U.S. Indexes Trim Losses to 2.4%, Service Industry Expands

Bikram Pandey
06 Sep, 2011
New York City

The U.S. indexes traded lower after a vortex of negative news from Europe added to market anxieties. The indexes trimmed losses after the service index showed an improvement in August. Shaw Group agreed to sell its 20% stake in Westinghouse Electric to Toshiba.

[R]11:20 AM New York – The U.S. indexes traded lower after a vortex of negative news from Europe added to market anxieties. The indexes trimmed losses after the service index showed an improvement in August. Shaw Group agreed to sell its 20% stake in Westinghouse Electric to Toshiba.[/R]

Stocks in New York traded sharply lower on the first trading day of this week on the rising tensions in Europe and the growing prospects of the economy slipping into a recession.

The European markets opened higher but turned lower after the New York markets declined more than 2% in the first thirty minutes of trading. Italy faced a wave of demonstrations and strikes as lawmakers debated the 46 billion euros austerity measures.

The Swiss franc lost as much as 8.5% in the late afternoon trading after the Swiss National Bank held out upper limit for the currency and said it will defend the franc with the “utmost determination.”

The decision to defend the franc may turn out to be expensive for the central bank as the uncertainty in the euro zone and in the U.S. rise. A team of negotiators from Germany, Finland and other nations failed to agree on the collateral terms with Greece and that added to another layer of uncertainties.

The premium to Greek 10-year bonds compared to German bonds of equivalent maturities increased to 1,671 basis points and yield premium for the Italian bonds rose to 368 basis points.

The U.S. indexes trimmed earlier losses after the release of the service industry index. The index of non-manufacturing businesses increased to 53.3 in August from 51 in July and any measure above 50 indicates an expansion.

The index for new orders increased to 52.8 from 51.7 in July and a measure of prices paid increased to 64.2 from 56.6, according to the Institute for Supply Management.

Shaw Group Inc is expected to exercise its option to sell its 20% stake in Westinghouse Electric to Toshiba Corp for as much as $1.6 billion.

The Louisiana based construction group has suffered losses in the last three quarters and the sale will trim its debt by half. The company is expected to record a gain of $545 million on the stake sale.

Stock Movers

Blyth, Inc. ((BTH)) soared 15.5% or $8.23 to $61.07 after the home fragrance and home décor maker reported second quarter net sales climbed 17% to $185.5 million from $157.9 million last year. Net loss for the quarter was $3.07 million or 37 cents per diluted share compared to net income of $0.74 million or 9 cents per share last year.

Fairchild Semiconductor International ((FCS)) fell 0.2% or 3 cents to $12.44 after the semiconductors and integrated circuits maker revised guidance of sales for the third quarter to between $400 and $410 million compared to previous guidance of $433 to $446 million.

Sunoco, Inc. ((SUN)) advanced 2.3% or 83 cents to $36.94 after the petroleum refiner plans to exit its refining business and sell refineries located in Philadelphia and Marcus Hook, Pennsylvania.

The company intends to idle the main processing units at the facilities in July 2012 if it fails to find a buyer in the next six months.

In connection with the decision to exit refining the company expects to record pretax non-cash charge of between $1.9 billion and $2.2 billion in the third quarter of 2011.