Slower GDP Growth Drags U.S. Stocks

Darlington Musarurwa
30 Jul, 2010
New York City

U.S. stocks decline after GDP expanded at a slower pace 2.4% in the second quarter from the revised 3.7% rate in the first quarter. Bullard warns U.S. at risk for Japanese-style deflation. The IMF says massive policy response aids U.S economic recovery. Disney agrees to sell Miramax Films.

[R]9:35 AM New York – U.S. stocks decline after GDP expanded at a slower pace 2.4% in the second quarter from the revised 3.7% rate in the first quarter. Bullard warns U.S. at risk for Japanese-style deflation. The IMF says massive policy response aids U.S economic recovery. Disney agrees to sell Miramax Films.[/R]

U.S. stocks fell on weak economic data, Asian stocks decline amidst reports of higher unemployment in Japan and European markets tracked lower after the U.S. GDP report.

The U.S. economic activity rose at a slightly slower than expected pace in the second quarter, according to a report released by the Commerce Department today.

The gross domestic product increased at an annual rate of 2.4% in the second quarter compared to the revised 3.7% in the first quarter.

The price index of gross domestic purchases increased 1.3% in the quarter compared to 1.1% in the first. Change in private inventories added 1.05% compared to 2.64% in the first.

Aon Corp. and McKesson profit rises.

Aon Corp., the insurance brokerage services provider today reported 2.7% increase in the second-quarter profit driven by acquisitions, foreign currency effects and lower operating costs.

Revenue in the second quarter rose marginally 1% to $1.9 billion from $1.88 billion last year. Net income in the quarter edged higher 2.7% to $153 million or $0.54 per share from $149 million or $0.51 per share in the prior-year quarter.

McKesson Corp., the healthcare services and information technology company posted higher profit for the first quarter, largely driven by a solid performance at its distribution solutions segment.

Revenues for the first quarter rose 3% to $27.5 billion from $26.7 billion in the comparable quarter of the previous year. Net income in the quarter increased 3.4% to $298 million or $1.10 from $288 million or $1.06 in the year ago quarter.

St. Louis Federal Reserve President James Bullard cautioned that the Fed's current policies are putting the U.S. at risk for a Japanese-style deflationary outcome within the next several years.

Bullard wrote in a paper released on Thursday that a better policy response to a negative shock is to expand the quantitative easing program through the purchase of Treasury securities rather than keeping interest rates low for an extended period. He further noted a pledge to keep the Fed's federal funds target rate near zero could be detrimental, as it could cause a decline in prices.

The financial system in the U.S. strengthened but remained vulnerable to shocks, according to a report published by the Executive Board of the International Monetary Fund.

The multi-lateral lender said the U.S. economy is recovering from the worst financial crisis since the Great Depression mainly due to a massive policy response. However, the lender felt that economic recovery was slow by historical standards and the outlook remains uncertain.

The Executive Directors noted the economic recovery is still dependent on policy support, rising downside risks, and substantial long-term fiscal and financial-sector challenges. The lender stressed further decisive action is needed to achieve stable medium-term growth and limit risks of adverse international spillovers.

Walt Disney Co. announced the sale of Miramax Films to Filmyard Holdings LLC for over $660 million, subject to certain adjustments. Los Angeles businessmen Ron Tutor, Tom Barrack, Colony Capital LLC and other individuals are partners in Filmyard

The sale of Miramax Films includes rights in over 700 film titles, and also non-film assets, such as certain books, development projects and the ""Miramax"" name.

Disney said it expects this transaction, which is subject to certain regulatory approvals, to close between September 10, 2010 and the end of the calendar year.