U.S. Private Sector Employment Improves; Costco Net Rises 11%

Arthi Gupta
05 Oct, 2011
New York City

The U.S. indexes opened higher and extended gains from the late evening rally of yesterday. The euro dropped to a new low against the yen. U.S. private sector employment improved in September, factory orders decreased in August and mortgage applications fell. Costco quarterly sales rose 17%.

[R]9:40 AM New York – The U.S. indexes opened higher and extended gains from the late evening rally of yesterday. The euro dropped to a new low against the yen. U.S. private sector employment improved in September, factory orders decreased in August and mortgage applications fell. Costco quarterly sales rose 17%.[/R]

U.S. stocks opened higher reacting to the private sector payrolls estimate.

The indexes built on the gains of the late evening rally of yesterday after better than expected private sector payrolls data. However, traders were cautious and hoped for a quicker solution to the fast evolving banking crisis in the euro zone.

European indexes gained more than 2.8% on the optimism that finance ministers of the euro area are formulating measures to contain widening debt contagion in the region. Belgium based Dexia SA sought a second bailout and Deutsche Bank said it will no longer meet its operating earnings target.

Though the policymakers are indicating several initiatives in place but no concrete steps are taken to arrest the growing fears of Greek default. Banks are reluctant in admitting that they may have to take at least 50% loss on their Greek holdings.

Moody''s Investors Service downgraded Italy''s government bond ratings by three notches to A2 from Aa2, with a negative outlook, citing material increase in long-term funding risks for euro area sovereigns with high levels of public debt.

Asian stocks traded with a negative bias after the Italian debt downgrade and the lack of progress on the Greek talks and the fears of wider debt contagion in the euro zone.

Australia reported trade surplus surged 71% in August after exports rebounded 8% and shipments of iron ore and coal resumed to China, Japan and Korea.

U.S. Private Sector Employment Improves

Employment in the U.S. private sector increased by more than expected in September, according to a report released by payroll processor Automatic Data Processing.

ADP said that private sector employment rose by 91,000 in September following a downwardly revised increase of 89,000 jobs in August.

U.S. Mortgage Applications Fall

U.S mortgage applications declined 4.3% during the last week of September, led by a drop in refinancing demand, according to data provided by the Mortgage Bankers Association.

The MBA''s seasonally adjusted index of refinancing applications fell 5.2% and the index that measures loan requests for home purchases dropped 0.8%.

Fixed 30-year mortgage rates averaged 4.18% in the week, down from 4.24% the week before.

U.S. Factory Orders Drop

U.S. factory orders fell modestly in August, according to data released by the U.S. Commerce Department.

New orders for manufactured goods decreased $840 million or 0.2% in August to a total of $451 billion.

IBM to Acquire Q1 Labs

IBM agreed to acquire privately held Q1 Labs, a Waltham, Massachusetts-based provider of security intelligence software. Financial terms were not disclosed.

Earnings Review

Acme Packet, Inc. ((APKT)), the communication equipment maker estimated third quarter total revenues of $70 million and adjusted earnings per share between $0.20 and $0.22.

Costco Wholesale Corporation ((COST)), the membership warehouses operator stated fourth quarter net sales increased 17% to $27.59 billion, from $23.59 billion in the prior year on comparable sales rise of 12%. Net income in the quarter increased 11% to $478 million or $1.08 per diluted share compared to net income of $432 million or 97 cents per share in the prior-year period.

Global Payments Inc. ((GPN)), the payment processing services provider reported first quarter revenues grew 23% to $542.8 million from $440.1 million last year. Net income in the quarter improved 30% to $64 million or 79 cents per diluted share compared to net income of $49.4 million or 61 cents per share last year.

RPM International Inc. ((RPM)), the multinational holding company stated first quarter net sales climbed 10.2% to $985.9 million from $894.8 million a year ago. Net income in the quarter rose 11.3% to $76.8 million or 59 cents per diluted share versus $69 million or 53 cents per share in the prior year.

Yum! Brands, Inc. ((YUM)), the fast food restaurant chains operator said third quarter total revenues increased 14% to $3.27 billion from $2.86 billion in the same quarter last year. Net income for the quarter rose 7% to $383 million or 80 cents per diluted share compared to net income of $357 million or 74 cents per share for the year-ago quarter.