The Labor Dept. said that the third quarter productivity growth came as output rose by 4.2 percent while hours edged up only 0.1 percent. In the second quarter, output increased by 4.4 percent while hours rose by 2.2 percent.

The report also showed that third quarter unit labor costs unexpectedly fell 0.5 percent following downwardly revised growth of 1.8 percent in the second quarter. The decrease surprised economists, who had expected labor costs to increase by 1.6 percent.

The drop in unit labor costs came on the heels of increases in each of the previous four quarters and reflected a drop in labor costs in the durable goods sector. The decrease may help to offset some recent inflation concerns.

Hourly compensation rose at an annual rate of 3.6 percent in the third quarter compared to the 4 percent growth seen in the second quarter. Adjusted for inflation, hourly compensation fell 1.4 percent.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks finished mixed with bourses in Japan and Singapore closed for holidays. Today’s gainers were led by Australia’s All Ordinaries, rising 1.2% on gains from Westpac Banking Corp. South Korea’s Kospi rose 0.8%, supported by Samsung Electronics, while Hong Kong’s Hang Seng declined 0.1%.

European markets rallied to close higher on strong U.S. markets and earnings news from major companies like BMW, Unilever and Adidas-Salomon. Stocks were also supported by the European Central Bank’s decision to keep interest-rate steady. The German DAX surged 1.1%., the French CAC 40 rose 1.6%, and London’s FTSE 100 climbed 1.4%.

ENERGY, METALS, CURRENCIES

Crude oil traded over $60 a barrel on bargain-hunting. Light sweet crude December contract gained 75 cents to $60.50 a barrel on the Nymex. Heating oil added 3 cents to $1.8180 a gallon. Gasoline climbed 2 cents to $1.5950. Natural gas advanced 7 cents to $11.670 per 1,000 cubic feet. London Brent rose 74 cents to trade at $59.12.

Gold lost ground in Europe. In London gold traded at $460.50 per troy ounce, down from $461.75. In Zurich it was fixed at $460.25, down from $462.80. In Hong Kong the precious metal rose $3.50 to close at $464.75. Silver closed at $7.52, up from $7.49.

In European trading the U.S. dollar advanced against its major counterparts. The euro was quoted at $1.2009, down from $1.2060. The dollar changed hands at 116.91 yen, up from 116.80. The British pound was trading at $1.7745, up from $1.7750.

EARNINGS NEWS

MCI Inc. (MCIP: chart), telecom carrier, posted Q3 net income of 82 cents a share, up from a net loss of $10.65 a share in the year-ago period. Q3 Results reflected the continued impact of new services and cost-cutting initiatives started in 2004, the company said, as well as it incurred and recorded a $164 million tax reduction in Q3. The year-ago loss largely stemmed from $3.5 billion in impairment charges.

Goody''s Family Clothing, Inc (GDYS: chart), retailer, announced that sales advanced 6.8%, with same-store sales up 2.5%. The company expects to report a greater loss in Q3 than the net loss of 2 cents a share posted in the year-earlier period.

American Retirement Corp (ACR: chart), senior living communities operator, reported that it reversed to to a Q3 profit of 13 cents a share, from a loss of 27 cents a share in the same period last year. Sales rose 11.3%. The company predicts 2005 adjusted earnings in the range of 48 cents to 50 cents a share.

Aquila Inc (ILA: chart), electricity and natural gas utility operator, posted a Q3 loss of 20 cents, up from a loss of 44 cents share on 46% higher revenue. Aquila said its electric- and gas-utility businesses strengthened but earnings were cut by the costs of its remaining obligations related to its merchant business.

Cost Plus (CPWM: chart), discount home products retailer, reported Q3 same-store sales dropped 4.7% from the year-ago period. The company expects a loss of 12 cents a share, in line with the analyst estimate.

CVS Corp (CVS: chart), drugstore and pharmacy chain, reported that Q3 net profit advanced 37% to 30 cents a share from the year-ago period on 13.4% revenue growth, matching analysts’ forecasts.

Entertainment (HET: chart), casino operator, posted Q3 earnings of 91 cents a share, down vs. $1.07 a share in the same period last year despite revenue growth. Excluding non-recurring items, the company would have earned $1.01 a share, beating analyst estimate of 99 cents a share.

R.R. Donnelley & Sons Co (RRD: chart), printer, announced that Q3 net profit from continuing operations advanced 15% to 62 cents a share, compared with the year-ago period on 15% revenue growth. The company raised its guidance for fiscal-year operating earnings from continuing operations by 4 cents to $2.21 a share.

Sara Lee (SLE: chart), consumer products maker, posted Q1 earnings of 9 cents a share, down from 44 cents a share in the same period a year earlier on revenue decline, missing analyst expectations of 27 cents a share. If not for non-recurring items, the company would have earned 34 cents a share. For its Q2 the company expects earnings of 25 to 30 cents a share, down from analyst expectations of 32 cents.