U.S. Jobless Claims Decline, Wall Street Higher on Global Gains

Devan Biswas
07 Jun, 2012
New York City

Stocks wavered in New York trading after jobless claims declined and Fed Chairman offered cautious assessment of the economy that failed to offer any new insights in the economic dynamics. Best Buy founder resigned and plans to explore stake sale in the retailer.

[R]11:00 AM New York – Stocks wavered in New York trading after jobless claims declined and Fed Chairman offered cautious assessment of the economy that failed to offer any new insights in the economic dynamics. Best Buy founder resigned and plans to explore stake sale in the retailer.[/R]

Stocks after one hour of trading in New York advanced after initial claims of jobless benefits fell and China offered a surprise rate cut.

First time claims of jobless benefits declined 12,000 to 377,000 in the week ending on June 2 from the revised 389,000 in the previous week according to the U.S. Labor Department estimate today.

The four week moving average of claims increased to 377,750 from 376,000 last week.

The total number of people still collecting unemployment benefits increased 34,000 to 3.29 million in the week to May 26 and the number of people collecting extended benefits declined 105,000 to 2.83 million.

China Cuts Rates

In addition, market sentiment was supported by the latest monetary easing in China. People’s Bank of China cut one year borrowing rate 25 basis points to 6.31% and one year deposit rate to 3.25%.

The PBOC also allowed banks to set its deposit and lending rate with a greater flexibility from June 8. The new relaxed guideline allows banks to offer new loans at as low as 80% of reference rate and rates on deposits as high as 110% of the benchmark rate.

European markets advanced more than 1% after Spain successfully sold more than planned long term bonds at a lower than market yields.

The FTSE 100 index jumped 1.7%, DAX index in Frankfurt gained 2% and CAC 40 index in Paris traded up 1%.

Market indexes gained across the euro zone after sovereign bond yields eased as political leaders stepped up activities to lay the ground work to facilitate direct lending to Spanish banks.

Spain Sells €2.1 Billion of Bonds

The Spanish Treasury completed the sale of €2.1 billion of medium and long term bonds that yielded 10-year bonds at 6.04%. The yield at the auction was higher than 5.74% in the previous auction in April but lower than peak of 6.5% last week and 6.12% in the hours before the auction.

The auction was closely watched after Spain’s Treasury Minister raised the prospect of narrow window for future debt sale as the rates approached unsustainable rate of 7% a week ago.

Stock Movers

SuperValu Inc ((SVU)) dropped 2% after the third largest independent grocery chain said it plans to eliminate 2,500 jobs at its Albertsons unit. Albertsons plans to begin layoff at all of its 247 stores in California and Nevada in the week of June 17 and complete it by the end of the month.

Best Buy Co., Inc ((BBY)) dropped 8% to $18.33 after its founder Richard Schulze resigned as chairman and plans to explore options to sell his 20.1% stake in the company. Hatim A. Tyabji, chairman of the audit committee and a director of the company will replace Schultz as the company chairman.

The J.M. Smucker Company ((SJM)) increased 0.9% to $76.72 after the food maker reported fourth quarter earnings of $104.1 million or 93 cents a share compared to $94.9 million or 82 cents a share. Sales increased 14% to $1.35 billion.

Lululemon Athletica Inc dropped 8% to $63.90 after it reported fiscal first quarter sales increased 53% to $285.7 million and same store sales rose 25%.

The stock plunged after the company reported inventory at the end of the quarter increased to $107.7 million from $64.4 million a year ago and estimated net revenues in the current quarter between $273 million to $278 million and earnings per share between 28 cents and 30 cents, below the market estimate between 33 cents and 36 cents.

Men’s Wearhouse Inc plunged 16% to $29.88 after the retailer of men’s suits reported first quarter net profit in the quarter ending in April of $26.9 million compared to $27.4 million a year ago quarter.

Revenues increased 1.1% to $586.6 million and earnings per share were flat at 52 cents.

The Houston based retailer estimated sales in the current quarter to increase between 0.75% and 1.25% and earnings per share in the range between $1.12 and $1.13.