U.S. Indexes in Second Day 3% Loss; Jobless Claims Fall 9,000

Bikram Pandey
22 Sep, 2011
New York City

U.S. indexes dropped 3% for the second day in a row and 10-year Treasury note yield dropped to historic low of 1.76%. Global economic data signaled slowdown in the euro zone and China. Weekly U.S. jobless claims fell to 423,000. Copper, gold and oil fell between 3% and 7%. FedEx trims outlook.

[R]12:15 PM New York – U.S. indexes dropped 3% for the second day in a row and 10-year Treasury note yield dropped to historic low of 1.76%. Global economic data signaled slowdown in the euro zone and China. Copper, gold and oil fell between 3% and 7%. FedEx trims outlook.[/R]

The drumbeat of negative news overwhelmed market indexes at the opening and the indexes extended 3% loss for the second day in a row. The Treasury yields declined to the low of 1.76%, last seen in 1940s.

U.S. indexes dropped more than 2% at the opening and quickly touched off the losses of 3% after economic news from the euro zone and China were below expectations.

Weekly initial jobless claims at the end of last week decreased 9,000 to 423,000 from the revised claims for the previous week of 432,000.

German private sector index showed a decline in activities for the eighth month in a row and the activities across the euro zone declined as well in the preliminary estimate for September. The outlook for the rest of the year also showed grim prospects.

European benchmark indexes plunged at least 4% and dropped to a 26-month low as the latest economic data from Germany, China and Spain showed weakening economic outlook. Italy lowered its economic outlook and plans more austerity measures.

The banks were among the leading decliners after the European risk monitoring agency warned of rising risks to the financial systems in the euro zone and urged all authorities to take swift actions.

The market sentiment was weak after the U.S. Federal Reserve Chairman Ben S. Bernanke’s efforts to revive the faltering economic growth fell short of the market expectations.

In addition, China’s Manufacturing Purchasing Index declined to 49.4 in September from final 49.9 in August. The data tracked by HSBC are a private estimate and the government estimate is expected next week.

The preliminary report showed manufacturing contraction for the third month in a row.

The Euro zone private sector registered its first contraction since July 2009, according to the latest survey of purchasing managers by Markit Economics.

The preliminary estimate showed the index declined to 49.2 from 50.7 in August and the reading below 50 indicates shrinkage. The survey showed the decline in manufacturing and in services.

The two leading economies in the region, Germany and France showed weakening economic activities. German private sector growth declined for the eight month in a row and index was nearly at standstill at 50.8 from 51.3 in August.

Italian government lowered its economic outlook for the nation. The cabinet lowered its forecast for 2010 gross domestic product to 0.6% increase from the earlier 1.1% rise estimate.

Stock Movers

Bed Bath & Beyond Inc. ((BBBY)) increased 2.4% or $1.41 to $58.89 after the specialty retailer reported second quarter net sales increased 8.3% to $2.31 billion from $2.14 billion in the same quarter last year. Comparable store sales in the fiscal second quarter of 2011 increased by approximately 5.6%.

The margin in the quarter improved as the company maintained overhead costs steady.

Net earnings in the quarter increased to $229.4 million or 93 cents per diluted share compared to $181.7 million or 70 cents per share a year ago.

CarMax, Inc. ((KMX)) slipped 5.8% or $1.60 to $25.83 after the used car retailer reported second quarter net sales increased 11% to $2.59 billion from $2.34 million in the same quarter last year. Comparable store used unit sales declined 2% for the quarter. Net income in the quarter rose 3.7% to $111.9 million or 49 cents per diluted share compared to $107.9 million or 48 cents per share a year ago period.

FedEx Corporation ((FDX)) slipped 6.2% or $4.55 to $67.95 after the air courier company reported first quarter revenue increased 11% to $10.52 billion from $9.46 billion in the same quarter last year.

Net income in the quarter soared 22% to $464 million or $1.46 per diluted share compared to $380 million or $1.20 per share a year ago earlier.

The package delivery company lowered its outlook for the current quarter to earnings between $1.40 and $1.60 a share and for the full year to earnings of $6.25 to $6.75 a share.

Goodrich Corporation ((GR)) soared 10.3% or $11.33 to $120.82 after the aerospace and defense contractor said it agreed to be acquired by United Technologies Corp. ((UTX)) for $127.50 a share in cash or a total enterprise value of $18.4 billion.

United Technologies reaffirmed its expectations for 2011 revenues of approximately $58 billion and earnings per share in the range of $5.35 to $5.45

Logitech International S.A. ((LOGI)) slumped 9.3% or 82 cents to $7.92 after the Switzerland based computer peripherals maker expects to revenue for this fiscal year of approximately $2.4 billion and operating income of $90 million. Previously the company estimated sales of approximately $2.5 billion and operating income of at least $143 million in the fiscal 2012.

Net loss in the quarter narrowed to $94.7 million or 11 cents per diluted share compared to $199.3 million or 23 cents per share a year ago quarter.

Red Hat, Inc. ((RHT)) increased 4.9% or $2.02 to $42.29 after the open source software solution provider reported second quarter revenues increased 28% to $281.3 million from $219.7 million in the same quarter last year. Net income in the quarter rose to $40 million or 20 cents per diluted share compared to $23.7 million or 12 cents per share a year ago.

Scholastic Corporation ((SCHL)) increased 5.8% or $1.52 to $27.43 after the publishing, education and media company reported first quarter revenue increased to $318.0 million from $290.4 million in the same quarter last year. Net loss in the quarter narrowed to $27.1 million or 87 cents per diluted share compared to $35.2 million or 98 cents per share a year ago period.

Steelcase Inc. ((SCS)) declined 17.9% or $1.22 to $5.59 after the office furniture maker reported second quarter revenues increased 16.8% to $700.5 million from $599.8 million in the same quarter last year. Net income in the quarter surged to $11.9 million or 9 cents per diluted share compared to $2.8 million or 2 cents per share a year ago.

Vail Resorts, Inc. ((MTN)) decreased 6.5% or $2.59 to $37.24 after the holding company said fourth quarter revenues decreased to $108.7 million from $144.2 million in the same quarter last year. Net loss in the quarter widened to $53.9 million or $1.49 per diluted share compared to $41.9 million or $1.16 per share a year ago earlier.