Weaker Job Growth

Elena
04 Nov, 2005
New York City

Asian-Pacific markets ended higher with the Nikkei up 1.3% at a four-year high above 14,000 points on microchip and banking stocks. Markets in South Korea, Singapore and Australia gained, only Hong Kong fell. European stocks lost ground at mid-day on higher oil prices and ahead of U.S. payroll data. After jumping $2 yesterday, crude oil eased back below $62 a barrel.

U.S. MARKET AVERAGES

The latest report released by the Labor Department on Friday offered fresh insights into the impact of Katrina, the most costly natural disaster in U.S. history. America's payrolls grew by 56,000 in October, a sign that the nation's job market is slowly regaining ground after the Gulf Coast area was hit by Hurricane Katrina. The unemployment rate dipped to 5% of the labor force.

U.S. stock futures point to a flat market opening on Friday.
S&P 500 futures were down 1 point, nearly even with their fair value. Dow Jones industrial average futures were flat, while Nasdaq 100 futures were down 1.50 points.

ECONOMIC NEWS

Friday morning, the Department of Labor released its report on the employment situation in the month of October, showing that the U.S. economy added fewer jobs than economists had been expecting.

The report showed that non-farm payrolls rose by 56,000 jobs in October following a revised decrease of 8,000 in September. The increase came in well below economist expectations of an increase of about 110,000.

Additionally, Kathleen Utgoff, commissioner of the Bureau of Labor Statistics, noted that the relatively weak growth in the labor market was not attributable to the areas directly affected by Hurricane Katrina.

“Rather, job growth in the remainder of the country appeared to be below trend in October,” Utgoff said. However, she noted, “It is possible, of course, that employment growth for the nation could have been held down by indirect effects of Hurricanes Katrina and Rita.”

The report also showed that the unemployment rate edged down to 5.0 percent in October from 5.1 percent in September, reflecting a smaller labor force. Economists had been expecting the unemployment rate to remain unchanged at 5.1 percent.

The weaker than expected job growth may raise some concern about the strength of the labor market and the economy as a whole.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed generally higher with the Nikkei hitting a four-year high above 14,000, boosted by upbeat U.S. economic data and strong confidence in the domestic economy. The index climbed 1.3% on record gains in microchip and banking stocks. Across the region, South Korea’s Kospi rose 0.3%, Singapore Straits Times advanced 0.5%, while the only loser Hong Kong fell 0.3% on property stocks.

European markets lost ground at mid-day on crude oil prices surge and expectations of weaker U.S. markets as a result. Expected payroll data release also weighed on market sentiment. The German DAX 30 lost 0.2%, the French CAC 40 shed 0.2%, while London’s FTSE 100 gained 0.1%, supported by oil majors.

OIL, METALS, CURRENCIES

Crude oil prices pulled back below $62 a barrel after jumping $2 on Thursday. Light sweet crude December delivery fell 49 cents to $61.29 a barrel. Heating oil lost 2 cents to $1.8075 a gallon, and so did gasoline, presently trading at $1.6073. Natural gas tumbled 18 cents to $11.505 per 1,000 cubic feet. London Brent dropped 61 cent to $59.91.

Gold traded mixed in Europe. In London the precious metal was fixed at $461.35 per troy ounce, up from $460.50. In Zurich gold rose to $461.18 from $460.25. In Hong Kong gold fell $3.30 to close at $461.45. Silver opened at $7.56, up from $7.52.

The U.S. dollar grew stronger against its major counterparts. The euro was quoted at $1.1943, down from $1.1944. The dollar bought 117.60 yen, up from 117.12. The British pound traded at $1.7661, down from $1.7702.

EARNINGS NEWS

Quanta Services Inc. ((PWR)), network services company, reported that Q3 net profit more than tripled to 11 cents a share, beating analyst estimate of 7 cents a share on 13% revenue growth and improved spending in industries that company serviced as well as the infrastructure work needed after the major hurricanes boosted results. Quanta predicts Q4 earnings between 6 and 8 cents a share on revenue between $450 million and $480 million.

Redwood Trust, Inc. ((RWT)), specialty finance firm, reported a Q3 net income decline of 22% from the year-ago period to $2.21 a share on higher operating expenses caused primarily by continued growth in personnel. Core earnings came in at $1.22 a share, down vs. $2.29 a share.

Alliant Energy Corp. ((LNT)), electric and gas energy company, announced that Q3 net profit advanced 38% to 96 cents a share from the year-ago period. Earnings from continuing operations rose 8% and revenue jumped 36%. Alliant expects fiscal-year earning from continuing operations in the range of $1.10 to $1.30 a share.

Artesyn Technologies Inc. ((ATSN)), electronic products and power supplies producer, posted Q3 net income of 9 cents a share, up a bit from the same period a year ago on both higher sales of its rectifier and amplifier products and pressure in its server segment missing analyst estimate by a penny. Sales dropped to $102 million from $107 million

Westar Energy ((WR)), electric generation and distribution services company, posted Q3 earnings of 97 cents a share, up from 70 cents a share in the year-ago period on revenue growth, topping analyst estimate of 82 cents a share. If not for a gain on fuel supply contracts, the company would have earned 65 cents a share. Results were affected by higher fuel supply contract valuations, warmer weather and lower interest expenses.

Carrizo Oil & Gas Inc. ((CRZO)), oil and natural gas company, posted Q3 net income of 19 cents a share if not for one-time items, up on this basis versus last year’s profit of 15 cents a share on 43% revenue growth, matching analysts’ expectations of 19 cents a share. The results reflected both greater output of natural gas and higher energy prices. The company’s production volumes increased by 7% in Q3.