While you were sleeping: Automaker layoffs rise, US stocks advance

Friday 15th May 2009

Americans filing claims for jobless benefits rose last week amid plant closures by Chrysler, the automaker that filed for bankruptcy.

Initial claims for state unemployment insurance benefits rose by 32,000 to 637,000 last week and the number of people remaining on benefit rolls after the first week rose to a record high.

Chrysler is seeking to end franchise agreements and shutter 25% of its dealerships to slash costs. General Motors is looking at substantial cuts to its use of imported components to win agreement from labour unions to cost cuts.

GM, which may follow Chrysler into bankruptcy by the June 1 federal government deadline for restructuring, is trying to win a new contract with United Auto Workers and negotiate concessions from the government and bondholders to slash US$44 billion of debt.

GM sank 5% to US$1.15, the biggest decline on the Dow Jones Industrial Average, which snapped a three-day slide, gaining 0.6% to 8331.32.

Ford Motor Co. said its restructuring is on track and the automaker may return to profit in 2011 without needing additional government aid. Ford’s shareholders approved funding for a healthcare trust for UAW workers at their annual meeting. Ford stock rose 4% to US$5.16.

The Standard & Poor’s 500 rose 1% to 893.07.

Companies in the S&P 500 have beaten analysts’ first- quarter earnings estimates by an average 9.3% even as profits fell 36%, Bloomberg reported.

The Nasdaq Composite gained 1.5% to 1689.21 after CA Inc., the world’s second-largest developer of software for mainframe computers, posted better-than-expected fourth-quarter earnings of 31 cents a share.

Citigroup rose 4.1% to US$3.55, leading gains in financials as costs to borrow dollars between banks eased to the lowest in about two months, stoking optimism access to credit is starting to thaw. The London interbank offered rate, or Libor, for three month loans fell about 3 basis points to 0.85%, according to Bloomberg data.

JPMorgan Chase rose 4.4% to US$35.54 and Bank of America gained 2.7% to US$11.31.

Wal-Mart Stores fell 1.2% to US$49.10 after reporting first-quarter profit was little changed from a year earlier. The retailer said per-share earnings may be 83 cents in the second quarter, less than analysts had estimated.

Labor Department figures showed prices paid to US producers rose in April, reflecting higher food costs. Prices rose 0.3%, more than expected, after sliding 1.2% in March. So-called core prices rose 0.1%.

The US Federal Reserve may revise rules for its use of ratings agencies amid concern it favours Standard & Poor’s, Moody’s Investors Service and Fitch Ratings. The review was referred to in a letter Fed Chairman Ben S. Bernanke sent to Connecticut Attorney General Richard Blumenthal, who released the document, according to Bloomberg.

The Fed is “conducting a broad review of our approach to using rating agencies,” Bernanke said. “That review encompasses the ratings of securities of all types accepted as collateral at all our recently established credit facilities as well as collateral accepted to secure regular discount window loans.”

The review was prompted by the expanding range of companies offering rating services, while only the big three are recognised by the Fed when it accepts securities as collateral.

Stocks in Europe snapped a three-day slide, with the Dow Jones Stoxx 600 Index gaining 0.5% to 201.70.

Portugal Telecom climbed 8% after reporting higher-than-expected first-quarter earnings of 166.4 million euros and vowing to hold dividends unchanged through 2011. Insurer Aegon rose 6.3% posted a smaller-than-expected loss of 173 million euros because of gains from selling bonds and a tax benefit.

Royal Dutch Shell, Europe’s largest oil company, fell 1.3% as the price of crude oil subsided. BP Plc fell 1.2% and France’s Total SA slipped 1.7%.

Oil fell for a second day after the International Energy Agency cut its estimate for oil demand this year, which is predicts will dwindle to the lowest since 1981.

The IEA said demand may slip to 83.2 million barrels a day this year, a 3% drop from 2008 levels.

Crude oil for June delivery fell 2.5% to US$56.55 a barrel on the New York Mercantile Exchange.

Gold futures for June delivery rose 0.1% to US$927 an ounce in New York. Copper futures for July delivery fell 2.6% to US$2.031 a pound.

The US dollar gained to 95.79 yen from 95.30 and traded at $1.3644 per euro from $1.36. The euro was at 130.68 yen.

The European Central Bank’s policy makers continued to struggle to find a united position, with disagreements over purchases of assets and the outlook for the region’s economy.

Businesswire.co.nz

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