Prices Fall in October, Production Rises; Oil Jumps to 5-month High

Nichole Harper
16 Nov, 2011
New York City

U.S. stocks pare losses and crude oil jumped above $101 a barrel for the first time in five months. U.S. consumer prices fell in October and industrial production increased at 0.7% in the month. Citigroup, BNP Paribas and Bank of America trim work forces.

[R]12:05 PM New York – U.S. stocks pare losses and crude oil jumped above $101 a barrel for the first time in five months. U.S. consumer prices fell in October and industrial production increased at 0.7% in the month. Citigroup, BNP Paribas and Bank of America trim work forces.[/R]

U.S. stocks opened lower as bond market jitter in Europe reach France and ensnare more nations in the region. However, domestic economic data showed a slow improvement in the economic climate.

U.S. consumer prices fell in October for the first time in four months and reported inflation was non-existent as capacity utilization increased to the highest level since July 2008.

The government’s and Fed’s measures of inflation are widely perceived to underreport inflation and most people face annual inflation between 5% and 10% depending on the size of the household and location of stay.

The costs of food, healthcare, education and transportation are at multi-decade high and are underweighted in the Federal Reserve and Labor Department calculations.

The Labor Department said consumer prices declined 0.1% last month and another report showed weekly earnings after adjusting for inflation rose 0.3%. Food prices increased 0.1% in the month and gasoline prices declined 3.1%.

From a year ago, consumer prices rose 3.5% and the increase declined from the rise of 3.9% in September.

A report from the Federal Reserve showed industrial production rebounded 0.7% in the month.

Manufacturing expanded 0.5% after rising 0.3% in September as motor vehicles production increased 3.1% and mining output increased 2.3%.

Italian Prime Minister Mario Monti formed a new government of 16 members that includes technocrats from different segments of the economy and will not include any politician.

The technocratic government is widely expected to implement austerity measures demanded by the international lenders and the European Central Bank but investors remain skeptical.

The Italian bond yield shot up in earlier trading above 7% and subsided at close to 6.97% and yields on Spanish bonds also closed at 6.3%. The fears in bond market also lifted the French yield to 3.6% and spreads to German bunds rose to 1.95%, the record high since the creation of the euro.

Stock Movers

Banks and securities brokers are expected to cut more staff in New York and Europe.

Citigroup is expected to cut at least 3,000 jobs from its global workforce and at least 20% of these cuts are likely to occur in its investment banking unit. The news was first reported by New York Times and later confirmed by two sources in New York.

Bank of America is also shrinking its equity sales team in London according to a report from Reuters.

BNP Paribas, the largest French bank is expected to cut its 7% staff or 1,400 jobs as the bank struggles to shore up its capital and sell more assets in the U.S. The bank is expected to let go 400 people in France and at least 1,000 at its international operations.

The French bank earlier this year also sold its stake in Atlanta, Georgia based investment management firm Montage Caldwell to its employees according to financial advisory focused publication Ticker.com.

Abercrombie & Fitch ((ANF)) dropped 14% to $48.02 after the teenage apparel retailer reported third quarter earnings increased to $50.9 million from $50 million a year ago quarter and earnings per share rose to 57 cents from 56 cents.

Sales in the quarter increased 20% to $1.08 billion and same store sales increased 7%.

Target Corporation ((TGT)) gained 25 cents to $53.43 after the discount retailer reported third quarter sales increased 5.4% to $16.05 billion and same store sales increased 4.3%.

Earnings in the quarter increased to $555 million from $535 million and earnings per share rose to 82 cents from 74 cents a quarter ago.

Target also said fourth quarter earnings per share are expected to be between $1.43 and $1.52.

Western Refining, Inc ((WNR)) dropped 10.6% or $1.65 to $13.87, Valero Energy Corp ((VLO)) dropped 7% to $23.13 and Tesoro Corp declined 6.7% to $25.05 after crude oil reached above $100 a barrel.

Crude oil jumped over $101 a barrel for the first time since July after Canada based Enbridge Inc agreed to acquire 50% stake for $1.5 billion for ConocoPhillip’s stake in Seaway Crude Pipeline System.

Enbridge and the pipeline operator Enterprise Products Partners LP agreed to divert the flow of crude oil away from the Midwest markets to refining centers in Houston to ease the glut in the region.