Market Wraps
Stocks
U.S. stocks sank broadly Friday, pushing the Dow Jones Industrial Average well below the 10000 level following a weaker-than-expected jobs report and renewed worries about euro-zone debt. Major stock indexes are also on pace to close out the first week of June solidly in the red, despite a big rally on Wednesday and slight gains on Thursday. Nonfarm payrolls rose by 431,000 last month, short of economists' expectations for a rise of 515,000 jobs, and only 41,000 private-sector jobs were added. The unemployment rate slipped to 9.7% in May from 9.9% the previous month, in line with expectations.
Treasurys
Prices of Treasury securities soared Friday, sending bond yields sharply lower, as investors sought safe assets as a result of growing worries about the global economic outlook. The euro zone's debt troubles flared up again, with fresh fear for the fiscal and economic health of Hungary, which has a close trading and financial link with the region. A key U.S. jobs report showing that the economy added fewer jobs than economists had forecast, with slackening expansion in private-sector employment, added to the unease in financial markets. Riskier assets from stocks to corporate bonds to commodities were sold. The euro, the common currency shared by 16 euro-zone nations, touched the weakest level since March 2006. In Hungary, the local currency, the forint, and the nation's stocks and bonds tumbled.
Forex
The euro plummeted to its lowest level in more than four years Friday, sinking decisively below the key $1.20 level, after a disappointing U.S. jobs report added to fears the euro-zone sovereign-debt crisis was spreading across the region, leading investors to file strongly out of riskier assets. The euro had already been under pressure, hitting an earlier four-year low, on worries Hungary would join its fiscally stressed euro-zone neighbors in a struggle with sovereign debt.
StocksU.S. stocks sank broadly Friday, pushing the Dow Jones Industrial Average well below the 10000 level following a weaker-than-expected jobs report and renewed worries about euro-zone debt. Major stock indexes are also on pace to close out the first week of June solidly in the red, despite a big rally on Wednesday and slight gains on Thursday. Nonfarm payrolls rose by 431,000 last month, short of economists' expectations for a rise of 515,000 jobs, and only 41,000 private-sector jobs were added. The unemployment rate slipped to 9.7% in May from 9.9% the previous month, in line with expectations.
TreasurysPrices of Treasury securities soared Friday, sending bond yields sharply lower, as investors sought safe assets as a result of growing worries about the global economic outlook. The euro zone's debt troubles flared up again, with fresh fear for the fiscal and economic health of Hungary, which has a close trading and financial link with the region. A key U.S. jobs report showing that the economy added fewer jobs than economists had forecast, with slackening expansion in private-sector employment, added to the unease in financial markets. Riskier assets from stocks to corporate bonds to commodities were sold. The euro, the common currency shared by 16 euro-zone nations, touched the weakest level since March 2006. In Hungary, the local currency, the forint, and the nation's stocks and bonds tumbled.
ForexThe euro plummeted to its lowest level in more than four years Friday, sinking decisively below the key $1.20 level, after a disappointing U.S. jobs report added to fears the euro-zone sovereign-debt crisis was spreading across the region, leading investors to file strongly out of riskier assets. The euro had already been under pressure, hitting an earlier four-year low, on worries Hungary would join its fiscally stressed euro-zone neighbors in a struggle with sovereign debt.
US Private Sector Jobs Growth Slows
The U.S. economy added jobs in May at the fastest pace in a decade, but the gains were inflated by temporary government hiring for the 2010 Census and weren't enough to bring unemployment down much.
The U.S. Labor Department said in its closely-watched jobs report that nonfarm payrolls rose by 431,000 last month, the largest gain since March 2000. That followed an unrevised 290,000 increase in April.
Economists polled by Dow Jones Newswires were expecting payrolls to rise by 515,000.
Taking into account revisions to prior months, the U.S. economy added an average of nearly 200,000 jobs a month in the January-May period, a positive sign for the labor market as it recovers from the worst recession since the 1930s.
However, the May figure was boosted by the hiring of 411,000 temporary workers for the census. Only 41,000 private-sector jobs were added.
BP Ramping Up Oil Capture; Can't Specify Figures
A BP PLC (BP, BP.LN) official said the company continues to increase the amount of oil siphoned from the mile-deep leak in the Gulf Of Mexico, but couldn't specify how much crude and natural gas were being captured by a containment device.
"We will continue to ramp up the oil and gas we bring up," BP Senior Vice President Kent Wells said during a teleconference. While he declined to say how many barrels were being brought up, he said BP would begin to provide numbers daily about how much had been collected in the preceding 24 hours.
Earlier, U.S. Coast Guard Admiral Thad Allen, who is the government's point man in the crisis, gave a "rough estimate" of 1,000 barrels a day for the capture rate.
Wal-Mart Sets New $15B Buyback Plan
Wal-Mart Stores Inc.'s (WMT) board approved a new stock-buyback program that allows the company to repurchase up to $15 billion of its shares.
The new program replaces the world's biggest retailer's previous $15 billion authorization, which was given about a year ago. That authorization had about $4.7 billion remaining on it.
The market value of Wal-Mart's shares outstanding totals about $195 billion, calculated with Thursday's closing price.
Chief Financial Officer Tom Schoewe said the company bought back $3 billion worth of shares--55.6 million of them total--during the first quarter of fiscal 2011, which ended April 30.
NYSE Awaits Approval For Single-Stock Pauses
The New York Stock Exchange won't begin rolling out single-stock circuit breakers on Monday as planned, the exchange said.
The exchange is still waiting for approval from the Securities and Exchange Commission before it can proceed, spokesman Ray Pellecchia said. The exchange had planned to start phasing in the circuit breakers on Monday.
In the wake of the May 6 market plunge, the stock exchanges agreed with regulators to launch a six-month pilot program to pause trading if any stock within the Standard & Poor's 500-share index fell more than 10% within a five-minute period. The program is scheduled to start on June 14 and end on Dec. 10. It is unclear whether the pilot will still begin on June 14.
Kan Elected DPJ Head, Becomes PM
The ruling Democratic Party of Japan picked Naoto Kan as its new leader, making it all but certain that the lawmaker, who has advocated a weak yen to help exporters and called for increased fiscal discipline, will become the nation's prime minister by the end of the day.
The DPJ has comfortable majority in the Lower House of Parliament, which has power to select the nation's prime minister and enact the national budget.
The 63-year-old former civic activist and previous finance minister will replace outgoing Prime Minister Yukio Hatoyama, who abruptly announced resignation Wednesday due to the DPJ's tumbling approval rate and his botched handling of moving a U.S. base. Kan would be Japan's fifth prime minister in less than four years, an embarrassing statistic for the world's second-largest economy, which has had a procession of new leaders nearly every year since the popular Junichiro Koizumi ended a five-year tenure in 2006.
US Oil, Gas Rig Count Falls
The number of rigs drilling for oil and natural gas declined this week as the growing oil spill in the U.S. Gulf of Mexico and subsequent drilling ban pared back activity.
The number of oil and gas rigs fell to 1,506 rigs, down 29 rigs from the previous week, according to data from oil-field services company Baker Hughes Inc (BHI).
The number of gas rigs was 947, a decrease of 20 rigs from last week, while the oil rig count was 545, a decrease of 10 rigs. The number of miscellaneous rigs rose by one to 14 rigs.
The offshore drilling rig count fell by half this week to 24 rigs, according to Baker Hughes.
Superfast Traders Using Stock Data
Some fast-moving computer-driven investment firms are getting an edge by trading on market data before it gets to other investors, according to market players and researchers who have studied the trading.
The firms gain that advantage by buying data from stock exchanges and feeding it into supercomputers that calculate stock prices a fraction of a second before most other investors see the numbers. That lets these traders shave pennies per share from trades, which when multiplied by thousands of trades can earn the firms big profits.
Critics call the practice the modern-day equivalent of looking at share prices listed in tomorrow's newspaper stock tables today.
"It is a rigged game," Sal Arnuk, co-founder of brokerage firm Themis Trading, said at a Securities and Exchange Commission roundtable discussion in Washington, D.C., referring to the trading activity, which some call "latency arbitrage."
Israel Girds For Another Gaza-Bound Ship
Israel vowed to intercept pro-Palestinian activists on an Irish ship heading to the Gaza Strip, setting up another test for the government of Prime Minister Benjamin Netanyahu.
The latest showdown at sea comes amid international condemnation of a bloody seizure by Israeli commandos of a flotilla of Gaza-bound activist- and aid-laden ships earlier in the week.
By midday, the Rachel Corrie was about 140 nautical miles from Gaza, said Mary Hughes, co-founder of the Free Gaza Movement, one of the pro-Palestinian groups that helped organize the earlier flotilla. The Cyprus-based group owns the Rachel Corrie, Hughes said.
Microsoft To End Bing Cashback
Microsoft Corp. (MSFT) plans to end its Bing search-engine cashback promotion on July 30.
In a statement, the company said it ended the 2-year-old program because it "had not seen the broad adoption it had hoped."
Microsoft had been using the rebate promotion to drive traffic to Bing among people doing online shopping. Microsoft would often match the discount offered by retailers who listed products for sale through Bing, effectively doubling the discount for shoppers.
In its place, Microsoft said it would be pursuing new incentive programs for customers and advertisers.
Grain Exports Steer Clear Of Gulf
Weeks after the explosion and sinking of the Deepwater Horizon oil rig in the Gulf of Mexico that unleashed the worst oil spill in U.S. history, shipping, including that of U.S. grain, has been virtually untouched by the crisis.
An estimated 60% of all U.S. grain exports are sourced from the Gulf annually, and grain freight rates are only nominally higher now than when the accident occurred, this week averaging $71.50 per metric ton from the U.S. Gulf to Japan, compared to $69 on April 23. In fact, 43 ocean-going grain freighters made port-of-call at the Gulf during the week ended May 27, which was more than twice as many as were loaded out of the area during the same period of 2009.
Thus far, only two commercial shipping vessels have been contaminated badly enough by the oil to require cleaning, although transit delays averaged less than one hour in length.
BNY Mellon To Offer 25.9M Shares
Bank of New York Mellon Corp. (BK) plans to offer $700 million in shares at a 1% discount to Thursday's closing price and had entered into a forward-sale agreement with Goldman Sachs & Co. (GS).
Bank of New York plans to sell 25.9 million shares at $27 each. The company has about 1.23 billion shares outstanding. According to the forward-sale agreement, Goldman or its affiliates will borrow shares through underwriters and sell them to the public.
Shares were down amid the broad market downturn. The stock is down 8% in the past year, underperforming the broader market.
Hong Kong Residents Attend Vigil
Tens of thousands of Hong Kong residents attended a candlelight vigil to commemorate the Tiananmen Square crackdown of 1989, in an unusually strong turnout that comes at a politically sensitive moment for this special administrative region of China.
Beijing and the rest of mainland China remained under tightened security.
Residents, packing a large Hong Kong park, held up candles, sang old protest songs and waved signs that read "Never Forget June Fourth, Give Us Democracy." During the vigil, residents chanted slogans calling for the release of Liu Xiaobo, a 1989 student activist and human-rights dissident sentenced last year to 11 years in prison by the Chinese government.
Organizers said 150,000 people attended the rally, while police put the number at 113,000.
McDonald's Recalls Shrek Glasses
McDonald's Corp. (MCD) is recalling 12 million glasses sold as a promotional tie-in to the latest "Shrek" movie because they contain the toxic metal cadmium.
The voluntary recall is a rare lapse for McDonald's, which is known for tough oversight of suppliers, and could hurt its standing with families that have driven the fast-food chain's growth. Shares were down 51 cents to $67.34 in early trading, with the broader markets also opening down.
The U.S. Consumer Product Safety Commission said that the designs on the glasses, which were sold for about $2 since the beginning of May, contain cadmium, which can cause health risks with long-term exposure. The glasses were manufactured by ARC International, of Millville, N.J.
No injuries have been reported, but McDonald's has asked consumers to stop using the glasses and return them for a full refund.
Execs See Governance As IPO Challenge
The top challenge executives say they face when preparing for an IPO is beefing up their corporate governance, according to an informal survey conducted by an accounting firm and NYSE Euronext (NYX) over the past year.
Besides improving corporate governance, preparing a strong business plan and building a financial track record ranked as the second- and third-most pressing issues when gearing up to go public, according to the group of 110 senior executives who participated in initial-public-offering workshops held by auditing firm KPMG LLP and NYSE Euronext.
The workshops, aimed at educating companies about preparing for IPOs, took place throughout the U.S. from September to April.
GE Sees Real Estate Losses Peaking
The head of General Electric Co.'s (GE) big finance arm reiterated Friday that he expects real estate losses to peak this year, although he cautioned that the overall sector is likely to remain troubled for some time.
"We're probably largely through just the free fall in [real estate] asset values," said Mike Neal, chief executive of GE Capital and a GE vice chairman.
But he said continued high unemployment will fuel delinquencies and serve as a persistent drag on the real estate sector.
Unemployment "is going to be with us for a while, but it's manageable," said Neal, speaking at a Sanford C. Bernstein conference.
GE, which is working to downsize GE Capital overall, plans to shrink the real estate portfolio in particular, Neal said.
SEC Targets Arbitration Award Evaders
Regulators have approved a change to stop brokers who have been ordered to pay an arbitration award from using an empty-pockets excuse to keep their license.
The Financial Industry Regulatory Authority submitted the rule change proposal to eliminate the so-called "inability to pay" defense in April. Brokers and brokerage companies often use the defense, which allows them to keep their securities licenses when they don't make good on arbitration awards, say lawyers.
Finra requires the payment of arbitration awards within 30 days, and uses an expedited proceeding to suspend those who don't comply.
The rule change, approved by the Securities and Exchange Commission on Wednesday, will leave in place certain other defenses, however, including a bankruptcy filing by a broker or brokerage. Additional defenses include settling for another amount or a payment schedule and challenging an award in court.
Fed's Lockhart Sees More Bank Failures
More banks in the southeastern U.S. are likely to fall victim of the financial crisis, a central bank official said.
"Conditions at community banks in the Southeast remained weak during the first quarter of 2010," Federal Reserve Bank of Atlanta President Dennis Lockhart said. "As I look forward, more bank failures in the region are likely," he said.
"Here in the Southeast, the banking industry still needs more time to heal," Lockhart said. "I believe that banks are stabilizing and, although not improving rapidly, not getting significantly worse as a group."
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