U.S. Indexes Rise, Productivity Estimate Lowered

Arthi Gupta
06 Jun, 2012
New York City

U.S. indexes inched ahead on the hopes on new stimulus measures. The European Central Bank left its key interest rate unchanged for June. News Corp. agreed to acquire 50% stake in ESPN STAR Sports. Home Depot reiterated its current year outlook.

[R]9:35 AM New York – U.S. indexes inched ahead on the hopes on new stimulus measures. The European Central Bank left its key interest rate unchanged for June. News Corp. agreed to acquire 50% stake in ESPN STAR Sports. Home Depot reiterated its current year outlook.[/R]

Stocks in early trading in New York gained on the hopes that the Federal Reserve may lend help in reviving jobs market and offer new stimulus measures.

The revised data from the Labor Department showed today productivity slipped in the first quarter at annual rate of 0.9%, faster than the previous estimate of 0.5% decline.

Unit labor cost increase was revised to 1.3% increase from the previous estimate of 2% and output rose at 2.4% annual rate and hours worked rose at a 3.3% rate.

Across the Atlantic, The European Central Bank left its key interest rate unchanged at a record low 1% for the sixth straight month in June, as expected.

The rate on the marginal lending facility was maintained at 1.75%, while the deposit facility rate was kept at 0.25%.

The European Commission announced its bank recovery and resolution plan that is expected to be voted by the European Parliament as early as this summer and may be enforced beginning 2014 with a four year transition.

The new proposal aims to shift the burden of future bank bailout to shareholders and demands that banking industry set asides capital that may be tapped to save failing banks before turning to governments.

The euro-zone economy stagnated in the first quarter, revised data from Eurostat showed today. The gross domestic product remained flat compared to the previous quarter after shrinking 0.3% in the fourth quarter of 2011. This matched the preliminary estimate.

Moody''s Investors Service downgraded six German banking groups and one German subsidiary of a foreign group by one notch, and confirmed the ratings for one group. The agency also downgraded the ratings of three major Austrian banks.

Asian markets traded higher following the surprise growth in the U.S. service sector in May according to a private survey released yesterday.

In addition, Australia reported its second best quarterly economic expansion in March quarter after a surprised surge in household spending added to the strong mining sector expansion.

The Nikkei in Japan added 1.8% and the index in Australia advanced but pared most of the early surge in the day. In Mumbai the Sensex gained 2.7% and the rupee advanced for the third day in a row.

News Corp. Buys Stake in ESPN Star Sports

News Corp. agreed to acquire ESPN''s 50% equity interest in ESPN STAR Sports. The transaction will allow News Corp. units to own and operate all of the ESS businesses while providing ESPN more independence and flexibility in future support of The Walt Disney''s overall efforts in Asia.

Financial details of the transaction weren''t disclosed.

Diageo Investment Plans

Diageo, the premium drinks business company unveiled plans to invest over £1billion in Scotch whisky production over the next five years to meet growing global demand for its brands.

The company also plans to invest in substantial new warehousing capacity to house the millions of additional liters of Scotch whisky which the distillation investment will produce.

Earnings Review

Bob Evans Farms Inc. ((BOBE)), the full-service restaurant company said fourth quarter sales fell 1.2% to $413.5 million compared to $418.7 million in the prior year. Net income in the quarter rose 20% to $22 million or 76 cents per diluted share compared to net income of $18.4 million or 60 cents per share last year.

Brown-Forman Corporation ((BFB)), the alcoholic beverage maker stated fourth quarter net sales rose 1% to $801.3 million from $791.3 million a year earlier. Net income in the quarter fell 37% to $104.5 million or 73 cents per diluted share compared to net income of $165.4 million or $1.13 per share a year ago.

The Home Depot, Inc ((HD)), the home improvement retailer reaffirmed its sales and diluted earnings-per-share guidance for fiscal 2012. The company still expects sales to be up approximately 4.6% for the year on a 53 week basis and diluted earnings per share increase approximately 17% to $2.90 for the year.

Vail Resorts, Inc. ((MTN)), the holding company said third quarter total revenue dropped 0.2% to $421.1 million compared to $422.1 million last year. Net income in the quarter rose 3.5% to $79.6 million or $2.17 per share compared to net income of $76.9 million or $2.08 per share in the comparable quarter a year ago.