U.S. Stocks Surge on Coordinated Central Bank Action

Arthi Gupta
30 Nov, 2011
New York City

The U.S. indexes soared after central banks of Europe, UK, Canada, Japan and Switzerland took a coordinated actions to ease liquidity crunch and lower rates for dollar swap lines by 50 basis points. U.S. private sector added 206,000 jobs in November. However, mortgage activity declined.

[R]9:35 AM New York – The U.S. indexes soared after central banks of Europe, UK, Canada, Japan and Switzerland took a coordinated actions to ease liquidity crunch and lower rates for dollar swap lines by 50 basis points. U.S. private sector added 206,000 jobs in November. However, mortgage activity declined.[/R]

U.S. stocks soared after the Federal Reserve joined with other major central banks in a coordinated effort to boost liquidity to the global financial system.

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank will also participate in a new program to make sure banks have access to dollars.

These central banks have agreed to lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements to 50 basis points from 100 basis points, effective December 5.

""""The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity,"""" read a statement on the Fed's Web site.

Global indexes traded higher after European finance ministers focused on leveraging the rescue fund capital with the help of the European Central Bank and the IMF. The move will allow the rescue fund to increase to €1 trillion and purchase sovereign bonds.

The meeting also decided to release the sixth loan instalment to Greece worth €8 billion from the first €110 billion bailout package. The ministers endorsed the payout after receiving a written commitment from Athens that it will fully adhere to the deficit cut plan.

Standard & Poor's lowered its credit ratings on 15 financial institutions, mostly in Europe and the U.S.

The downgraded banks include among others Bank of America, Goldman Sachs, Citigroup, JPMorgan Chase., Barclays, HSBC Holdings Plc, Royal Bank of Scotland and UBS. The ratings were lowered by one notch.

The late downgrade of banks by a rating agency was yet another indication of how lax and slow the agencies are in catching up with market realities.

Investors are increasingly concerned about the usefulness of the ratings and many are demanding the withdrawal of the rating agencies licenses.

The People's Bank of China cut the required bank reserve ratios by 50 basis points to 21%, effective December 5, the first reduction since December 2008.

U.S. Mortgage Activity Drops

U.S. mortgage applications fell for a third consecutive week last week, industry data showed Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity slumped 11.7% in the week ended November 25, following a decline of around 1% the week before.

The MBA's refinancing index plunged 15.3% last week, while purchase application dropped 0.8%.

Fixed 30-year mortgage rates averaged 4.21% in the week, down from 4.23% the week before.

U.S. Private Sector Employment Soars

Private sector employment in the U.S. increased in November, according to a report released by payroll processor Automatic Data Processing today.

Private sector employment surged 206,000 jobs in November following an upwardly revised increase of 130,000 jobs in October.

U.S. Worker Productivity Revised Down

The sharp rebound in U.S. worker productivity initially reported for the third quarter was revised downward, according to the U.S. Labor Department.

The initially reported 3.1% spike in productivity was revised down to a 2.3% increase for the third quarter.

Affymetrix to Buy eBioscience

Affymetrix, Inc., a manufacturer of genetic analysis products agreed to acquire privately-held eBioscience, Inc. for $330 million in cash.

Affymetrix expects the acquisition to create significant new commercial opportunities in the key post-genomic applications of immunology, oncology, cell biology, stem cell biology, and diagnostics.

Earnings Review

Jos. A. Bank Clothiers, Inc. ((JOSB)), the men’s apparel retailer reported third quarter net sales gained 21% to $209.64 million from $173.27 million in the same quarter last year on comparable store sales increase of 14.6%.

Net income in the quarter increased 19.3% to $14.98 million or 54 cents per diluted share compared to net income of $12.56 million or 45 cents per share reported last year.

The Fresh Market, Inc. ((TFM)), the specialty retailer said third quarter sales grew 11.7% to $263.26 million from $235.77 million in the prior year. Net income in the quarter fell 26.2% to $9.15 million or 19 cents per diluted share compared to net income of $12.39 million or 26 cents per share in the year-ago quarter.

United Natural Foods, Inc. ((UNFI)), the specialty foods distributor said first quarter net sales increased 15.6% to $1.217 billion from $1.053 billion in the prior-year period. Net income in the quarter dropped 12.9% to $15.16 million or 31 cents per diluted share compared to net income of $17.40 million or 39 per share last year.