U.S. Indexes Lower; Avaya Plans $1 Billion IPO

Arthi Gupta
08 Jun, 2011
New York City

The U.S. indexes traded lower ahead of the release of regional economy survey from the Fed. The World Bank forecasted slowdown in growth in developing economies. U.S. consumer credit rose more than estimated in April and mortgage applications declined. Avaya planned to file for $1 billion IPO.

[R]9:00 AM New York – The U.S. indexes traded lower ahead of the release of regional economy survey from the Fed. The World Bank forecasted slowdown in growth in developing economies. U.S. consumer credit rose more than estimated in April and mortgage applications declined. Avaya planned to file for $1 billion IPO.[/R]

World indexes retreated after comments from the U.S. Federal Reserve Chairman Ben Bernanke did not indicate any new measures to revive the faltering economy.

Bernanke estimated economy to rebound in the second-half but he also highlighted uneven recovery and persistent weakness in the labor market. He also stressed that the recent commodities price inflation is transitory and not expected to spill to the broader economy.

The United States economy should pick up in the second half of the year as the labor market gradually improves, the Federal Reserve Chairman Ben Bernanke said while speaking at the International Monetary Conference in Atlanta.

However, he indicated that the Fed is likely to leave accommodative monetary policy in place due to slower than expected economic growth.

The World Bank lowered its global growth forecast for 2011 to 3.2% from 3.3%, citing the political unrest in the North Africa and Middle East and the natural disaster in Japan.

The World Bank projects that as developing countries reach full capacity, growth will slow from 7.3% in 2010 to around 6.3% each year from 2011 to 2013.

High-income countries will see growth slow from 2.7% in 2010 to 2.2% in 2011 before picking up to 2.7% and 2.6% in 2012 and 2013 respectively.

The International Monetary Fund said today that Japan needs a more ambitious medium-term strategy to reduce debt and maintain confidence in its public finances as the economy continues to face headwinds from its biggest earthquake on record.

U.S. Consumer Credit Rises

The Federal Reserve released a report on Tuesday showing that U.S. consumer credit increased by $6.3 billion in April following a revised $4.8 billion increase in March.

Non-revolving credit, such as car loans, rose by $7.2 billion in April after increasing by $4.8 billion in March.

U.S. Mortgage Applications Drop

U.S. mortgage applications for the week ending June 3 declined 0.4% after falling 4% in the previous week, according to data from the Mortgage Bankers Association.

The MBA''s refinancing index rose 1.3%, as 30-year fixed mortgage interest rates dropped to 4.54%.

Avaya Plans to File for IPO

Avaya Inc., the telecommunications network equipment maker plans to file for an initial public offering that would seek to raise about $1 billion in the sale of 20% of the company, according to media reports on Tuesday.

Pfizer Plans Cost Cuts

Pfizer Inc. is seeking to cut an additional $1 billion in annual costs in order to make up for the impending revenue loss due to patent expiry of some drugs, The Wall Street Journal said on Tuesday.

This is on top of a near $3 billion in research and development expense cuts to be achieved by 2012.

Ford Foresees Strong Mid-Decade Sales Growth

Ford Motor Co., the automaker estimates its worldwide sales to increase by about 50% to about 8 million vehicles a year by the middle of the decade.

Ford said it expects its global automotive operating margins to increase to 8% to 9% by mid-decade from 6.1% in 2010, with North America operating margin in the 8% to 10% range at mid-decade.

The company also said small vehicles will account for about 55% of its total vehicle sales by 2020, with nearly one-third of sales coming from Asia Pacific Africa due to significant growth.

Earnings Review

ABM Industries Inc. ((ABM)), the provider of parking, security and janitorial services reported second quarter revenue soared 23.9% to $1.06 billion from $855.5 million last year. Net income in the quarter surged 65% to $14.2 million or 26 cents per diluted share compared to net income of $8.6 million or 16 cents per share last year.

Ciena Corporation ((CIEN)), the provider of communications networking equipment, software and services reported second quarter revenue surged 65% to $417.9 million from $253.47 million in the prior-year quarter. Net loss in the quarter narrowed 30.3% to $62.7 million or 66 cents per common share compared to a net loss of $90.0 million or 97 cents per share in the year-ago quarter.

Piedmont Natural Gas Company, Inc. ((PNY)), the energy services company stated second quarter operating revenues declined 17% to $392.57 million compared with $472.85 million in the previous year. Net income in the quarter improved 1.3% to $47.41 million or 66 cents per diluted share compared to net income of $46.82 million or 65 cents per share in the year earlier period.

Verint Systems Inc. ((VRNT)), the provider of Actionable Intelligence solutions and value-added services reported first quarter revenues climbed 2.1% to $176.3 million from $172.6 million last year. Net loss in the quarter narrowed 81.1% to $3.7 million or 10 cents per diluted share compared to a net loss of $19.6 million or 60 cents per share in the year-ago quarter.