U.S. Consumer Spending Rises; Stocks Up

Arthi Gupta
01 Oct, 2010
New York City

U.S. stocks gained after manufacturing in China expanded and sustained foreign investments in India. Personal spending in the U.S. rose more-than-expected in August. Sinopec agreed to invest $7.1 billion in Repsol

[R]9:35 AM New York – U.S. stocks gained after manufacturing in China expanded and sustained foreign investments in India. Personal spending in the U.S. rose more-than-expected in August. Sinopec agreed to invest $7.1 billion in Repsol’s Brazilian unit. Boeing delayed first delivery of 747-8 freighter.[/R]

World markets traded higher after China reported manufacturing expansion and India growth estimates were revised on better than expected monsoon rains and sustained international capital flows.

China''s manufacturing growth picked up in September, according to a survey by the Federation of Logistics and Purchasing. The official purchasing managers'' index rose to 53.8 in September from 51.7 in August. Foreign investment in India’s stocks reached $18 billion in the first eight months, exceeding the flows in the previous year.

The U.S. Commerce Department released a report today stating personal spending increased moderately in August. The spending increased 0.4% in August, matching the increase in July.

The Commerce Department said that personal income rose 0.5% in August after edging higher 0.2% in July.

Federal Reserve Chairman Ben Bernanke told the Senate banking committee that the Dodd-Frank Act is an important step forward for financial regulation in the United States.

He added in accordance with Dodd-Frank, ""the Federal Reserve and other financial regulatory agencies must supervise financial institutions and critical infrastructures with an eye toward not only the safety and soundness of each individual firm, but also overall financial stability.""

But on the other hand, Federal Reserve Bank of Cleveland President Sandra Pianalto said at a conference in New York City that the U.S. economy is showing some signs that it is on the mend, although the pace of recovery is not robust enough to bring down unemployment.

The Institute for Supply Management - Chicago released a report showing an unexpected acceleration in the pace of growth in Chicago-area business activity in September. The ISM - Chicago said its Chicago business barometer rose to 60.4 in September from 56.7 in August.

The United States imposed sanctions on a Swiss subsidiary of Iran''s state-owned oil company for its involvement in the Iranian petroleum sector. In addition, the U.S. government received commitments from four major European international energy firms to terminate their investments and avoid any new activity in Iran''s energy sector.

The oil companies that have pledged to end their investments in Iran''s energy sector are Total of France, Statoil of Norway, Eni of Italy and Royal Dutch Shell of UK and the Netherlands.

Repsol YPF SA, the Spanish oil and gas group and China Petroleum & Chemical Corp. or Sinopec announced the formation of an alliance worth $17.8 billion, probably Latin America''s largest private energy group.

The joint venture will be 60% owned by Repsol and 40% owned by Sinopec, which will also invest $7.1 billion in the company. Repsol Brasil''s assets are currently valued at $10.664 billion.

American International Group, Inc. announced a plan for full repayment to U.S. taxpayers, utilizing proceeds from asset dispositions. As per the agreement with the regulators, the insurer would fully repay to Federal Reserve Bank of New York and the AIG common stock would be exchanged with U.S. treasury holdings. The U.S. Treasury also agreed to exit ownership stake over a period of time.

According to the plan, the $49.1 billion Troubled Asset Relief Program or TARP shares would be exchanged with 1.655 billion shares of AIG common stock. In addition, AIG plans to issue 75 million warrants at $45 per share to common shareholders. Once the exchange is completed the Treasury would own 92.1% of the common stock of AIG. The company also noted that after the exchange is completed, the U.S. Treasury will sell its stake in AIG on the open market.

BP plc, the British energy giant agreed to pay a record $15 million fine to resolve environmental violations at its Texas City refinery, the U.S. Department of Justice and Environmental Protection Agency said on Thursday. The settlement addresses violations stemming from two fires that occurred at the refinery in March 2004 and July 2005, and a leak that occurred in August 2005.

Boeing Co. announced a change in its schedule for its commercial jet 747-8 Freighter, with the first delivery now expected in mid-2011. The company also announced steps to support the new schedule, including adding a fifth airplane to the flight-test fleet.

Rio Tinto Alcan announced that it would invest $140 million in a casting facility to produce value-added billet at its aluminum smelter in Straumsvik, Iceland, bringing total investment announced in recent weeks in ISAL to $487 million.

Principal Financial Group, Inc., the asset manager and life insurer announced that it will exit the medical insurance business, saying that the investment of additional capital into the rapidly changing business in order to offer competitive products did not make sense.

As part of the exit strategy, the company entered into an agreement with healthcare services provider UnitedHealth Group Inc. to renew medical insurance coverage for its customers as the business transitions within the next 36 months.

Hewlett-Packard Company named Léo Apotheker, as its President and Chief Executive Officer, effective November 1. Apotheker will succeed Cathie Lesjak, who was appointed interim CEO in August.

Paychex, Inc. announced the promotion of its Senior Vice President of Operations Martin Mucci as President and Chief Executive Officer, with immediate effect. Mucci succeeds Jonathan Judge, who resigned from the positions in July 2010 to pursue other interests.

Viacom, Inc. named James Barge as its Chief Financial Officer, effective October 1. Barge, who previously served as Executive Vice President, Controller, Tax and Treasury for the company, succeeds Thomas Dooley, who recently became the Chief Operating Officer of the company.

Yahoo! Inc. confirmed media reports that Hilary Schneider, Executive Vice President of the Americas region, will be leaving the company after a transition period. The company made the disclosure in a filing with the Securities and Exchange Commission.

According to the Wall Street Journal, Gymboree Corp., the children''s clothing retailer is exploring a possible sale of the company, and could be taken private by potential private-equity buyers, citing people familiar with the matter. The company is yet to comment on the report.

In yet another report, citing people familiar with the matter, the Wall Street Journal said that activist investor Carl Icahn bought a significant portion of Metro-Goldwyn-Mayer Inc. or MGM studio''s debt, which gives him about 10% of MGM''s outstanding debt. Also, Icahn is pushing the beleaguered film studio to merge with rival Lions Gate Entertainment Corp., where he is the largest shareholder, with nearly 33% holding.

Earnings Review

Accenture Plc ((ACN)), the technology outsourcing and consulting firm said fourth quarter revenues increased 5.8% to $5.83 billion from $5.51 billion in the same quarter last year. Net income in the quarter surged 75% to $445.5 million or 66 cents per diluted share, compared with net income of $254.7 million or 39 cents per share in the prior-year quarter.

Aehr Test Systems ((AEHR)), the memory test equipment maker reported first quarter revenues soared 69% to $2.2 million from $1.3 million in the prior-year quarter. Net loss generated in the quarter was $1.5 million or 17 cents per diluted share, compared to net income of $961,000 or 11 cents per share in the year-ago quarter.

AZZ incorporated ((AZZ)), the manufacturer of electrical products and a provider of galvanizing services said second quarter revenues rose 5% to $99.6 million, compared to $95.2 million for the same quarter last year. Net income in the quarter declined 13.5% to $9.6 million or 77 cents per diluted share compared with net income of $11.1 million or 89 cents per share last year.

DemandTec, Inc.((DMAN)), the business software and service provider stated second quarter revenue rose 3.03% to $20.39 million, compared to $19.8 million in last year period. Net loss in the quarter narrowed 6.5% to $2.9 million or 9 cents per diluted share, compared to a loss of $3.1 million or 11 cents per share in the prior-year quarter.

Lawson Software, Inc. ((LWSN)), the enterprise software provider reported first quarter revenues increased 3.4% to $174.7 million from $169 million last year, reflecting the growth in maintenance services. Net income for the quarter surged 60% to $9.6 million or 6 cents per diluted share compared with net income of $6.0 million or 4 cents per share a year ago.

Resources Connection, Inc. ((RECN)), the professional service provider reported first quarter revenue increased 4.6% to $123.71 million from $118.26 million last year. Net income for the quarter was $1.23 million or 3 cents per diluted share, compared to a loss of $7.19 million or 16 cents per share in the previous year.

SMART Modular Technologies, Inc ((SMOD)), the maker of electronic subsystems said fourth quarter revenues surged 119% to $218.7 million from $99.8 million from a year ago. Net income for the quarter was $17.0 million or 26 cents per diluted share, compared to a net loss of $0.3 million or a breakeven per share in the year-ago quarter.

Trio-Tech International ((TRT)), the provider of third-party semiconductor testing and burn-in services reported fourth quarter revenue tripled 197.4% to $12.874 million compared to $4.328 million for the fourth quarter of fiscal 2009. Net income in the quarter was $0.39 million or 12 cents per diluted share versus a loss of $0.65 million or 21 cents per share in the year-ago period.

Whirlpool Corporation ((WHR)), the home appliance maker lowered its annual earnings forecast after including the $91.8 million antitrust fine to be remitted by its indirect subsidiary Embarco for conspiring to fix prices of compressors.

Whirlpool now expects full-year 2010 earnings in a range of $7.80 to $8.30 per share, down from the prior range of $9.00 to $9.50 per share.