U.S. Consumer Prices Drop, Citi Net Rises 24%; News Corp Fallout

Arthi Gupta
15 Jul, 2011
New York City

U.S. indexes gained after consumer prices dropped 0.2% but industrial production rose in June. Icahn offered to acquire the remaining shares in Clorox in a deal valued at $12.6 billion. Citigroup quarterly net rose 24% despite a drop in revenue.

[R]10:30 AM New York – U.S. indexes gained after consumer prices dropped 0.2% but industrial production rose in June. Icahn offered to acquire the remaining shares in Clorox in a deal valued at $12.6 billion. Citigroup quarterly net rose 24% despite a drop in revenue.[/R]

U.S. indexes gained in early trading after better-than-estimated earnings and economic data.

These gains offset the negative impact after Standard & Poor''s placed U.S. sovereign debt rating ''AAA'' long-term and ''A-1+'' short-term on watch with negative implications.

European indexes traded lower ahead of the European Banking Authority tests results later today. Analysts estimate that at least ten banks may fail the latest stress tests of European banks. Stress tests results are expected later in the evening.

Italy''s lower house of parliament is due to vote later today on an austerity budget aimed at avoiding the need for an EU rescue passage. The austerity package includes cuts of €48 billion that was approved by the Italian senate yesterday.

In the UK, in another volte-face, Rebekah Brooks, the chief executive officer of News International resigned after bowing to pressure over the phone-hacking scandals that have rocked the UK.

There is a growing perception in the New York media circles that Chief executive of Dow Jones Les Hinton, publisher of the Wall Street Journal may be ensnared in the UK inquiry for his knowledge and role in phone hacking practice at the News of the World during his tenure between 1995 and 2007 when he ran the News International.

Rupert Murdoch controlled News Corp and the parent of Fox News is also looking to sell most of its print publications in the UK contrary to his denial today at a press conference.

The swift change of events at News Corp has left several long term shareholders even question if Rupert Murdoch is too old to run the company that has been at the forefront of several scandals in the last ten years.

Asian stocks traded mixed on global economic concerns.

U.S. Consumer Prices Drop

The U.S. Consumer Price Index dropped 0.2% in June from May and increased 3.6% from a year ago month, according to a report released by the U.S. Labor Department today. This was the first monthly decline in prices since June 2010.

The energy index fell 4.4% and gasoline index decreased 6.8% in June.

Separately, the New York Fed said its general business conditions index rose to a negative 3.8 in July for a second consecutive month from a negative 7.8 in June.

U.S. Industrial Production Rises

U.S. industrial production rose 0.2% in June after edging lower by a revised 0.1% in May, according to the Federal Reserve report released today.

Manufacturing production unchanged and mining increased 0.5%. Utility output increased 0.9% and capacity utilization for total industry unchanged at 76.7%.

BHP Acquires Petrohawk

BHP Billiton agreed to acquire U.S. oil and natural gas producer Petrohawk for $38.75 per share in an all-cash deal of $12.1 billion and a total enterprise value of approximately $15.1 billion, including the assumption of net debt.

The transaction would provide BHP Billiton with operated positions in U.S. based shale oil resource regions of the Eagle Ford and Haynesville shales, and the Permian Basin.

Icahn Bids for Clorox

Icahn Enterprises L.P. offered to acquire the remaining shares in Clorox Co. that it does not already own for $76.50 per share net in cash in a deal valued at $12.6 billion before fees and expenses.

Icahn already owns a 9.4% stake in the company.

Earnings Review

Citigroup Inc. ((C)), the financial services provider reported second quarter total revenues declined 7% to $20.62 billion from $22.07 billion in the year-ago period. Net income in the quarter soared 24% to $3.34 billion or $1.09 per share compared to net income of $2.70 billion or 90 cents per share in the previous-year quarter.

Genuine Parts Company ((GPC)), the automotive and industrial replacement parts distributor reported second quarter net sales grew 12% to $3.18 billion from $2.85 billion in the same quarter last year. Net income in the quarter rose 22% to $151.81 million or 96 cents per diluted share compared to net income of $124.47 million or 78 cents per share in the prior-year quarter.

Google Inc. ((GOOG)), the Internet search engine said second quarter revenues increased 32% to $9.03 billion from $6.82 billion in the same quarter of last year. Net income in the quarter surged 36% to $2.51 billion or $7.68 per share compared to net income of $1.84 billion or $5.71 per share in the prior-year quarter.

Mattel, Inc. ((MAT)), the toy manufacturer reported second quarter net sales grew 14% to $1.16 billion from $1.02 billion in the same quarter last year. Net income in the quarter surged 56% to $80.5 million or 23 cents per diluted share compared to net income of $51.6 million or 14 cents per share in the previous year.