Modest Gains on Employment Data

Elena
08 Dec, 2006
New York City

Stocks opened modestly higher Friday amid easing concerns about the health of the U.S. economy. The long awaited employment report brought some relief to the market as the Labor Department said 132,000 jobs were created in November, greater than the expected increase of 105,000. Unemployment ticked up to 4.5%. However, sharply higher oil prices and weaker dollar limited gains.

[R]9:45AM Stocks opened modestly higher, boosted by employment report.[/R]
Stocks opened modestly higher Friday amid easing concerns about the health of the U.S. economy. The long awaited employment report brought some relief to the market as the Labor Department said 132,000 jobs were created in November, greater than the expected increase of 105,000. Unemployment ticked up to 4.5%. However, sharply higher oil prices and weaker dollar limited gains.

In corporate news, Xilinx ((XLNX)) dropped 5.9% after the chip maker lowered its Q3 earnings forecast, pointing to unexpected weakness in its business. Yum Brands Inc. ((YUM)) fell 2.6% amid growing concern about an outbreak of E. coli in some of its restaurants. A Wachovia cut its rating on the company to Market Perform from Outperform. 3M Co. ((MMM)) weighed, falling 2% after Prudential downgraded the stock to neutral from overweight, citing valuation. Hewlett-Packard Co. ((HPQ)) fell 0.5% after it agreed to pay $14.5 million to settle charges related to the spy scandal. At the same time, shares in Oracle Corp ((ORCL)) gained 0.7% after late Thursday the company raised by 42% its bid for India's i-Flex Solutions shares. In the first hour of trading, the Dow Jones industrial average was up 13.05, or 0.11%, at 12,291.46. The Standard & Poor's 500 index was up 2.40, or 0.17%, at 1,409.69, and the Nasdaq composite index was up 4.97, or 0.20%, at 2,432.66.


[R]9:30AM The FTSE 100 was lower on Friday due to weak mining stocks.[/R]
The FTSE 100 in London was fractionally lower 0.07% at 6,128 in afternoon trading.

Advancers

The newspaper and education publisher, Pearson, made steady gains on the back of reports that private equity bidders are circling the group. There was also some talk of interest in its French daily, Les Echos. Pearson was up 1.33%.

Imperial Chemical Industries was also higher 2.04% on reports of a possible tie-up with Holland''s Akzo Nobel following the sale of its Quest business.

Shares in Yoomedia surged 40% following news that it had agreed to provide some of its most popular games for BT new next-generation TV service, BT Vision.

UK high street bank Barclays was up, 1.49% for a second day as reports of a possible bid from Bank of America refuse to go away. Royal Bank of Scotland and Lloyds TSB were also higher, 0.31% and 1.00% respectively.

Swedish healthcare equipment firm Getinge has agreed to purchase Huntleigh Technology Getinge offer helped shares in Huntleigh zoom 26.93%.

Decliners

The mining sector was in the red after Merrill Lynch lowered the sector to neutral on worries about a slowdown in the global economy. The broker downgraded Antofagasta and Kazakhmys to sell and lowered BHP Billiton, Rio Tinto and Xstrata to neutral. Antofagasta dipped 5.14%, Kazakhmys slipped 3.93%, BHP Billiton was off 2.98%, Rio Tinto declined 2.17% and Xstrata declined 2.61%.

Benson & Hedges producer Gallaher also lost despite Citigroup upgrading the shares to hold from sell in the wake of news of the takeover approach. Gallaher shed 2.52%.


[R]9:00AM Stocks futures rose on upbeat payrolls data.[/R]
Wall Street sentiment turned positive after a long awaited government report showed that jobs created in November were more than expected, easing worries about the economy''s health. The report showed that non-farm payrolls rose by 132,000 jobs, following a downwardly revised increase of 79,000 in October. Economists had expected an increase of about 105,000 jobs. The data also showed that the unemployment rate edged up to 4.5% in November from 4.4% in October.

The Nasdaq is expected to come under pressure amid disappointing news from two chipmakers after the bell. National Semiconductor Corp. ((NSM)) posted a lower quarterly profit, while Xilinx Inc. ((XLNX)) cut its outlook for the current quarter. Xilinx Inc. fell 4.6% after the bell, while National Semiconductor declined 1.8%. Standard & Poor''s 500 futures were up 3 points, above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures were up 23 points, and Nasdaq 100 futures were up 3.75 points.


[R]U.S. economy added more jobs than it was expected.[/R]
The Department of Labor released its report on the employment situation in the month of November on Friday, showing that the U.S. economy added more jobs than economists had been expecting. The report showed that non-farm payrolls rose by 132,000 jobs in November following a downwardly revised increase of 79,000 in October. Economists had expected an increase of about 105,000 jobs compared to the increase of 92,000 originally reported for the previous month. At the same time, the job growth in September was revised up significantly to 203,000 from the previously reported 148,000. The Labor Department said that the job growth in November came as job gains in service-providing industries such as professional and business services, food services, and health care more than offset declines in construction and manufacturing. The report also showed that the unemployment rate edged up to 4.5 percent in November from 4.4 percent in October. The modest increase in the unemployment rate was anticipated by economists. Average hourly earnings also moved modestly higher, edging up $0.03 to $16.94 in November. With the increase, average hourly earnings were up 4.1 percent year-over-year.


[R]8:30AM Oracle Corp. boosted its bid offer for Indian i-flex to $1.3 B.[/R]
Oracle Corp. ((ORCL)), the world''s biggest maker of database software, improved its offer for Indian banking software provider i-flex Solutions Ltd. to $1.3 billion. The new offer means Oracle is bidding for nearly 28.4 million i-flex shares worth 59.5 billion rupees, or $1.3 billion. Oracle said it wanted to take its stake in i-flex to 90% and raised the price it is willing to pay to 2,100 rupees per share, up 42% from 1,475 rupees previously offered. The revised offer represented a 20% premium to i-flex''s closing price on Thursday. It values i-flex at 49 times forecast earnings, versus a sector average of Indian application software makers of 24. Oracle already owns 55% of i-flex. In September it offered to pay up to $531 million to boost its stake to 75%.

The news sent i-flex shares to record highs. Before retreating to 16.5%, they hit a record of 2,055 rupees, up 17.4%.


[R]7:30AM Asian markets ended mostly lower on Friday with Japan, HK down.[/R]
Asian markets mostly declined on Friday. The Nikkei Average of 225 companies ended down 55 points, or 0.3% , to 16,417.80. October core machinery index advanced 2.8% from the previous month, but failed to match expected 5.7% growth.

NTT DoCoMo declined 1.7% after the cellular provider posted its first-ever net decline in mobile subscribers in November. Sanyo Electric Co. shed 3.1% after NTT DoCoMo said Thursday it would withdraw 1.3 million cellphone batteries made by a Sanyo unit on safety concerns. Japan Tobacco gained 4%, continuing its winning streak from the previous session.

Hang Seng Index in Hong Kong closed 0.6% lower to 18,739.99. The China Enterprises Index of stocks listed in Hong Kong, declined 0.9%. Power tool and vacuum-cleaner maker Techtronic Industries Co advanced 0.8% as the group announced it had bought Whirlpool Corp.''s. China Mobile shed 1.8%, continuing its 2.6% slip in the previous session due to reports of a large share sale by an institutional holder.

Share indexes in Malaysia dipped 0.4% while Taiwan Weighted Price Index slipped 0.7%. Kospi in South Korea also declined 1.4% and Australia S&P/ASX 200 was off 0.7% as well as Singapore Strait Times Index down 0.6%. New Zealand NZX-50 bucked the trend and gained 0.9%.


[R]6:30AM European markets were lower Friday as markets await US job report.[/R]
European markets were trading lower Friday. By mid morning, FTSE 100 in London slipped 0.2% to 6,118.3, Frankfurt Xetra Dax shed 0.3% to 6,394.01, and the CAC 40 in Paris declined 0.5% to 5,353.59.

Advancers

Banks bucked the overall downtrend and advanced. Barclays added 1.1% in the light of recent bid talks, while KBC in Belgium gained 1.9% after sturdy results this week. Capitalia in Italy advanced 2.2%.

Deutsche Börse gained 1% after Citigroup hiked its price target on the German stock exchange operator.

Decliners

Miners listed in London influenced the negative trend on the markets the most after Merrill Lynch reduced its rating on the sector and lowered some indivdual stocks. Xstrata, which was lowered to neutral, shed 3.1%, while Antofagasta and Kazakhmys, both reduced to sell shed 2.8% and 3.1% respectively.

German truckmaker Man, declined 1% on worries it may sweeten its unfriendly bid for Swedish rival Scania after it said on Thursday it was prolonging its offer period. Scania was off 0.3%.

Oil and gold

Crude oil for January delivery advanced 31 cents to $62.80 a barrel in electronic trading on the NYME, up from $62.49 a barrel on Thursday. January Brent crude at London ICE Futures exchange gained 33 cents to $62.90 a barrel.

Currencies

In early European trading, the euro traded at $1.3284, up from $1.3280 in New York late Thursday. In England, the Bank of England abstained from hiking its rate and held it firm at 5 percent Thursday. The British pound traded on Friday at $1.9674, up from $1.9620 on Thursday. The dollar gained slightly to 115.32 Japanese yen from 115.29 yen.