Fed Lowered Growth Outlook; JPMorgan Up

Arthi Gupta, Mayank Mehta and Sanjay Barot
15 Jul, 2010
New York City

U.S. stocks gain after JPMorgan reported 76% rise in earnings. The Federal Reserve lowered U.S. economic growth forecast. U.S. Senate votes today on Financial Reforms Bill. U.S. weekly jobless claims fell 29,000 and inflation index declined 0.5% in June. Carlyle Group agreed to acquire NBTY for $3.8 billion.

[R]9:35 AM New York – U.S. stocks gain after JPMorgan reports 76% rise in earnings. The Federal Reserve downwardly revises growth forecast. Senate votes today on Financial Reforms Bill. U.S. weekly jobless claims fall by 29,000 and inflation down 0.5% in June. NBTY and Carlyle Group to merge in $3.8 billion deal.[/R]

U.S. stocks and European markets gain on better-than-expected earnings from JPMorgan but Asian markets declined after the Federal Reserve cut its growth forecast.

The minutes of the latest Federal Reserve meeting released on Wednesday show that members of the Federal Open Market Committee continue to anticipate a moderate recovery in economic activity albeit at a slower pace.

The FOMC said that the downward revision to its growth forecast reflects """"intensifying concerns among investors about the implications of the fiscal difficulties faced by some European countries.""""

The committee lowered its expectations for GDP growth in 2010 from 3.2% to 3.7% to 3.0% to 3.5%. Growth expectations for 2011 were changed from 3.4% to 4.5% to 3.5% to 4.2%. Expectations for 2012 remained unchanged at 3.5% to 4.5%.

Core inflation for 2010 is now expected to range from 0.8 to 1.0%. The expectations for 2011 and 2012 are at 0.9 to 1.3% and 1.0% to 1.5%, respectively.

The Senate is scheduled to vote on the Wall Street Reform bill after consideration of the conference report accompanying H.R.4173 today. This is the last and crucial stage before the financial reforms bill getting the presidential assent and becoming law.

However, support of three Senate Republicans becomes crucial for the regulatory-overhaul bill that envisages sweeping financial reforms in the United States.

The U.S. Congressional negotiators approved a final version of the bill on June 25, and the House of Representatives passed it by a 237-192 margin later.

The 2,300-page bill empowers the government to break up wavering companies if it is convinced that their possible failure would threaten the economy.

The proposed bill bans proprietary trading, and limits hedge-fund investment. It strengthens oversight of derivatives and creates consumer protection bureau at the Federal Reserve.

The U.S. Labor Department released that initial jobless claims were 429,000 for the week of July 10. This was down 29,000 from the previous week''s revised total of 458,000.

The Labor Department released a report today showing that producer prices fell with food and energy prices showing notable decreases in the month of June. The producer price index fell 0.5% in June following an unrevised 0.3% decrease in May.

The core producer price index edged up 0.1% in June after rising by 0.2% in the previous month, excluding the decreases in food and energy prices.

The foreclosure filings declined both year-over-year and sequentially in June, according to a report released today by RealtyTrac. However, foreclosure filings for the second quarter were slightly higher than in the year-ago period, although it declined 4% from the previous quarter.

Releasing its midyear 2010 U.S. Foreclosure Market Report, the default data provider said foreclosure filings, including default notices, auction sale notices and bank repossessions, were reported on 313,841 U.S. properties in June, down 2.81% from the previous month and a drop of 6.98% from June 2009. June was the sixteenth straight month when total number of properties with foreclosure filings exceeded 300,000.

NBTY Inc., a global manufacturer and marketer of nutritional supplements, announced the execution of a merger agreement, by which The Carlyle Group will acquire NBTY in a transaction valued at $3.8 billion.

As per the terms of the merger agreement, Carlyle will acquire all of the outstanding common shares of NBTY for $55.00 per share in cash, representing a premium of about 57% over NBTY''s average closing share price during the 30 trading days ended July 14.

NBTY also announced that its board has unanimously approved the merger agreement and recommended that its stockholders adopt the agreement with Carlyle. The transaction is expected to close by the end of 2010.

Commodities, Currencies and Yields

Dollar decreased against euro to $1.2787 and decreased against the Japanese yen to 88.00.

Crude oil increased $0.05 to $77.09 a barrel for a front month contract, natural gas edged higher $0.01 cents to $4.31 per mBtu and gasoline increased 0.490 cents to 207.14 cents.

Gold increased $5.20 in New York trading to close at $1,212.20 per ounce, silver closed higher $0.055 to $18.34 per ounce and copper for the front month delivery increased 0.400 cents to $3.01.

Yields on 10-year U.S. bonds increased to 3.04% and on 30-year U.S. bonds traded at 4.02%.

Stock Movers

Eclipsys Corporation rose 1.7% after the health-care information- technology provider announced that a record date and a special meeting date have been established for Eclipsys stockholders to consider and vote upon a proposal to adopt the previously announced merger agreement with Allscripts-Misys Healthcare Solutions, Inc.

Mylan Inc. closed unchanged at $17.85 after the maker of generic drugs announced plans to acquire Bioniche Pharma Holdings Limited, a privately held, global injectable pharmaceutical company for $550 million in cash.

OPNET Technologies, Inc. plunged 11.7% after the management software maker said diluted earnings per share for the first quarter of fiscal 2011 are expected to be between 5 cents and 6 cents, within the previously guided range of 3 cents to 8 cents.

Peregrine Pharmaceuticals, Inc. rose 0.5% after the drug development company reported fourth quarter loss of 16 cents a share.

Rubicon Technology, Inc. fell 0.6% after the maker of crystalline products was upgraded to “overweight” in new coverage at Piper Jaffray Cos.

Veeco Instruments Inc. fell 0.3% after the maker of gear for chipmakers and data storage was downgraded to “neutral” from “overweight” at Piper Jaffray Cos.

Vivus, Inc. rose 2.2% after the company is seeking Food and Drug Administration support to sell its drug, Qnexa, to adults to use once-a-day along with exercise and diet changes to slim down, according to a Reuters report.

Earnings Review

JPMorgan Chase & Co. ((JPM)), the financial services provider said second quarter revenues fell 2% to $25.10 billion from $25.62 billion a year ago. Net income in the quarter surged 76% to $4.8 billion or $1.09 per diluted share compared to net income of $2.7 billion or 28 cents per share a year ago.

Marriott International, Inc. ((MAR)), the hotel operator said second quarter revenues rose 8% to $2.77 billion from $2.56 billion a year ago. Net income in the quarter rose 221.6% to $119.0 million or 31 cents per diluted share compared to net income of $37.0 million or 10 cents per share a year ago.

Universal Forest Products, Inc. ((UFPI)), the wood-products maker said second quarter sales rose 24% to $638.6 million from $515.0 million a year ago. Net income in the quarter fell 15% to $13.7 million or 70 cents per diluted share compared to net income of $16.1 million or 83 cents per share a year ago.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 109.71 or 1.12% to 9,685.53, Hang Seng index in Hong Kong decreased 305.19 or 1.48% to 20,255.62 and CSI 300 index in China lower 45.09 or 1.70% to 2,608.52. ASX 200 index in Australia decreased 19.80 or 0.44% to 4,442.60. The FTSE Bursa KL Composite index in Malaysia closed lower 7.00 or 0.52% to 1,334.08.

The Kospi Index in South Korea decreased 6.72 or 0.38% to close at 1,751.29. SET index in Thailand closed higher 1.48 or 0.18% to 821.02 and JSE Index in Indonesia decreased 0.46 or 0.02% to 2,980.60. The Sensex index in India decreased 28.70 or 0.16% to 17,909.46.

Europe Markets Review

In London FTSE 100 Index traded higher 0.54 or 0.01% to 5,254.06, in Paris CAC 40 Index increased 7.65 or 0.21% to 3,640.63 and in Frankfurt DAX index traded higher 18.70 or 0.30% to 6,228.46. In Zurich trading SMI increased 6.95 or 0.11% to 6,339.23.