U.S. Stocks Lower on Weak Private Jobs, Manufacturing Growth

Arthi Gupta
01 Jun, 2011
New York City

U.S. indexes traded lower after private sector added 38,000 jobs in May, less than estimated. U.S. manufacturing expansion decelerated at the fastest pace in 27 years and construction spending highlighted the ongoing drag on the economy. Sealed Air agreed to buy Diversey Holdings for $4.3 billion.

[R]11:35 AM New York – U.S. indexes traded lower after private sector added 38,000 jobs in May, less than estimated. U.S. manufacturing expansion decelerated at the fastest pace in 27 years and construction spending highlighted the ongoing drag on the economy. Sealed Air agreed to acquire Diversey Holdings for $4.3 billion. Phillips-Van Heusen swung to profit.[/R]

Stocks in New York traded lower after the private sector added 38,000 jobs. The net new job addition was lower than anticipated and smallest since September 2010 and investors focused on the end of Fed bond buying program at the end of this month.

The weak regional manufacturing in the Midwest and a decline in consumer reports was followed by a string of reports that raised concerns on the U.S. economic recovery.

Separately, The Institute for Supply Management said its manufacturing index declined to 53.5% in May from 60.4% in April. The index has expanded for 22 months in a row but the growth rate has declined for three months in a row.

The index showed expansion in manufacturing continued by the growth decelerated the most since 1984.

The latest data on construction spending added to four economic reports that signalled weak and patchy economic recovery.

April construction spending increased 0.4% at annual rate of $765.0 billion from the revised March estimate of $762.1 billion and dropped 9.3% from a year ago spending of $843.1 billion.

March spending was revised lower and spending in the four months to April declined 8.4% from a year ago to $222.7 billion.

European markets traded sideways as markets focused on the Greek debt resolution. The bailout terms for Greece are expected to be finalized today but the Greece’s ability to repay debt in the next three years is uncertain as the economy shrinks, tax receipts decline and bank withdrawals mount.

Market sentiment was also dampened after manufacturing grow rate declined in China partly because of power shortage and the lack of parts from Japan.

Asian markets traded mixed after China Federation of Logistics and Purchasing said that its purchasing managers' index for the manufacturing sector fell to 52 in May from 52.9 in April.

The OECD area economy expanded at a steady pace in the first quarter, the Organization for Economic Cooperation and Development said on Wednesday.

The Canadian economy grew 1% in the first quarter, following 0.8% expansion in the previous three months.

U.S. Private Sector Growth Slows

Private sector employment in the U.S. increased by much less than anticipated in the month of May, according to a report released by payroll processor Automatic Data Processing, Inc. on Wednesday.

ADP said private sector employment increased by 38,000 jobs in May following a downwardly revised increase of 177,000 jobs in April.

Sealed Air Acquires Diversey Holdings

Sealed Air Corp., the packaging materials provider said it entered into an agreement to acquire privately owned cleaning and sanitation firm Diversey Holdings, Inc. for $4.3 billion in cash and stock.

Rio Tinto Forms JV with Chinalco

Rio Tinto Plc said that it formalized a joint venture with Aluminium Corp of China Ltd., also known as Chinalco, aiming to explore mainland China.

In the joint venture, Chinalco will hold a 51% interest and Rio Tinto will hold the remaining 49% interest.

Toyota Recalls Prius Vehicles

Toyota Motor Corp.'s U.S. sales unit stated it will conduct a voluntary safety recall of about 52,000 Prius vehicles manufactured between 2001 and 2003 due to a steering related problem.

Toyota Motor also announced the recall of 34 Venza AWD and 16 Sienna AWD cars.

Hyundai Motor Co. Ltd. reported total vehicle sales grew 13.6% to 339,205 units in May from last year's 298,722 units. Domestic sales rose 17.3% annually to 57,750 units, while overseas sales rose 12.8% to 281,455 units from last year.

Coca-Cola Mulls Listing On Shanghai Stock Exchange

Coca-Cola Co. is considering a listing on the Shanghai Stock Exchange, according to several reports. The company is reportedly looking to increase investments in China to as much as $2 billion.

Earnings Review

Dollar General Corp. ((DG)), the discount retailer said first quarter sales improved 10.9% to $3.45 billion in the latest quarter from $3.11 billion in the previous year. Same-store sales rose 5.4% in the quarter.

Net quarterly income increased 15% to $157 million or 45 cents a diluted share compared to net income of $136 million or 39 cents per share last year.

Jos. A. Bank Clothiers, Inc. ((JOSB)), the men's clothing and accessories retailer reported first quarter net sales grew 8.5% to $193.27 million from $178.13 million in the same quarter last year. Net income in the quarter increased 12.7% to $17.81 million or 64 cents per diluted share compared to net income of $15.81 million or 57 cents per share in the previous year.

Phillips-Van Heusen Corporation ((PVH)), the apparel maker said first quarter total revenue doubled 121% to $1.37 billion from $619.04 million in the same quarter last year. Net income generated in the quarter was $57.7 million or 79 cents per diluted share compared to a net loss of $27.6 million or 53 cents per share for the year-ago quarter.

Shanda Games Limited ((GAME)), the online games operator reported first quarter revenues grew 9.6% to RMB 1,252.6 million from RMB 1,143.2 million in the year-ago quarter. Net income in the quarter declined 4.9% to RMB 312.9 million from RMB 329.0 million in the year-ago quarter. Earnings per ADS were RMB 1.10 compared to RMB 1.14 last year.