U.S. Adds 54,000 Jobs in May; Service Sector Activity Rises

Arthi Gupta
03 Jun, 2011
New York City

The U.S. indexes declined after non-farm payrolls increased in May at the slowest pace in eight months. U.S. warned of possible debt rating downgrade. Walgreens agreed to acquire drugstore.com for $409 million.

[R]11:00 AM New York – The U.S. indexes declined after non-farm payrolls rose in May at the slowest pace. Rating agency lagging market perception issued a possible U.S. debt rating downgrade. Walgreens agreed to acquire drugstore.com for $409 million.[/R]

The U.S. stocks turned lower after the release of May jobs data. The smallest increase in payroll in eight months adds to a list of weak economic reports this week.

European indexes traded sideways after private sector growth weakened and Asian markets declined on global economic concerns. Greece’s debt and the contagion worries hovered market sentiment.

U.S. Non-Farm Payrolls Drop

The U.S. added just 54,000 jobs in May following the revised addition of 232,000 jobs in April, according to the latest data released by the U.S. Labor Department.

The job gains came entirely in the private sector, with the addition of 83,000 private sector jobs offsetting the loss of 29,000 government jobs. Private hiring increased 251,000 in April.

The report showed that the unemployment rate edged higher to 9.1% in May from 9% in April.

Factory jobs decreased 5,000 after increasing 24,000 in April and service sector added 51,000. Retailers cut 5,000 jobs and construction companies added 2,000.

U.S. Monster Employment Index Drops

The Monster employment index for the U.S. dropped in May after rising for three straight months, the Monster Worldwide said today.

The index declined to 143 in May, from 145 in April. On an annual comparison, the indicator rose 7%, marking the 16th consecutive month of growth.

In another report, the ISM said its non-manufacturing index, which tracks activity in the service sector, rose to 54.6 in May from 52.8 in April.

Moody's Warns of Downgrade

Moody's Investors Service warned that it will place the U.S. government's Aaa credit rating for a possible downgrade, provided there is no progress on raising the statutory debt limit in coming weeks.

The rating agency said that if the debt limit is raised and default avoided, the current Aaa rating will be retained. But the outlook on the rating will depend on the outcome of negotiations on deficit reduction.

U.S. Treasury Sells Chrysler Stake to Fiat

The U.S. Department of the Treasury reached an agreement with Italian carmaker Fiat S.p.A to sell its 6% fully diluted equity interest in automaker Chrysler Group LLC to Fiat.

The expected total proceeds to Treasury from this transaction are $560 million.

Wal-Mart Authorizes Buyback Program

Wal-Mart Stores, Inc. said its board approved a new program authorizing the company to repurchase $15 billion of its shares. This program replaces the previous $15 billion program, announced on June 4, 2010, that had approximately $2 billion of remaining authorization.

Walgreens Acquires drugstore.com

Walgreen Co. reported concluding its acquisition of drugstore.com for a total enterprise value of $409 million.

The acquisition adds to Walgreen's portfolio of approximately 60,000 products and connects them with over 3 million online customers.

Earnings Review

Diamond Foods, Inc. ((DMND)), the snacks maker stated third quarter net sales soared 61% to $222.99 million from $138.73 million last year. Net income in the quarter was $7.73 million or 34 cents per diluted share compared to a net loss of $4.27 million or 22 cents per share last year.

The Cooper Companies, Inc. ((COO)), a maker of vision care and women's healthcare products, reported second quarter revenues grew 12% to $325.3 million from $289.3 million in the year-ago quarter. Net income in the quarter surged 687% to $35.4 million or 73 cents per diluted share compared to net income of $4.5 million or 10 cents per share in the year-ago quarter.

Walgreen Company ((WAG)), the drugstore chain stated that comparable store sales for May rose 5.6%, leading to a total sales increase of 7% for the month.

The company's total sales for the month of May grew 6.8% to $6.08 billion compared with $5.69 billion for the same month last year.