07/10 Wall Street Tentative Ahead of Jobless Data

October 7, 2010
By THE ASSOCIATED PRESS

Indexes on Wall Street seesawed Thursday as traders balance slightly better news on jobs against mixed results from PepsiCo.

The Dow Jones industrial average came within two points of 11,000 before turning lower.

Indexes were up in the first minutes of trading after the Labor Department reported that first-time filings for jobless aid dropped by 11,000 last week to a seasonally adjusted 445,000. That was the lowest level since the week ending July 10. Wall Street analysts had expected a small increase. The four-week average of new claims, a less volatile measure, dropped to 455,750, the sixth consecutive weekly decline.

But within the first half-hour, those gains were shed. Trading was held in check as investors awaited the government’s crucial monthly employment report Friday and PepsiCo kicked off earnings season with mixed results.

In late morning trading, the Dow Jones industrial average was down 19.26 points, or 0.18 percent. The Standard & Poor’s 500-stock index and the Nasdaq composite were also off by 0.2 percent.

The beverage and snack maker PepsiCo reported a 12 percent rise in third-quarter profit, on strong overseas sales. But the company lowered the top end of its guidance, and it said changes in currency exchange rates are expected to weigh on future profit. PepsiCo shares fell 3.4 percent in early trading.

High unemployment remains a big obstacle to stronger growth. Worries about jobs had been keeping a lid on spending in recent months, though retailers reported Thursday that sales improved modestly in September. Macy’s, Abercrombie & Fitch and Limited Brands, which owns Victoria’s Secret and Bath and Body Works, all reported better-than-expected monthly sales.

In European equity markets, the FTSE 100 in London was down 0.34 percent, while the DAX in Frankfurt and the CAC 40 in Paris gained 0.1 percent.

Two key central banks in Europe held their benchmark rates steady on Thursday. The European Central Bank also signaled Thursday that it would stick to its policy of gradually removing extraordinary economic stimulus measures — even as other monetary authorities appeared to be moving in the opposite direction.

Trading had been fairly subdued in Asia earlier, with South Korea’s Kospi closing down 0.2 percent to 1,900.85 while Japan’s Nikkei 225 stock averaged dropped 0.1 percent, to 9,684.81. Hong Kong’s Hang Seng index ended flat at 22,884.32.

In the currency markets, the euro and the yen continued to strengthen. The euro briefly topped $1.40 for the first time since early February and the dollar dropped below the level that forced the Bank of Japan to intervene in the markets to stem the export-sapping appreciation of the yen.

The gains in the euro came amid warnings from the chief of the International Monetary Fund about the risk of a global currency war. In a bid to bolster their flagging economies , many countries are abandoning the solidarity shown during the financial crisis and adopting beggar-thy-neighbor policies.

The yen strengthened despite the Bank of Japan’s intervention and its move earlier this week to buy more assets, trading at 82.36 yen to the dollar. And the British pound rose slightly, to $1.60, also for the first time since February. Commodity prices, including oil, rose as the dollar weakened.

Members of the Federal Reserve have indicated that they are willing to offer more relief for the struggling American economy. Buying government debt from banks would lower interest rates in the economy, weakening the appeal of dollar assets.

Dominique Strauss-Kahn, the managing director of the International Monetary Fund, said he “takes very seriously the threat of a currency war, even a nascent one.”

In an interview with the French newspaper Le Monde published Thursday, Mr. Strauss-Kahn said China’s currency was “at the root of tensions in the world economy that are becoming a threat,” and that China must speed up its currency appreciation “if we want to avoid creating the conditions for a new crisis.”

On Wednesday, Treasury Secretary Timothy F. Geithner also stepped up pressure on Beijing to make more progress to let its currency fluctuate.

In a speech at the Brookings Institution, Mr. Geithner said the United States would make currencies a major topic at international finance meetings this weekend in Washington. He also called on the International Monetary Fund to play a bigger role in monitoring how countries manage their currencies.

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