U.S. Stocks Turn Positive on Job, Housing Data; House Vote Watch

Arjun Dave
28 Jul, 2011
New York City

The U.S. indexes trended lower as the House prepares to vote on a revised spending plan. The U.S. may not be able to avert a debt downgrade. Weekly jobless claims fell below 400,000. Exxon Mobil quarterly net fell on lower refining margins.

[R]11:30 AM New York – The U.S. indexes trended lower as the House prepares to vote on a revised spending plan. The U.S. may not be able to avert a debt downgrade. Weekly jobless claims fell below 400,000. Exxon Mobil quarterly net fell on lower refining margins.[/R]

The U.S. indexes declined as the House prepared to vote on the revised spending cut plan and attach conditions to debt ceiling revision. In addition, the Fed in its regional survey indicated that nearly half the nation’s economy worsened as manufacturing slowed down and home sales weakened.

Seasonally adjusted weekly jobless claims decreased 24,000 to 398,000 from the revised previous week claims of 422,000, the Labor Department said.

The preliminary insured unemployment rate in the week ending July 16 declined to 2.9% from the prior week's unrevised rate of 3%.

The jobless claims fell below the 400,000 level indicating that the labor market may be on the rebound. However, four-week moving average claims fell only 8,500 to 413,750.

Pending home sales contracts increased 2.4% in June after rising at 8.2% in May according to the industry group the National Association of Realtors.

In the European markets, the CAC-40 index dropped 1.2% or 45.80 to 3,688 and the DAX 30 index declined 1.5% or 111.50 to 7,141.

The benchmark index in Milan dropped 1.1% to 18,278.40 and in Spain fell 0.8% to 9,568.00. The indexes in Athens, Zurich and Stockholm dropped nearly 1%.

The European markets declined for the third day this week as the U.S. slides near default and may not be able to avert a rating downgrade.

The euro strengthened and weak earnings from BASF, Siemens and Vallourec contributed to the decline.

Investors also sold bonds of Italy and Spain for the fifth day in a row as the world markets declined and premium to the German bunds rose. German bond yields on 10-year declined to 2.62% as investors sought safety.

The yields on 10-year Spanish bonds rose to 6% and Italy sold 2.7 billion euros of 10-year bonds at 5.77%. The Italian Treasury also sold 3-year bonds at a yield of 4.8%.

The Italian bond yield rose to the highest level since the creation of the euro in 2000 and jumped full one percentage point when it sold similar bonds in late June.

Stock Movers

Air France Group dropped 8% to 8.70 euros and Deutsche Lufthansa AG declined 3% to 14.05 euros after the airlines reported earnings that were lower than expected after fuel prices surged and demand to North Africa travel was trimmed.

BASF SE dropped 6% to 61.99 euros after the chemical maker reported earnings before interest and taxes were nearly unchanged at 2.24 billion euros.

Credit Suisse AG declined 3% to 28.40 euros after the investment bank reported second quarter net declined 52% to Sfr768 million or $959 million as the trading released earnings declined. The company also plans to cut 2,000 jobs.

Exxon Mobil second quarter net soared 41% to $10.68 billion or $2.18 a share compared to $7.56 billion or $1.60 a share in the quarter a year ago. Oil and gas production increased 10% to 4.4 million barrels oil equivalent in the quarter.

Exploration unit profit rose 60% to $8.54 billion and chemicals income declined 3.4% to $1.32 billion.

Lafarge SA declined 5% to 37.65 euros after second quarter operating profit declined to 702 million euros from 838 million euros a year ago quarter.

Siemens AG declined 1% to 90.22 euros after the engineering company said net profit in the fiscal third quarter declined 47% to 763 million euros and guided 7.5 billion euros of earnings for the full year.

Sprint Nextel dropped 18% to $4.23 after it reported the fifteenth quarterly loss in a row. The company also signed a deal with Lightsquared Inc for 15 years and will receive a total of $9 billion in cash and $4.5 billion credit payments that will allow the use and resell the capacity.

Volkwagen AG decreased 6.5% to 134.5 euros after the largest European car maker reported second quarter operating earnings of 3.17 billion euros. The company blamed rising euro and commodities prices and said the earnings for the year will be under pressure.