Core Consumer Inflation Gains 0.1%

Elena
31 Aug, 2006
New York City

Stock futures rose Thursday after data showed a weaker-than-expected rise in a key inflation gauge. The Department of Commerce released a report that showed increases in both personal income and spending in July came in line with economist estimates. Personal income rose 0.5%, while personal spending rose 0.8%. Core consumer inflation rose 0.1% in July, the smallest gain since December and less than the 0.2% gain expected by economists.

[R]9:00AM Stock futures gained on upbeat inflation data.[/R]
U.S. stock futures moved to the upside backed by a moderation in core consumer inflation and signs of strength in back-to-school sales. Personal income and spending in July came in line with economist estimates. Personal income rose 0.5%, while personal spending rose 0.8%. Core consumer inflation rose 0.1% in July, the smallest gain since December and less than the 0.2% gain expected by economists. In addition to the economic calendar, Federal Reserve Chairman Ben Bernanke is scheduled to speak at 12:30 p.m., followed by St. Louis Fed President William Poole at 1 p.m. S&P 500 futures were up 2.2 points, but slightly below fair value. Dow Jones industrial average futures were up 10 points, and Nasdaq 100 futures were up 2.75 points.

[R]Initial jobless claims declined to 316,000.[/R]
Thursday morning, the Department of Labor released its report on initial jobless claims in the week ended August 26, showing that jobless claims fell compared to an upwardly revised reading for the previous week. The report showed that jobless claims fell to 316,000 from the previous week's revised figure of 318,000. Economists had expected jobless claims to increase to 315,000 from the 313,000 originally reported for the previous week. The Labor Department also said that the four-week moving average rose to 317,500 from the previous week's revised average of 316,500. This marked the third consecutive increase by the less volatile moving average. The report also showed that continuing claims in the week ended August 19 rose to 2.486 million from the preceding week's revised level of 2.483 million.

[R]Personal income and spending rose in line with estimates.[/R]
The Department of Commerce released its report on personal income and spending in the month of July on Thursday, showing increases in both personal income and spending that came in line with economist estimates. The report showed that personal income rose 0.5 percent in July compared to an unrevised 0.6 percent increase in June. Economists had been expecting personal income to increase by about 0.5 percent. The Commerce Department also said that personal spending rose 0.8 percent in July following an unrevised 0.4 percent increase in June. The increase in personal spending came in line with economist estimates. The report also showed that its reading on core consumer inflation, which excludes food and energy prices, edged up 0.1 percent in July after rising 0.2 percent in June. Core consumer inflation rose at an annual rate of 2.4 percent.


[R]8:00AM Stock futures were busy digesting retailers’ August sales.[/R]
Among the companies releasing upbeat results, Mothers Work Inc ((MWRK)), maternity apparel retailer, posted a 5% increase in August comparable store sales, citing strength in its product lines. Net sales rose 1% during the month, to $46.5 million. The retailer also said that it expects to meet or exceed Q4 sales and earnings per share guidance.

Bebe Stores Inc ((BEBE)), women’s apparel retailer, said same-store sales rose 12.5%, topping estimates of 11.4% increase. The reported same-store sales growth in August was the 41st straight month of positive comparable sales. Department store operator Nordstrom Inc ((JWN)) said same-store sales rose 7.1%, above expectations of 3.3% growth. On a preliminary basis, total sales rose 9.3% to $517 million. Limited Brands ((LTD)), operating Victoria''s Secret, Bath & Body Works, Express, Limited Stores, White Barn Candle Co. and Henri Bendel stores, said Thursday its August sales at stores open at least one year rose 9%, exceeding expectations of an increase by 6.2%. Net sales rose 11% to $638.8 million.

J.C. Penney Co ((JCP)) said Thursday its August sales at department stores open at least one year fell 0.5%, missing expectations of a gain of 1.8%. The company backed its previous Q3 and Q4 earnings forecast, with same-store department store and direct sales both expected to increase in the low single digits in the five week September period. Stage Stores ((SSI)) reported 3.8% same-store sales growth and 15.8% jump in August total sales. Same-store sales rise was driven by cosmetics, women''s special sizes and home décor and came in above analyst estimates of 2.7%. Stage Stores said it sees Q3 same-store sales growth in the low single digits.

At the same time, some retailers reported results which came in below estimates, while others posted monthly sales decline. Claire''s Stores Inc ((CLE)), jewelry retailer, said August same-store sales rose 1%, missing estimates of a rise of 2%.

Pier1 Imports ((PIR)) posted a 9.1% drop in August same-store sales, saying traffic trends remained below last year. Analysts had forecasted an 8.1% decline in same-store sales. Gottschalks ((GOT)), department store chain, said August same-store sales slipped 1.1% from last year due to weak results from its home store division. The Gap ((GPS)) Thursday said same-store sales fell 7% in August. Analysts had expected a decrease of 3.4% in same-store sales for the month. Total sales slipped 2% to $1.15 billion from $1.17 billion in the same period a year earlier.


[R]7:30AM Asian stocks advanced on weaker yen and upbeat exporters.[/R]
Asian markets ended higher on Thursday. The Nikkei 225 Average closed the day 1.69% higher at 16140.76. Exporters led the advancers in Japan. Canon ended 2.3% higher and Toshiba gained 3.2%. Kyocera rose 3%, Sony closed 1.8% higher, Matsushita Electric Industrial jumped 2.2% and Pioneer climbed 2.5%. Auto stocks ended up because of the relatively weak yen and a Nihon Keizai Shimbun report that Toyota, Nissan and Honda will boost procurement of locally produced auto parts in China. Toyota ended 1.3% higher, Honda gained1.5% and Nissan advanced 2.4%.

Hong Kong''s Hang Seng Index rose 0.62% to close at 17392.27, with property stocks leading the advance. Sun Hung Kai Properties rose 1.6%, Cheung Kong Holdings gained 1.3%, and Henderson Land Development ended 0.8% higher. South Korea''s Kospi Index rose 0.85% to 1352.74, with Samsung Securities climbing 1.6% and Mirae Asset Securities rising 6.1%. In China, Shanghai Composite Index ended 0.2% higher at 1658.64. Shares closed higher for a fourth consecutive session, with strong performance by banks, following their solid first-half results as well as with optimism over China Merchants Bank''s Hong Kong initial public offering.

Taipei gained 0.37% to 6611.77, and Australia''s S&P/ASX 200 closed 0.95% higher at 5115.40. In Taiwan stocks closed moderately higher on demand from hedge funds and hopes of an improvement in companies profits for the remainder of the year, while in Australia, month-end buying exaggerated strength in the stock market, after slight gains in commodity prices Wednesday.


[R]6:30AM European stocks are trading lower Thursday on oil price rise.[/R]
European markets were lower by mid-morning on Thursday. The FTSE 100 in London shed 0.1% to 5,923.8, the Xetra Dax in Frankfurt edged down 0.1% to 5,863.62, and the CAC-40 in Paris sank 0.2% to trade at 5,170.74. On the corporate front, Thales, defence electronics group, gained 1.7% after Safran, aero engine maker, denied speculation it was interested in Zodiac, which Thales had also been linked with. Safran added 0.2%.

L’Oreal, cosmetics group, advanced 3.55 after it topped expectations with a 19.6% rise in first half operating profits, while KBC, banking and insurance group, plunged 5.2% despite a 48% jump in second quarter net earnings. Altadis, tobacco group, fell 1.4% after first half core earnings fell 1%, hit by tax hikes, an anti-tobacco law and a price war in its domestic market.

Oil prices advanced Thursday on concerns about possible supply disruptions as a U.N. deadline on Iran''s nuclear program arrived.
Light sweet crude for October delivery increased 37 cents to $70.40 a barrel on the NYME. Brent crude on London''s ICE futures exchange rose 42 cents to $70.60 a barrel.

Gold opened Thursday at a bid price of $619.40 a troy ounce, up from $617.60 late Wednesday. The euro was at $1.2852 at 10:10 a.m. in London, from $1.2833 late yesterday in New York. The British pound was also at $1.9067 versus the dollar from $1.9025. The U.S. dollar rose to 117.45 yen, the highest since July 19, before slipping back to 117.22 yen, up from 117.13 yen on Wednesday in New York.