What’s the Story

by CC September 7, 2012 9:22 am • Commentary


Nonfarm payrolls increased only 96,000 last month, the Labor Department said on Friday. While the unemployment rate dropped to 8.1 percent from 8.3 percent in July, it was largely due to Americans giving up the search for work.

The report’s weak tenor was also underscored by revisions to June and July data to show 41,000 fewer jobs created than previously reported. The labor force participation rate, or the percentage of Americans who either have a job or are looking for one, fell to 63.5 percent — the lowest since September 1981.

Calculated Risk


Compounding the weak August report, July and June payroll numbers were revised down—July payrolls rose 141,000, compared with the initially reported 163,000, and June was up 45,000, versus an earlier estimate of 64,000.

The latest news comes just days ahead of a meeting of Federal Reserve policy makers. Central bank Chairman Ben Bernanke, speaking at a Fed conference in Jackson Hole, Wyo., last week said the Fed shouldn’t rule out new efforts to lower what he described as gravely high unemployment.

The Fed has several tools at its disposal, though markets have been speculating most heavily on whether it would launch another large bond-buying program. Mr. Bernanke and other senior officials believe such programs, often dubbed quantitative easing, or QE, drive down long-term interest rates, push up stocks and other asset values, and soften the value of the dollar. They thereby can boost spending, investment and exports.

Another round of bond purchases would be the Fed’s third.


Here’s the big picture: The U.S. economy has been adding jobs at a rate of about 150,000 per month for close to two years now. The month-to-month numbers have been volatile — as high as 275,000 in January, and as low as 54,000 in May of 2011 — but the 12-month average has been remarkably consistent, staying between 140,000 and 190,000 since early 2011. The private-sector numbers have been even steadier.


Intel Corp. (INTC), the world’s largest semiconductor maker, slashed its third-quarter sales prediction amid declining demand for personal computers from corporate customers in a weakening economy.

Third-quarter sales will be $12.9 billion to $13.5 billion, down from a prior projection of $13.8 billion to $14.8 billion, the Santa Clara, California-based company said in a statement today. Analysts on average had estimated sales of $14.2 billion, according to data compiled by Bloomberg.

PC makers are reducing orders for Intel’s chips at a time of the year when they normally buy more to build machines for the holiday shopping season. Intel said demand for chips used in business machines and orders for computers going to emerging markets are worse than expected, compounding concern that the PC market may not grow this year.


Lululemon Athletica [LULU  68.60        ]– The athletic apparel retailer reported quarterly profit of $0.34 per share, excluding certain items, three cents above estimates. It’s also forecasting full-year profit above Street estimates, as same-store sales rose 15 percent.

Pandora [P  12.57        ]The Wall Street Journal reports that Apple [APPL  92.00  —  UNCH    ] is considering starting its own custom radio service similar to Pandora’s. Apple has declined comment on the story.

Intel [INTC  25.095        ] – The chipmaker is cutting its third-quarter revenue forecast to $12.9 billion to $13.5 billion, versus Street estimates of $14.2 billion. Intel said it’s seeing softer demand because of a weak macroeconomic environment.

Mattress Firm Holding [MFRM  32.45        ] – The company reported a quarterly profit of $0.42 per share, excluding certain items, compared to Street estimates of $0.28. The mattress retailer also raised its full-year forecast, but investors appear to be concentrating, at least initially, on the company’s current quarter earnings per share guidance of $0.43 to $0.47. That’s below current estimates of $0.51 a share.

Smith & Wesson [SWHC  9.00        ] – The gun maker reported fiscal first-quarter profit of $0.28 per share, 10 cents above estimates, on strong sales. The company is also boosting its full-year guidance to $0.85 to $0.95 per share from the prior $0.60 to $0.65. For the current quarter, it sees $0.19 to $0.21 per share compared to analysts’ estimates of $0.13. Analysts say Smith & Wesson and rivals are seeing sales rise amid concerns about a possible tightening of gun control laws.

Activision Blizzard [ATVI  12.23        ], Electronic Arts [EA  13.63  —  UNCH    ], GameStop [GME  21.06        ] – NPD reports that industry sales fell 20 percent in August compared to a year ago.

Zimmer Holdings [ZMH  64.05        ] – The drugmaker’s stock has been upgraded to “outperform” from “market perform” at Bernstein.

Nvidia [NVDA  13.73        ] – The chipmaker’s stock has been downgraded to “hold” from “buy” at Cantor Fitzgerald, which has cut its price target on the stock to $13.50 from $20. Cantor said it sees little growth in the PC and computer ecosystem sectors.

Rock-Tenn [RKT  68.26        ], Weyerhauser [WY  25.50        ], Packaging Corp. [PKG  32.90        ] – Paper and packaging companies are the subject of a new report from Goldman Sachs, which has upgraded Rock-Tenn to “buy” from “neutral,” and added it to its “Conviction Buy” list. It also upgraded Packaging Corp. to “neutral” from “sell,” and downgraded Weyerhaeuser to “neutral” from “buy.”

Priceline.com [PCLN  604.00        ] – The travel services company’s stock has been raised to “buy” from “neutral” at Nomura. Nomura is making the call on a valuation basis.

Green Mountain Coffee Roasters [GMCR  24.5801        ] – Lazard Capital has initiated coverage on the coffee producer’s stock with a “buy” rating.