U.S. Jobless Rate at 9.1%; Deficit Estimate Lowered 20%

Arthi Gupta
02 Sep, 2011
New York City

U.S. indexes fell after non-farm payroll level stagnated in August. The OMB estimated U.S. deficit to fall 20% to $1.316 trillion. Domestic automakers reported strong growth in U.S. auto sales in August. NextEra agreed to sell natural gas-fired power assets for $1 billion.

[R]9:35 AM New York – U.S. indexes fell after non-farm payroll level stagnated in August. The OMB forecasted U.S. deficit lowered 20% to $1.316 trillion. Major automakers reported strong growth in U.S. vehicle sales in August. NextEra agreed to sell natural gas-fired power assets for $1 billion.[/R]

The White House Office of Management and Budget projected U.S. 2011 deficit to be $1.316 trillion, a $329 billion or 20% decrease from the $1.645 trillion deficit projected in February. As a percentage of GDP, the deficit is now projected to equal 8.8%, down from 10.9% projected in February.

Chain store sales in August advanced on strong demand across all categories of retail. The Hurricane Irene lifted sales at discounters BJ’s and Costco but other stores also enjoyed gains. Department stores sales declined in the month.

European banks declined after the U.S. Federal Housing Finance Agency planned to sue some of the largest banks on claims that mortgages securitized by the lenders misled investors regarding the quality of the loans.

The list of banks on the FHFA target includes Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank.

Greek authorities have not been able to reach an agreement with the European Union, International Monetary Fund and European Central Bank on the country’s ability to meet its deficit targets with the necessary budget cuts.

However, the combined mission is estimated to return within ten days after the Greek authorities are ready with a draft of the 2012 budget. Greece is likely to overshoot its deficit target of 7.6%.

Euro-zone producer prices rose 0.5% on a monthly basis and 6.1% on an annual basis in July, according to the latest data from Eurostat.

Asian markets traded mixed after Japan’s capital spending in the second quarter on plant and machinery amounted to at 7.714 trillion yen, 7.8% lower than the second quarter of last year, the Ministry of Finance said on Friday.

U.S. Employment Flat

The total non-farm payroll level in the U.S. for August showed that there were no new jobs created for the month with private sector job growth being offset by a drop in government jobs, according to data released by the U.S. Labor Department today.

This is the weakest reading recorded since September 2010 when the economy shed 29,000 jobs.

However, the unemployment rate held steady at 9.1%.

U.S. Auto Sales Up

General Motors, Ford and Chrysler on Thursday reported strong growth in U.S. vehicle sales for August.

GM said its U.S. vehicle sales for August rose 18% to 218,479 units from 185,176 units in the same month last year.

Ford said that it sold 175,220 vehicles in the U.S. in August, an increase of 11.2% from 157,503 vehicles sold in the same month last year.

Chrysler Group LLC said its U.S. sales rose 31% to 130,119 vehicles in August from 99,611 vehicles last year.

However, Toyota Motor Sales USA Inc., a division of Toyota Motor Corp., said its U.S. vehicle sales for August fell 12.7% to 129,483 units from 148,388 units in the same month a year earlier.

NextEra to Sell Assets

NextEra Energy Resources, LLC, a subsidiary of NextEra Energy, Inc. agreed to sell its ownership interest in a portfolio of natural gas-fired generating assets to an affiliate of LS Power for $1.05 billion.

The transaction will result in net cash proceeds of approximately $500 million, after the repayment of debt and transaction costs and a one-time after-tax charge of approximately $97 million.

Earnings Review

Campbell Soup Company ((CPB)), the producer of canned soups and related products said fourth quarter net sales improved 6% to $1.61 billion from $1.52 billion in the comparable period a year ago. Net earnings in the quarter decreased 11.5% to $100 million or 31 cents per diluted share compared to net earnings of $113 million or 33 cents per share in the prior-year quarter.

Esterline Technologies Corporation ((ESL)), the aerospace and defense contractor reported a third quarter revenues grew 8.2% to $409.5 million from $378.3 million in the year-ago quarter. Net profit in the quarter dropped 5.5% to $37.7 million or $1.21 per share compared to net profit of $39.9 million or $1.30 per share in the year-ago period.

H&R Block, Inc. ((HRB)), the tax service provider said first quarter revenues fell 2.5% to $267.6 million from $274.5 million in the same quarter last year. Net loss in the quarter widened 36% to $173.4 million, or 57 cents per diluted share compared to a loss of $127.6 million, or 40 cents per share for the year-ago quarter.

Peabody Energy Corporation ((BTU)), the coal miner slashed its earnings outlook for the third quarter and fiscal year 2011. The company estimates third quarter adjusted earnings in a range of $0.70 to $0.90 per share, down from the prior range of $1.05 to $1.25 per share.

For fiscal year 2011, Peabody lowered its outlook for adjusted earnings to a range of $3.70 to $4.15 per share from the prior range of $4.20 to $4.60 per share.