subscribed, with the Treasury receiving €8.5 billion in bids.

The Bank of England on Thursday left its key interest rate unchanged at a record low again at 0.5% and retained the size of the quantitative easing at £200 billion.

The European Central Bank retained its key interest unchanged at a record low of 1%.

U.S. Weekly Jobless Claims Surge

First-time claims for U.S. unemployment benefits unexpectedly surged last week, according to figures released by the Department of Labor.

In the week ending January 8, seasonally adjusted initial claims increased 35,000 to 445,000 from the previous week''s revised 410,000.

The Labor Department said that the less volatile four-week moving average rose to 416,500, an increase of 5,500 from the previous week''s revised average of 411,000.

U.S. Producer Prices Rise

Producer prices in the U.S. increased more than expected in the month of December, according to a report released by the Labor Department on Thursday, with the price growth due in large part to a jump in energy prices.

The Labor Department said its producer price index rose 1.1% in December following an unrevised 0.8% increase in November.

U.S. Trade Deficit Narrows

With the value of U.S. exports increasing at a faster rate than the value of U.S. imports in the month of November, the Commerce Department released a report on Thursday showing that the U.S. trade deficit for the month unexpectedly narrowed compared to October.

The report showed that the trade deficit narrowed to $38.3 billion in November from a revised $38.4 billion in October.

U.S. economic activity continued to expand moderately in recent months, according to the Federal Reserve''s Beige Book report, a compilation of anecdotal evidence on economic conditions from each of the 12 Fed districts.

The report released on Wednesday said the twelve Fed districts generally reported that conditions were better in the manufacturing, retail, and non-financial services sectors than in the financial services or real estate sectors.

U.S. Foreclosure Filings Rise

RealtyTrac, an online marketplace for foreclosure properties said 3,825,637 foreclosure filings were reported on a record 2,871,891 U.S. properties in 2010, an increase of 2% from 2009. One in 45, or 2.23% of all U.S. housing units received at least one foreclosure filing during the year, up from 2.21% in 2009 and 1.84% in 2008.

World Bank Forecasts Slowdown in Global Growth

In its Global Economic Prospects 2011, the World Bank said global growth is forecast to slow to 3.3% this year from 3.9% in 2010. The lender said the global economy is moving on from a post-crisis bounce-back phase of recovery to slower but still solid growth this year and next.

AIG Announces Warrant Dividend Condition Fulfilled

American International Group, Inc. said that the condition to its previously announced dividend of approximately 75 million warrants has been satisfied.

The warrant dividend was subject to the condition that parties to the recapitalization determining to expect that the recapitalization will close on January 14. The parties include AIG, the U.S. Department of the Treasury, the Federal Reserve Bank of New York or FRBNY, and the AIG Credit Facility Trust.

Lockheed Wins Contracts from U.S. Navy

Lockheed Martin Corporation, the defense contractor said it received a variety of production and development contracts totaling $360 million from the U.S. Navy, covering a spectrum of systems aboard the MH-60R Seahawk helicopter fleet, built by Sikorsky Aircraft Corp.

Oregon State AG Sues J&J

Johnson & Johnson was sued on Wednesday by the Oregon State Attorney General John Kroger related to the """"Phantom Recall"""" of defective over-the-counter pain relieving drug Motrin. J&J is alleged to have attempted to secretly buyback defective supplies of Motrin from store shelves instead of notifying retailers and consumers and an immediate public recall.

GE Purchases Lineage Power

GE said that it agreed to acquire privately-held Lineage Power Holdings, Inc., from Gores Group, LLC., for about $520 million or eight times enterprise value on 2011 EBITDA basis. The deal is expected to expand GE''s $40 billion energy portfolio of solutions for customers in vital industries.

Earnings Review

Blackboard Inc. ((BBBB)), the education software applications provider backed its fourth quarter and full-year 2010 financial guidance.

The company''s guidance for revenues is estimated in the range of $114.8 million to $118.8 million and adjusted net income is in the range of $0.31 to $0.35 per share for the fourth quarter.

For the full year, revenues are projected in the range of $444.4 million to $448.4 million and earnings in the range of $1.57 to $1.61 per share.

CLARCOR Inc. ((CLC)), a maker of filtration and packaging products reported fourth quarter net sales rose 18% to $275.66 million from $234.39 million in the prior-year period. Net earnings in the quarter grew 17% to $29.00 million or 57 cents per diluted share, compared to net earnings of $24.68 million or 49 cents per share in the year-ago period.

Net sales for the year rose 11% to $1.01 billion from $907.75 million last year. For fiscal year 2010, the company''s net earnings surged 34% to $96.08 million or $1.88 per share from $71.54 million or $1.40 per share in the previous year.

Infosys Technologies Limited ((INFY)), the Indian software services firm reported third quarter revenues increased 28% to $1.585 billion, from $1.232 billion in the year-ago period. On an IFRS basis, net profit rose 19% to $397 million, from $334 million in the prior year. Earnings per American Depository Share grew to $0.69 from $0.59.

MSCI Inc. ((MSCI)), the investment support tools provider said fourth quarter operating revenues surged 80% to $213.32 million from $118.79 million year ago. Net income in the quarter increased 23.3% to $30.27 million or 25 cents per diluted share, compared with net income of $24.54 million or 24 cents per share last year.

Williams-Sonoma, Inc. ((WSM)), the specialty retailer of products for the home said net revenues for the 8-week holiday period ended December 26, 2010 grew 10.5% to $865 million, compared to the 8-week holiday period ended December 27, 2009. Comparable store sales increased 5.0%.