U.S. Indexes Turn Lower on Euro Worries

Arthi Gupta
28 Dec, 2011
New York City

The U.S. indexes fell on the worries that the euro zone may need more help from politicians and the central bank. Italy successfully completed bond auction at a sharply lower borrowing costs. Morgan Stanley plans to cut 580 jobs in New York City.

[R]1:50 PM New York – The U.S. indexes fell on the worries that the euro zone may need more help from politicians and the central bank. Italy successfully completed bond auction at a sharply lower borrowing costs. Morgan Stanley plans to cut 580 jobs in New York City. New York Times agreed to sell its Regional Media Group for $143 million.[/R]

U.S. indexes declined after Italian bond yield rebounded after the auction and the euro dropped to a ten year low against the yen. U.S. retailers reported better than expected sales on higher than expected discounting.

U.S. retailers’ sale in the last week increased 4.5% from a year ago as shoppers took advantage of the last minute bargains.

Sales in the week ending December 24 increased 0.9% from the previous according to a index tracked by International Council of Shopping Centers. Sales at the previous week increased 3.4% from a year ago.

Chain stores sales are expected to rise in December month and in the holiday period but profit margins at large chains are expected to shrink. The ICSC reaffirmed its December same store sales estimate between 3.5% and 4% and the National Retail Federation estimated sales increased of 3.8% in the holiday season compared to 5.2% in the period a year ago.

In Europe, the benchmark indexes gained after the Italian Treasury sold €9 billion, or $11.8 billion of 179-day bills at 3.251% versus 6.504% at a previous auction on November 25. Demand was 1.7 times the amount on offer compared with 1.47 times previously.

The Treasury also sold €1.733 billion of zero coupon bonds due in 2013 at a rate of 4.853% compared to 7.814% a month ago.

The ECB reported banks in the euro zone parked €452.03 billion for overnight deposits, the record beating the previous high for one day deposits of €411.8 billion on Tuesday.

However, the euro declined 1% to a 10-year low against the yen and traded at 100.74 yen and 10-year Italian bonds rebounded 1 basis point after dropping 25 basis points to 6.99%.

Greek finance minister Evangelos Venizelos told his party colleagues that elections would be later than February 19 originally agreed.

""Elections will be held after Easter, in late April,"" Venizelos said, according to Agence France Presse.

Asian stocks closed declined as trading volume hovered near the lows of the year.

A report released by Japan's Ministry of Economy, Trade and Industry showed that industrial production dropped 2.6% from a month ago in November impacted by the floods in Thailand. October factory output declined 2.2%.

Separately, Japan's retail sales fell 2.3% annually in November.

Morgan Stanley Slashes Jobs

Morgan Stanley, the financial services provider will cut 580 jobs in New York City, the company said in a filing with New York State's Department of Labor on Tuesday. The company cited economic reasons for the job cuts.

Fidelity to Sell Stake in Personal Lines Business

Fidelity National Financial signed an agreement to sell an 85% stake in its personal lines business to WT Holdings for about $119 million. The company also said the sale is expected to result in a $15 million pre-tax loss.

New York Times to Sell Regional Media Group

New York Times announced an agreement to sell its Regional Media Group, consisting of 16 regional newspapers, other print publications and related businesses to Halifax Media Holdings for $143 million in cash, subject to certain adjustments. The company estimates the net after-tax proceeds from the sale to be about $150 million.

Earnings Review

Cavium Inc. ((CAVM)), the provider of integrated semiconductor processors expects that revenue in the fourth quarter of 2011 will be between $56 million and $57 million.

DemandTec, Inc. ((DMAN)), the software company said third quarter revenue rose 3% to $22.31 million versus $21.67 million in the comparable period. Net loss in the quarter widened 138% to $5 million, or 15 cents per diluted share compared to a net loss of $2.1 million or 7 cents per share loss in the previous year.

Medicis Pharmaceutical Corporation ((MRX)), the specialty pharmaceutical company estimated fourth quarter adjusted earnings and revenue guidance attributed to its progress in securing multi-year contracts for Solodyn beginning 2012.

The company estimates non-GAAP cash earnings in the range of 51 cents to 57 cents per share on revenues of $170 million to $183 million.