U.S. Stocks Look Down on Euro Worries; Mixed Jobs Picture

Arthi Gupta
05 Jan, 2012
New York City

The U.S. indexes futures dropped on the ongoing euro area debt worries with no end in sight. Employment in the U.S. private sector expanded in December and weekly jobless claims fell to 372,000, Consumer price inflation in the OECD area eased in November.

[R]9:00 AM New York – The U.S. indexes futures dropped on the ongoing euro area debt worries with no end in sight. Employment in the U.S. private sector expanded in December and weekly jobless claims fell to 372,000, Consumer price inflation in the OECD area eased in November.[/R]

U.S. indexes futures and European indexes edged lower on the volatile debt crisis as sentiment swung and sovereign bond yields rose in a lower demand for the French debt auction. Oil futures advanced as the war of words escalated between Iran and the U.S.

Greece''s Prime Minister Lucas Papademos warned at a meeting with union leaders that deeper cuts in incomes to reduce the country''s debt are the only way for the country to remain in the euro currency zone and to secure further funding from international lenders.

Greece will start negotiations with lenders on the €130 billion-second bailout package in mid-January.

The French Treasury today auctioned a total of €7.963 billion in long-term debt with different maturities, but borrowing costs for the 10-year debt increased. The maximum target set for the OAT sale was €8 billion.

The Treasury sold €4.02 billion of the 10-year bond at an average yield of 3.29%, up from 3.18% in the previous auction on December 1. The bid-to-cover ratio dropped to 1.64 from 3.05 in the previous auction.

European Union member-states have now agreed in principle to impose the oil embargo on Iran, but added that they require more time to discuss and finalize when and how to impose the ban, reports said, citing EU diplomats.

The Asian markets closed lower on the worries that the euro zone problems are more entrenched and politicians are incapable of lowering debt and spending as smaller nations struggle. Greece’s economy was estimated to contract for the fourth year in a row in 2011 and is expected to shrink in 2012 by 2.9%.

Chinese service sector activity maintained a steady rate of expansion in December. A survey by Markit Economics showed that the business activity index remained unchanged at 52.5 in December compared to the previous month.

U.S. Private Sector Employment Soars

Employment in the U.S. private sector increased more than anticipated in December, according to a report released by payroll processor Automatic Data Processing.

ADP said that private sector employment jumped by 325,000 jobs in December following a downwardly revised increase of 204,000 jobs in November.

U.S. Initial Jobless Claims Drop

New U.S. unemployment claims fell in the final week of December, according to data released by the U.S. Labor Department today.

New unemployment claims for the week ended December 31 was at a seasonally adjusted level of 372,000, a drop of 15,000 from the previous week''s revised number of 387,000, the Labor Department reported.

OECD Annual Inflation Eases

Consumer price inflation in the Organization for Economic Cooperation and Development area eased in November, reflecting mainly slower growth in energy prices, latest data showed today.

Annual inflation eased to 3.1% in November from 3.2% in October. Inflation slowed for the second consecutive month.

Earnings Review

Constellation Brands, Inc. ((STZ)), the wine distributor said third quarter net sales decreased 27% to $700.7 million from $966.4 million a year ago. Net income in the quarter fell 25% to $104.8 million compared with net income of $139.3 million in the earlier year period.

Mosaic Co. ((MOS)), the fertilizer company said second quarter net sales grew 13% to $3.01 billion from $2.67 billion in the same quarter last year. Net income in the quarter plunged 39% to $623.6 million or $1.40 per diluted share compared to net income of $1.03 billion or $2.29 per share for the year-ago quarter.

MSC Industrial Direct Co., Inc. ((MSM)), the industrial equipment distributor stated first quarter net sales climbed 15.4% to $545.7 million from $472.8 million in the prior year. Net income in the quarter rose 25.6% to $59.8 million or 95 cents per diluted share compared to net income of $47.6 million or 75 cents per share in the year-ago quarter.

RPM International Inc. ((RPM)), the specialty chemical products company reported second quarter net sales increased 10.9% to $916.09 million from $826.34 million a year ago. Net income in the quarter increased 2.3% to $49.93 million compared to net income of $48.79 million a year ago. Earnings per share for the second quarter were $0.38 in both years.