Unemployment Rate Falls 4.7%

Elena
03 Feb, 2006
New York City

U.S. stocks opened lower on disappointing employment report. Tech stocks moved to the downside with the Internet sector dragged by Amazon''s 11% decline on earnings report. Maytag posted wider Q4 net loss of 93 cents a share, despite 7% sales growth, missing estimates. Moody reported 22% income rise in Q4 on 21% revenue growth. Ryder System Q4 reported profit decline despite 13% sales growth.

U.S. MARKET AVERAGES

U.S. stocks declined Friday on economic data and earnings news.

The Labor Department said that employers added 193,000 jobs in January, up from a 140,000 gain the prior month. The upswing in job creation signaled that the economy was off to a good start this year, but the upbeat data also raised concerns the Federal Reserve would keep raising interest rates. However, the job growth was less than the 250,000 rise forecast by economists, although the unemployment rate slipped to 4.7% from a previous 4.9% level.

Falling consumer confidence widened stocks' losses. The University of Michigan reported consumer sentiment index slid 2.2 points to 91.2 compared with expectations of a slight decrease to 93.1.

Disappointing earnings reports from Amazon.com Inc and appliance maker Maytag Corp also weighed on sentiment. Maytag posted a wider Q4 deficit on restructuring and impairment charges. Internet retailer Amazon.com posted 43% profit drop in Q4, missing estimates. The decline came despite higher sales as the company continues to invest heavily in technology and marketing.

Technology stocks were notable movers to the downside in the early going. The Internet sector was dragged lower by Amazon ((AMZN)), which fell down more than 11% on earnings report. The computer hardware sector also posted weakness. Housing stocks moved lower on the prospect of higher mortgage rates, extending yesterday's losses. The gold sector was a conspicuous decliner in the early going with a sharp drop of 3.5%.

The airline sector moved lower, posting a decline of 1.8% in early going, following volatile trading over the last couple sessions. On Wednesday the sector fell on disappointing earnings from JetBlue ((JBLU)), but bounced back during Thursday's trading on a sharp fall in oil prices.

In midmorning trading, the Dow Jones industrial average fell 49.87, or 0.46%. The Standard & Poor's 500 index was down 7.80, or 0.61%, and the Nasdaq composite index dropped 18.64, or 0.82%.

Bonds declined, with the yield on the 10-year Treasury note rising to 4.60% from 4.56% late Wednesday, but the yield curve remained inverted as the two-year note pressed higher to 4.62%.

ECONOMIC NEWS

The Department of Commerce release its report on factory orders in the month of December on Friday, showing that order growth came in slightly higher than expected.

The report showed that new orders for manufactured goods rose 1.1 percent in December following an upwardly revised increase of 3.3 percent in November. Economists had expected orders to increase 1.0 percent compared to the 2.5 percent increase originally reported for November.

The increase in factory orders came as new orders for manufactured durable goods rose 1.8 percent in December after rising 5.3 percent in November. The growth in durable goods orders was upwardly revised from the previously reported 1.3 percent growth.

New orders for manufactured non-durable goods also increased in December, rising by 0.3 percent.

The report also showed that shipments rose 2.2 percent in December following a 0.8 percent increase in November. At the same time, inventories rose 0.5 percent after rising 0.3 percent in the previous month.

The U.S. economy added fewer than expected jobs in the month of January, according to a report from the Department of Labor. At the same time, the report showed an upward revision to December job growth and an unexpected decline in the unemployment rate.

The report showed that non-farm payroll employment rose by 193,000 in January following an upwardly revised increase of 140,000 in December. Economists had been expecting payrolls to increase by 275,000 compared to the increase of 108,000 originally reported for December.

The Labor Dept. said that job gains occurred in several industries, including construction, mining, food services and drinking places, health care, and financial activities. Modest declines were seen in employment in retail trade and government.

The report also showed that the unemployment rate unexpectedly fell to 4.7 percent in January from 4.9 percent in December. Economists had expected the unemployment rate to remain unchanged.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks closed largely in the red with tech shares in the spotlight after positive earnings news from electronics giant Matsushita and resumed post-holiday trading in tech-heavy Taiwan. Taiwan’s Weighted index surged 0.96%, shrugging off U.S. markets losses. The most notable decliner was South Korea’s Kospi ending deeply down 3%. The Japanese Nikkei lost 0.3% hurt by weak major consumer electronics shares, following recent gains.

European stocks traded in the positive territory at mid-day dealings, reflecting lower oil prices, mixed corporate news from Volvo Group and British Airways and expectations of U.S. payrolls data. The German DAX 30 rose 0.5%, the French CAC 40 gained 0.2%, and London’s FTSE 100 added 0.1%.

OIL, METALS, CURRENCIES

Crude oil advanced as market kept watch over IAEA which was to decide whether to refer Iran to the UN Security Council over its nuclear program. Light sweet crude for March delivery gained 27 cents to $64.95 a barrel. Heating oil edged up a cent to $1.7825 a gallon, while gasoline inched up to $1.6730. Natural gas added 1 cent to $8.360 per 1,000 cubic feet. London Brent rose 24 cents to $63.12.

European gold traded mixed. In London gold traded at the fixed price of $571.85 bid per troy ounce, down from $572.15. In Zurich the precious metal traded at $571.90, down from $572.80. In Hong Kong gold rose 95 cents to close at $572.90. Silver opened at $9.86, up from $9.83.

The U.S. dollar gained ground against other major currencies. The euro was quoted at $1.2079, down from $1.2098. The dollar bought 118.50 yen, unchanged. The British pound stood at $1.7762, down from $1.7804.

EARNINGS NEWS

Ryder System Inc, ((R)), vehicle fleet management company, reported Q4 net income of 92 cents a share, down from 96 cents a share in the year-ago period. Income from continuing operations amounted to 93 cents a share, a penny down from the analyst estimate. Sales for the company grew 13%.

Weyerhaeuser Co, ((WY)), wood, paper and packaging company, reported a Q4 loss of 86 cents a share, swinging from a net income 82 cents a share a year-ago. After adjusting for items, the company earned 98 cents a share, topping analyst estimate of 74 cents a share.

THQ Inc, ((THQI)), video game publisher, reported a Q3 profit of 72 cents a share, down from $1.05 a share a year-ago on revenue decline, topping analyst estimate of 65 cents a share.

Moody''s Corp, ((MCO)), credit ratings, research and risk analysis provider, reported Q4 net income of 50 cents a share, up about 22% from 40 cents a share in the year-earlier period on 21% revenue growth, beating analyst estimate for earnings of 46 cents a share.

Carbo Ceramics Inc, ((CRR)), provider of equipment and services for natural-gas and oil wells, reported Q4 net income of 43 cents a share, down from 45 cents in the same period the previous year. Revenue grew to $63.6 million from $62.2 million while Q4 operating profit dropped to $15.8 million from $16.6 million. Analyst forecast earnings of 48 cents a share.

Maytag Corp, ((MYG)), home and commercial appliances manufacturer, reported a Q4 net loss of 93 cents a share, down from a net loss of 18 cents a share in the year-earlier period despite 6.6% sales growth, missing analysts’ expectations of a loss of 13 cents a share. Q4 results were affected by restructuring charges in connection with the closing of the Florence, S.C., plant, a non-cash asset impairment charge related to a laundry product line and a goodwill impairment charge involving a commercial cooking business were recorded in Q4

B/E Aerospace Inc., ((BEAV)), aircraft cabin products maker, reversed to a Q4 profit of 96 cents a share, benefiting from a $52 million tax benefit. If not for the tax benefit and one-item items, it would have earned 18 cents a share, while sales rose 18% to $223 million.

Volvo Group, ((VOLVY)), truck maker, reported that Q4 net income dropped 15% to 7.37 kronor a share, while sales grew 15%. The company announced that operating margin in Q4 fell to 6.5% from 8.2% last year on account of extensive product launches. Volvo stated its income was affected by a 430 million kronor capital gain from the sale of Celero and a 550 million kronor write down of its holdings in Blue Bird.