U.S. GDP Growth Slowed to 1.3%; Chevron Earnings Surge

Arthi Gupta
29 Jul, 2011
New York City

U.S. indexes declined after GDP expanded at a slower pace of 1.3% in the second quarter. The debt ceiling impasse continued after the Republican lawmakers delayed a critical vote yesterday. Merck plans to cut up to 13,000 positions by the end of 2015.

[R]9:55 AM New York – U.S. indexes declined after GDP expanded at a slower pace of 1.3% in the second quarter. The debt ceiling impasse continued after the Republican lawmakers delayed a critical vote yesterday. Merck plans to cut up to 13,000 positions by the end of 2015.[/R]

U.S. indexes edged lower after Republican lawmakers cancelled a critical vote on House Speaker John Boehner's bill for raising the U.S. debt ceiling. The bill is expected to be brought to the floor later today as Boehner needs six more votes to pass the bill.

Boehner on a dramatic Thursday failed to garner enough support for his negotiated bill with President Barack Obama to cut spending by $3 trillion and raise debt limit in two steps.

The U.S. is only three days away from a debt default that could slow the incipient economic recovery and raise rates. The irresponsible lawmakers are largely concerned about their election prospects a year from now rather than the fiscal future of the U.S. and world economy.

Asian markets fell after a deadlock on the U.S. debt ceiling continued and mixed economic data.

European indexes declined after Moody's Investors Service today placed Spain's Aa2 government bond ratings on review for possible downgrade. The rating downgrade will be limited to one notch, the agency said.

The bond yields on 10-year Spanish bonds rose to 6.16% and Italian bonds inched higher to the record level since the creation of the euro.

Euro-zone annual inflation slowed to 2.5% in July and German retail sales surged 6.3% in June.

U.S. GDP Rises

U.S. gross domestic product expansion slowed to 1.3% annual rate in the second quarter of 2011 compared to the first quarter revised lower growth of 0.4%, according to data released by the U.S. Commerce Department today.

Growth for the first quarter had previously been estimated at 1.9%.

The Commerce Department also revised the data during the times of recession in 2008 and 2009.

For 2007-2010, real GDP decreased at an average annual rate of 0.3% compared to previous estimates of increase at an average annual rate of less than 0.1%.

From the fourth quarter of 2007 to the first quarter of 2011, real GDP decreased at an average annual rate of 0.2% compared to previous estimate of an increase at an average annual rate of 0.2%.

The percent change in real GDP was revised down 0.3 percentage point for 2008, was revised down 0.9 percentage point for 2009, and was revised up 0.1 percentage point for 2010.

Yahoo! Deal on Alipay

Yahoo! Inc., Alibaba Group, and SoftBank signed an agreement in which Alibaba Group would continue to participate in Alipay's future financial performance, including a future IPO or other liquidity event.

Yahoo! said Alibaba Group would receive no less than $2 billion and no more than $6 billion in proceeds from an IPO of Alipay or other liquidity event.

CA Technologies Buys Watchmouse

CA Technologies agreed to acquire privately-held Watchmouse B.V. Terms of the transaction were not disclosed.

Earnings Review

Amgen, Inc. ((AMGN)), the independent biotechnology medicines company reported second quarter total revenue increased 4% to $3.96 billion from $3.80 billion in the second quarter of 2010. Net income in the quarter fell 2.5% to $1.17 billion compared to net income of $1.20 billion last year. However, earnings per share for the latest quarter remained unchanged at $1.25.

Chevron Corporation ((CVX)), the integrated energy company said second quarter sales and other operating revenues increased 31% to $66.67 billion from $51.05 billion in the year-ago period. Net earnings in the quarter rose 43% to $7.7 billion or $3.85 per share compared with net earnings of $5.4 billion or $2.70 per share last year.

Merck & Co., Inc. ((MRK)), the drugmaker reported second quarter total sales increased 7% to $12.15 billion from $11.35 billion in the same quarter last year. Net income in the quarter surged 169% to $2.02 billion or 65 cents per share compared to net income of $752 million or 24 cents per share in the prior-year quarter.

Merck noted that it remains on track to achieve its goal of $3.5 billion in annual cost synergies by the end of 2012 and an additional 12% to 13% reduction in workforce of up to 13,000 positions by the end of 2015.

MetLife, Inc. ((MET)), the insurer stated second-quarter total revenue rose 21.3% to $17.1 billion, compared to $14.1 billion last year. Net profit in the quarter declined 21% to $1.2 billion or $1.13 per share compared to net profit of $1.52 billion or $1.84 per share last year.

Samsung Electronics Co., Ltd. ((SSNLF.PK)), the South Korean conglomerate reported second quarter total sales increased 4% to 39.44 trillion won from last year's 37.89 trillion won. Net profit in the quarter declined 18% to 3.51 trillion won from 4.28 trillion won in the prior-year quarter.