Morning Market Update

Jobs Data Disappoints and Euro Fears Rise

Stocks are lower after the May jobs report showed that excluding a gain from Census hiring, only 41,000 private sector jobs were added during the month, and as fears in Europe took another step higher. While rumors about bank losses and central bank currency moves are a factor in today’s fresh four-year low in the euro, the revelation from the new Hungarian Prime Minister that it too has lied about the state of it’s economic health and may need help to avoid a default pushed European shares lower on the day. In equity news, government technology services provider SAIC reported mixed results but said its orders improved, while infant formula provider Martek Biosciences announced strong revenues. Treasuries are higher and Asian shares ended mixed.

As of 8:45 a.m. ET, the June S&P 500 Index Globex future is 20 points below fair value, the Nasdaq 100 Index is 38 points below fair value, and the DJIA is 170 points below fair value. Crude oil is down $1.62 at $72.99 per barrel, and the Bloomberg gold spot price is down $4.85 at $1,201.80 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.7% at 87.85.

Government technology services provider SAIC Inc (SAI $17) reported 1Q EPS of $0.32, ahead of the Street’s $0.31 estimate, but revenues of $2.69 billion came in short of the forecast of $2.75 billion. The company said that they improved their book-to-bill ratio “considerably” to 1.2, after winning “several significant contracts” in the areas of cybersecurity and logistics, and left its full year outlook unchanged.

Biotechnology company Martek Biosciences (MATK $20) posted 2Q earnings per share of $0.37 including $0.08 in costs related to its acquisition of Amerifit, while the expectation was for a profit of $0.32 per share according to Reuters, and revenues of $124 million were higher than the forecast of $114.9 million. Sales of infant formula, which makes up the majority of the company’s business, grew 12%. The company gave guidance for 3Q EPS of $0.33-0.36, while the Street estimate was for a gain of $0.39.

Jobs gains were primarily Census-related

Nonfarm payrolls rose by 431,000 jobs in May, short of the Bloomberg estimate of a 536,000 increase in jobs, and April and March were revised 22,000 lower, while excluding government hiring, private sector payrolls grew by a mere 41,000, versus the forecast of a gain of 180,000, and after expanding by a downwardly revised 218,000 in April. The unemployment rate fell to 9.7% from 9.9%, as the labor force contracted by 322,000 in the month, while the expectation was for it to come in at 9.8%. Average hourly earnings rose 0.3% versus the Street's forecast of a 0.1% increase, while average weekly hours ticked higher to 34.2, versus the forecast to remain flat at 34.1. Government payrolls rose as Census hiring added 411,000 temporary workers. Treasuries extended gains after the report.

Elsewhere in North American economics, Canada reported higher-than-expected job gains in the month of May, of 24,700, while the forecast was for a 12,500 net gain, and the unemployment rate remained unchanged at 8.1%, as expected. May’s job growth comes on the heels of a 108,700 gain in April, and was the fifth month in a row of growth.

European stocks erase an early gain

Stocks in Europe are falling, erasing an early gain, as the euro fell to a fresh four-year low versus the dollar and concerns were raised about a potential loss on a derivatives transaction at a bank in the region, and the new Hungarian Prime Minister Orban said the country was in a “grave situation” and that the prior government “lied” about the state of the economy. A fact-finding panel will probably present preliminary economic figures this weekend, after Orban said that “We need a clean slate to formulate our economic action plan,” and that it is “no exaggeration” to talk about a default. Hungary previously reported a deficit of 7% of GDP and received a 20 billion euro ($24 billion) bailout in 2008.

Meanwhile, shares of BP Plc (BP $39) are higher after the company lowered a cap over the pipe in its latest attempt to stem the flow of oil from the Gulf of Mexico spill. Elsewhere, shares of Valeo SA (VLEEY $15) are posting another day in the green after the company, which is France’s largest auto-parts supplier according to Bloomberg, reported a strong profit forecast yesterday and today said its working with financial advisors to evaluation options to yield the “highest possible value.”

In economic news, euro-zone 1Q gross domestic product (GDP) was revised slightly upward on a year-over-year basis to 0.6%, while gaining 0.2% quarter-over-quarter, and 4Q GDP was also slightly upwardly adjusted.

The UK FTSE 100 Index is 1.4% lower, France’s CAC-40 Index is down 2.4%, Germany’s DAX Index is declining by 1.4%, Italy’s FTSE MIB Index is down by 3.6%, Portugal’s PSI 20 Index is falling by 1.3%, Greece’s Athex Composite Index is decreasing 3.4%, and Hungary’s Budapest Stock Exchange Index is plunging 6.9%.

Asian shares mixed, resource names fall

Stocks in Asia were mixed, with shares of commodity-oriented companies falling after concerns about growth in China were raised by the world’s two largest copper companies, while property names in China gained on easing concerns after the largest real estate developer, China Vanke (CVKEF $1), said it won’t cut prices nationally this month. Chinese shares also got a boost after the World Bank said that while first quarter growth was “a bit overheated,” and it would be good if growth “slows a little,” there is no problem” for China to maintain 9-10% growth in 2010. The Shanghai Composite Index and the Hong Kong Hang Seng Index both ended the day nearly unchanged.

Shares in Japan were little changed after former Finance Minister Kan was named the new Prime Minister, as widely expected, after Hatoyama resigned two days ago amid a crisis in confidence, and the Nikkei 225 Index closed down 0.1%, and the yen was little changed during the session. Elsewhere, the South Korean Kospi Index rose 0.1% after economic growth was revised higher for the first quarter, Australia’s S&P/ASX 200 Index fell 0.8% after concerns about Chinese growth was raised by two copper companies, and India’s BSE Sensex 30 Index gained 0.6%.