Wall Street Higher on Narrower Deficit; Italy, France Stay in Focus

Bikram Pandey
10 Nov, 2011
New York City

U.S. stocks traded higher a day after the indexes plunged 3.7%. Earnings and narrower trade deficit played a role in improving the sentiment. Worries for the euro zone eased after Italy successfully sold bonds but at a higher rate. U.S. trade deficit declined and China''''s export growth slowed.

[R]4:30 PM New York – U.S. stocks regained its footing a day after the indexes plunged more than 3%. Corporate earnings and narrower trade deficit played a role in improving the sentiment. Worries for the euro zone eased after Italy successfully sold bonds but at a higher interest rate. U.S. trade deficit declined and China reported slower growth in exports.[/R]

U.S. markets overlooked the ongoing turmoil in the euro zone and focused on corporate earnings.

U.S. stocks gained on positive earnings and a sustained rise in Chinese trade and a decline in U.S. trade deficit. Market sentiment was bolstered at the opening after Italy completed the sale of €5 billion of bonds and the parliament is set to vote on economic bill this weekend.

The U.S. trade deficit in September declined 4% to $43.1 billion, third monthly decline in a row. Exports in the month increased 1.4% to $180.4 billion and imports edged up 0.4% to $223.5 billion. For the year, trade deficit increased to $558.2 billion, up 11.6% from a year ago.

U.S. trade deficit with Japan narrowed 22.7% to $5.2 billion and imports of oil increased 0.3% to $36.4 billion. Deficit with China edged up $28.1 billion, a slight decline from the monthly record high of $29 billion in August.

China also reported its trade statistics that showed a decline in the growth of its surplus with the rest of the world.

China’s exports rose at 15.9% to $157.5 billion in October from a year ago and surplus in the month was $17 billion, according to customs bureau. Imports increased 28.7%. Export growth declined from 17.1% in the previous month and imports accelerated from 20.7% rate.

Export growth to European Union declined to 7.5% from a year ago and shipments to Italy declined 18% in the month. Imports from the region increased 28.2%.

In corporate earnings, Cisco Systems results were ahead of expectations. Cisco first quarter net fell 7.9% to $1.8 billion. Kohl’s third quarter net soared 20% to $211 million. Viacom fourth quarter net surged to $576 million. 99Cents second quarter net increased to $15.1 million.

European markets stabilized after Italy successfully completed the sale of 1-year note but at nearly twice the rate only five weeks ago and European Central Bank was said participate in the purchase and support the sale.

Prime Minister Silvio Berlusconi’s resignation may come as early as Monday after lawmakers approve the austerity measures demanded by the European Union and European Central Bank. The lawmakers are the Senate are set to pass the austerity measures tomorrow and the lower house is scheduled to debate and approve the measures on Saturday.

Greek Prime Minister designate Lucas Papademos reaffirmed the commitment to euro and is expected to appoint a new cabinet as early as Friday. After a divisive political discourse in the last three days between the two leading parties, Greek president brokered to deal to pick a technocrat as a new leader.

Japanese stocks declined following the regional losses in Asian markets. Banks were among the leading decliners. Machinery orders in September fell 8.2%. Olympus stock plunged daily limit as police inquiry begins.

Australian stocks recovered from the early selloff after China reported rising imports. Australia added net new 10,100 jobs in October. Brambles quarterly net soars 32%. John B. Fairfax sold his remaining 9.7% in the namesake media company.

Commodities, Bonds and Currencies

The yield on 10-year U.S. bond closed up to 2.04% and 30-year bond increased to 3.09%.

The U.S. dollar rose 0.4% at $1.360 to one euro and closed lower against the Japanese yen to 77.66.

Immediate delivery futures of Texas crude oil increased $2.00 to $97.40 a barrel and futures of natural gas decreased 1 cent to $3.64 per mbtu and gasoline prices decreased 1.5 cents to 262.93 cents a gallon.

In metals trading, copper decreased 8.20 cents to $3.35 per pound, gold decreased $28.60 to $1,763.00 per ounce and silver decreased $0.34 to $33.99.