U.S. Stocks Advance; Jobless Claims Fall, Productivity Rises

Nichole Harper
03 Nov, 2011
New York City

U.S. stocks struggled to hold onto early gains after central bank in Europe cut its lending rate. Eastman Kodak estimated a higher annual loss and lower revenues. Third quarter productivity increased at 3.1% and weekly jobless claims fell below 400,000.

[R]11:30 AM New York – U.S. stocks struggled to hold onto early gains after central bank in Europe cut its lending rate. Eastman Kodak estimated a higher annual loss and lower revenues. Third quarter productivity increased at 3.1% and weekly jobless claims fell below 400,000.[/R]

The early market rally quickly faded after investors took a cautious view of the latest rate cut in Europe.

U.S. stocks opened higher after a string of positive earnings news and a rate cut announced by the newly appointed president. However, Greek government turmoil raised the prospect of more troubles ahead in the euro zone.

European markets soared after the European Central Bank lowered its key lending rate to 1.25% from 1.5% and estimated lower economic growth in the second half.

At the press conference, newly appointed President Mario Draghi said that second half economic estimate is expected to be lowered next month. Inflation in the euro zone in October remained at 3%, well above the target rate just below 2%.

The euro edged lower 0.1% to $1.372 and market indexes pared earlier gains by half near the close.

The rate cut also lifted the prospects that the ECB may step up and act as a lender of last resort and buy bonds of Italy and Spain and support the sovereign debt markets.

The mood in Greece changed for worse as the divide in the Greek government deepened and more lawmakers in the governing coalition with Socialist Party ask for Prime Minister George Papandreou’s resignation.

The leaders of G20 nations gather in the South of France to find ways to revive global economic growth and increase employment. The sovereign debt crisis took added importance at the meeting after Greece decided to hold a referendum on the EU bailout.

Weekly Jobless Claims Fall

U.S. weekly jobless claims declined 9,000 to 397,000 in the week ending on October 29, according to the data released by the Labor Department.

Total number of people on the unemployment benefits decreased 15,000 to a six-month low of 3.68 million.

The four-week moving average of claims declined 2,000 to 404,500.

Third Quarter Productivity Increases 3.1%

U.S. Labor Department also said third quarter productivity increased at a 3.1% annual rate after declining in two quarters in a row. The expenses per employee fell a 2.4% rate after a 2.8% increase in the second quarter.

Productivity increased 1.1% from a year ago quarter and labor costs increased 1.2% in the period.

Stock Movers

The Eastman Kodak Company ((EK)) dropped 8 cents to $1.12 after the technology company reported larger than expected loss. The third quarter loss increased to $222 million or 83 cents a share compared to $43 million or 16 cents a share a year ago quarter.

Revenues declined 17% to $1.46 billion and excluding one-time revenues last year fell 5%. Kodak lowered the revenues expectations in the current year to a range between $6.3 billion and $6.4 billion.

Kodak increased the estimate of loss in 2011 to a range between $400 million and $600 million from the previous estimate between $200 million and $400 million.

Procter & Gamble Co ((PG)) increased 18 cents to $63.04 after it announced restructuring costs targets and lifted its annual earnings outlook on the sale of Pringles snack business that raised $1.5 billion.

The second largest consumer products maker increased annual earnings per share outlook to between $4.52 and $4.83 from the previous estimate of between $4.17 and $4.33.

Freddie Mac reported wider than expected loss in the third quarter of $4.4 billion compared to $2.5 billion loss in the quarter a year ago.

MGM Resorts International ((MGM)) decreased 9% to $10.38 after the casino operator reported third quarter revenues increased to $2.23 billion from $1.57 billion a year ago. Loss per share narrowed to 25 cents from 72 cents a year ago.