U.S. Growth at 2.5%, Weekly Jobless Claims Fall

Nichole Harper
26 Sep, 2013
New York City

Market indexes on Wall Street advanced despite the ongoing uncertainty about the possible government shutdown as early as next week. eBay agreed to acquire payment processing platform services provider Braintree for $800 million. U.S. second quarter growth rate estimate was unrevised at 2.5%.

[R]12:25 PM New York – Market indexes on Wall Street advanced despite the ongoing uncertainty about the debt ceiling talks and a possible government shutdown as early as next week. eBay agreed to acquire payment processing platform services provider Braintree for $800 million. U.S. second quarter economic growth rate was unrevised at 2.5%.[/R]

Stocks on Wall Street opened higher and extended gains for the second day after falling for four previous days.

S&P 500 index increased 28.80 to 1,695.67 and the Nasdaq Composite Index gained 19.71 to 3,780.77.

In international markets, the Nikkei in Tokyo soared 1.2% after dropping as much as 1.4% on the hopes that the new economic package to be released on October 1 may include a cut in corporate income tax.

In Europe, FTSE 100 index increased 0.2% and the DAX index was nearly flat and the CAC 40 index decreased 0.2%.

Lixil Group Corp and Development Bank of Japan agreed to acquire sanitary fixtures maker Grohe Group for 3.06 billion euros or $4.1 billion.

U.S. June Quarter Growth Unrevised at 2.5%

The U.S. economy expanded at 2.5% annual rate in June quarter, the Commerce Department said in its third and final estimate.

The economic growth was unrevised from the second estimate a month ago but a slowdown in housing sector is worrying several economists.

The latest report is yet another confirmation that the U.S. economy has difficulty in growing faster than 2% a year and the growth pattern is volatile from a quarter-to-quarter.

The 2.5% growth in the second quarter follows first quarter annual pace of 1.4% on the back of a jump in business investments from a decline to a rise of 4.7%. However, research and development spending fell.

Consumer spending in the quarter slowed to 1.8% in the quarter from 2.3% in the first quarter as consumers continued to increase spending on durable goods and restrain services expenditures.

Durables goods spending increased 6.2% and services spending increased 1.2%.

In the first six months to June, the economy has expanded at a rate of 1.8%.

Weekly Jobless Claims Drop to 305,000

In a separate report, the U.S. government said initial jobless claims declined last week to the second-lowest in six years.

Initial claims fell 5,000 to a seasonally adjusted 305,000 and 4-week average declined 7,000 to 308,000, the lowest since June 2007 according to the Labor Department.

The latest report is a proxy to the layoffs and most companies are not laying off people in the recent months.

However, new hiring pace has slowed since April. In the first four months in the year, employers added 205,000 jobs and since then the monthly pace has slowed to 155,000.

Total number of people receiving jobless claims has declined 32% from a year ago period to 3.9 million in the week ending on September 7, about 23,000 more than in the previous week.

Most economists estimate that the decline in claims was mostly driven down after unemployment benefits were exhausted and many people have left the jobs market.

U.S. Stocks in Review

Bed Bath & Beyond Inc climbed 4.4% to $77.51 after the home furnishings retailer reported net sales in the second-quarter jumped 8.9% to $2.82 billion. Comparable store sales in the quarter increased 3.7%.

Net income in the quarter surged 15% to $294.3 million or diluted earnings $1.16 per share compared to $224.3 million per share or 98 cents per share.

The company expects net earnings per diluted share in third quarter in the range of $1.11 to $1.16 and $1.70 to $1.77 for the fourth quarter and between $4.88 and $5.01 for the year.

eBay Inc climbed 4.2% or $2.28 to $56.48 after the online marketplace agreed to acquire Braintree, the payment platform provider for $800 million in cash.

The transaction is expected to close late in the fourth quarter of this year.

Hertz Global Holdings, Inc plunged 11.6% or $2.95 to $22.83 after the rental car company lowered its revenues and adjusted pre-tax income guidance for the year to between $10.80 billion and $10.90 billion compared to earlier forecast in February in the range of $10.85 billion to $10.95 billion.

The company estimated adjusted net income between $780 million and $830 million from the prior guidance of $830 million to $875 million.