S&P 500 Drops 2% as Jobless Claims Rise

123jump.com Staff
04 Feb, 2010
New York City

U.S. stocks turned lower after the weekly jobless claims in last week increased 8,000 to 480,000. Non-farm business productivity surged 6.2% in the fourth quarter and increased 5.1% over the last four quarters, the largest increase since 2002.

[R]10:30 AM New York – U.S. stocks turned lower after the weekly jobless claims in last week increased 8,000 to 480,000. Non-farm business productivity surged 6.2% in the fourth quarter and increased 5.1% over the last four quarters, the largest increase since 2002.[/R]

U.S. stocks dropped sharply after weekly jobless claims increased to 480,000. The larger than expected increase in jobless claims dragged market indexes at the opening.

The dollar edged higher after the euro declined on the worries that Spain, Portugal and Italy still have not produced a credible plan to bring down the budgetary deficit in line with the EU limit of 3%.

Berkshire Hathaway Inc may sell as early today $8 billion of unsecured notes to finance its acquisition of Burlington Northern Santa Fe Corp. According to the SEC filings the company is likely to offer five year fixed rate securities, 1-year floating rate debt and 2- and 3-year notes that may pay fixed or floating rate.

Seasonally adjusted weekly jobless claims increased 8,000 to 480,000 from the revised previous week claims of 472,000. The preliminary insured unemployment rate in the week ending January 23 fell 3.5% unchanged from the prior week''s unrevised rate of 3.5%.

Nonfarm business sector labor productivity increased at a 6.2% annual rate during the fourth quarter of 2009, this was the first quarterly gain in hours worked since the second quarter of 2007. Labor costs drops 4.4% and unit labor cost fell to 2.8% in the last four quarters.

Productivity increased 5.1% over the last four quarters, the largest increase since the gain of 6.1% from the first quarter of 2001 to the first quarter of 2002.

Over the last four quarters unit labor costs declined 2.8%, the largest decline in unit costs fell 3.2% over the four quarters ending with the first quarter of 2002.

New orders for manufactured goods in December, up seven of the last eight months, increased $3.7 billion or 1% to $370.4 billion. This followed a 1% November increase. Excluding transportation, new orders increased 1.2%.

Commodities Update

Futures of crude oil decreased $1.70 to $75.28 a barrel and natural gas declined 4 cents to $5.38 per mBtu. Gold dropped $29.20 to $1,082 an ounce after the dollar gained.

The dollar traded higher against the most international currencies in New York. One euro fetched $1.378 and one dollar traded at 90.47 yen.

Earnings Review

Cisco Systems, Inc., the maker of computer networking equipment said second quarter sales rose 7.7% to $9.8 billion from $9.1 billion a year ago. Net income in the quarter rose 26.6% to $1.9 billion or 32 cents per diluted share compared to net income of $1.5 billion or 26 cents per share a year ago.

Visa Inc, the payment processing company said first quarter revenues rose 12.6% to $1.96 billion from $1.74 billion a year ago. Net income in the quarter rose 33% to $763 million or $1.02 per diluted share compared to net income of $574 million or 74 cents per share a year ago.

Willis Group Holdings PLC, the insurance broker said fourth quarter revenues rose 4% to $824 million from $792 million a year ago. Net income in the quarter rose 27.4% to $79 million or 47 cents per diluted share compared to net income of $62 million or 37 cents per share a year ago.

YUM! Brands, Inc, the fast-food operator said fourth quarter revenues fell 0.6% to $3.37 billion from $3.39 billion a year ago. Net income in the quarter rose 6% to $216 million or 45 cents per diluted share compared to net income of $204 million or 43 cents per share a year ago.