Market Snapshot May 8, 2009, 4:25PM EST

Stocks Finish Broadly Higher

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Royal Bank of Scotland (RBS), now 70% state-owned, fell to a slim January-March loss after bad debts quadrupled to 2.9 billion pounds and it took a 2.1 billion pound writedown on risky assets. "We expect credit conditions to continue to deteriorate over the next few quarters consistent with these trends and that there will be a slowdown in financial market activity compared with the very buoyant conditions seen in the first quarter," Chief Executive Stephen Hester said. He said bad debts this year will be at least four times the first-quarter level, so over 11.4 billion pounds, more than 50% above last year's level.

Meanwhile, Germany's Commerzbank made an 861 million euro loss in the quarter, after a 1.2 billion euro charge from the investment bank and a 54 million euro charge from its commercial real estate unit. The Frankfurt-based bank which has been hit by writedowns on debt products related to the U.S. residential mortgage market unveiled bullish targets as part of a planned overhaul, which included a reshuffle of its board.

In economic news Friday, U.S. nonfarm payrolls fell 539,000 in April, while the unemployment rate jumped from 8.5% to 8.9%. The market consensus forecast had called for a 625,000 decline in payrolls and an unemployment rate of 8.9%, although the numbers had moderated after the release of the ADP employment estimate Wednesday.

Job losses remain concentrated in construction (down 110,000) and manufacturing (down 149,000). Service jobs dropped 269,000, despite a 72,000 rise in the government workforce. The average workweek was unchanged at 33.2 hours, while average hourly earnings rose only 0.1%. However, the March job drop was revised to 699,000 from the 663,000 reported last month.

Inventories held by merchant wholesalers fell 1.6% in March, while sales were down 2.4%. The inventory decline was much bigger than the 0.5% expected by the market. The inventory/sales ratio rose to 1.32 months from 1.31 in February and 1.12 a year ago. Auto inventories (imported cars, since domestic are considered retail inventory) fell 5.0%.

"The drop suggests a drop in imports, since wholesale inventories (especially autos) are dominated by imported goods," says S&P chief economist David Wyss. "The impact on U.S. GDP is thus limited."