U.S. Payrolls Up 117,000, Indexes Surrender Gains; P&G Net Rises 15%

Arthi Gupta
05 Aug, 2011
New York City

U.S. indexes traded higher after better than estimated employment net gains of 117,000 jobs in July and jobless rate fell to 9.1%. AIG swung to quarterly profit and Procter & Gamble net rose 15%. Priceline.com surged 11%.

[R]10:00 AM New York – U.S. indexes traded higher after better than estimated employment net gains of 117,000 jobs in July and jobless rate fell to 9.1%. AIG swung to quarterly profit and Procter & Gamble net rose 15%. Priceline.com surged 11%.[/R]

The U.S. indexes soared at the opening but surrenders gains after July payrolls data was better than expected and unemployment declined to 9.1%. The decline in unemployment was welcomed by most traders but not strong enough to avert another recessionary bout in the next few quarters.

The indexes rebounded more than 1% after private sector added more than estimated jobs and states lowered employment less than expected. Services expanded at the fastest pace in three months and construction hired the most since February and manufacturing added jobs at twice the rate last month.

However, world markets confidence is fragile on the rising list of worries rooted in the U.S. economic weakness and the growing uncertainties in the euro-zone debt market.

World markets have been on an accelerated slide since July 22 after the bond yields for Italy and Spain began to rise and flirt above 6% level sparking deep fears that the contagion is spreading to larger nations in Europe.

In addition, the willingness of the Republican Party controlled U.S. House to hold the U.S. economy to hostage to meet their political objectives also put bond market on the alert. The U.S. is battling economic, financial, housing market and jobs crisis after excessive spending and costly wars in the Middle East.

The latest sell-off in New York was sparked after a string of weak economic reports in the manufacturing industry, jobs markets and persistent weakness in the housing market.

European indexes edged lower after European leaders called for an urgent meeting today on the fears of a contagion spreading to Italy and Spain. Rising Italian and Spanish bond yields have compounded the fears that both nations will be forced to ask for a bailout from the European rescue fund that may not be prepared.

Market indexes in Italy, Spain and Switzerland are down more than 20% since the peaks in February. For the year, the index in France is down 12%, in Germany 9.2% and in the UK 11%. Italian index has plunged 26% from its peak in February and down 21% in the year.

The market plunge in New York triggered a sell-off of similar proportion in Hong Kong, Tokyo and Sydney. The index in Mumbai declined 2.2%. Decline in commodities prices is also adding to traders’ woes with oil falling below $86 a barrel.

U.S. Non-Farm Payrolls Rise

The U.S. economy added 117,000 jobs in July, following an upwardly revised increase of 46,000 jobs in June, according to the U.S. Labor Department today.

The job growth was entirely in the private sector, with new 154,000 net new jobs offsetting a decline of 37,000 government positions lost as state employment declined 23,000 after Minnesota was forced to lay-off temporarily.

Manufacturing added 24,000 net new jobs after adding 11,000 in the previous month and services expanded 75,000 and construction added 8,000, the largest addition in five months.

The Labor Department also said that the unemployment rate declined to 9.1% in July from 9.2% in June. The rate declined as more people gave up looking for jobs and benefits expired after extended time period.

The jobless rate fell because 193,00 people stopped looking for jobs and the eligible share of population holding a job fell 58.1%, the lowest in the last 26 years.

Earnings Review

American International Group, Inc. ((AIG)), the insurer reported second quarter net income of $1.84 billion or $1 per diluted share compared to a net loss of $2.66 billion or $19.57 per share a year ago.

First Solar, Inc. ((FSLR)), the manufacturer of thin film photovoltaic modules said second quarter net sales declined 9% to $533 million from $588 million in the same quarter of 2010. Net income in the quarter plunged 62% to $61.1 million or 70 cents per diluted share compared to net income of $159.0 million or $1.84 per share in the prior-year quarter.

priceline.com Incorporated ((PCLN)), the online travel company reported second quarter revenues soared 44% to $1.102 billion from $0.767 billion in the year-ago quarter. Net income in the quarter surged 123% to $256.4 million or $5.02 per diluted share compared to net income of $115 million or $2.26 per share in the year-ago quarter.

The AES Corporation ((AES)), the power company reported second quarter total revenue increased 16% to $4.54 billion from $3.92 billion in the comparable period. Net income in the quarter grew 21% to $174 million or 22 cents per diluted share compared to net income of $144 million or 18 cents per share a year ago.

The Procter & Gamble Company ((PG)), the provider of consumer packaged goods reported fourth quarter net sales increased 10% to $20.9 billion from $18.9 billion in the year ago period. Net profit for the quarter increased 15% to $2.51 billion or 84 cents per diluted share compared to net profit of $2.19 billion or 71 cents per share in the year-ago quarter.