S&P 500 Index Drops 4% on Europe Worries

Arthi Gupta
18 Aug, 2011
New York City

U.S. indexes traded lower after weekly jobless claims rose 9,000 to 408,000 and consumer prices rose more than estimated in July. Coca-Cola planned to invest $4 billion in China. Asahi Group agreed to acquire New Zealand-based Independent Liquor for N$1.525 billion.

[R]10:20 AM New York – U.S. indexes traded lower after weekly jobless claims rose 9,000 to 408,000 and consumer prices rose more than estimated in July. Coca-Cola planned to invest $4 billion in China. Asahi Group agreed to acquire New Zealand-based Independent Liquor for N$1.525 billion.[/R]

U.S. indexes declined after mixed economic data. The weekly jobless claims again rose above the key 400,000 level offsetting some good corporate earnings.

The European markets faced accelerated sell-off by the mid-day trading as investors’ fears mount on the growing possibilities of another economic decline. The market indexes in Europe dropped more than 2% and markets in Asia decline more than 1%.

The rating agency Standard & Poor''s today confirmed France''s AAA rating and stable outlook and said it is confident that the country would maintain its top rating held since 1975.

The Federal Reserve Bank of New York is intensifying its scrutiny of the U.S arms of many European banks, amid concerns that the banks are facing funding difficulties; the Wall Street Journal reported but did not say where it got the information.

Germany''s employment increased 1.4% from a year ago in the second quarter, the same pace as in the first quarter, Destatis said.

Japan recorded a trade surplus of 72.5 billion yen in July compared to a surplus of 68.6 billion yen in June. Exports fell 3.3% from a year ago compared to a 9.9% rise in imports.

U.S. Weekly Jobless Claims Rise

First-time claims for unemployment benefits rose 9,000 to 408,000 from the previous week''s revised figure of 399,000 in the week ended August 13th, according to a report released by the U.S. Labor Department today, with claims climbing back above the key 400,000 level.

The preliminary insured unemployment rate in the week ending August 6 was to 2.9% unchanged from the prior week''s unrevised rate of 2.9%.

U.S. Consumer Prices Up

The U.S. Labor Department said it consumer price index rose 0.5% in July following a 0.2% decrease in June.

The energy index increased 2.8% and gasoline index rose 4.7% in July.

Coca-Cola to Invest In China

The Coca-Cola Company, the world''s largest non-alcoholic beverage company, said that it will make an investment of $4 billion in China, along with its Chinese bottling partners, aiming for long-term sustainable growth in that country.

The investment will be completed in three years by 2015.

Asahi Group to Acquire Independent Liquor

Asahi Group Holdings Ltd., the Japan-based alcohol manufacturer agreed to acquire New Zealand beverage group Independent Liquor for N$1.525 billion or 97.6 billion yen. The deal is part of Asahi''s continuing efforts to expand overseas as the Japanese market contracts.

Foster''s Urges Shareholders to Reject SABMiller Offer

Foster''s Group Ltd.''s, the Australian beer maker urged its shareholders to reject a A$4.90 per share takeover bid by British brewer SABMiller plc saying the offer significantly undervalues the company and is highly conditional

Earlier, SABMiller said it will take its bid worth A$9.51 billion or about $9.97 billion directly to Foster''s shareholders, after the Australian company''s Board rejected an initial confidential proposal.

Cree Acquires Ruud Lighting

Cree, Inc., the Light emitting diode components maker acquired privately-held LED lighting company Ruud Lighting, Inc. for an estimated net cost of about $525 million, comprised of $372 million in cash, $211 million in stock, $85 million paid concurrently with the acquisition to retire outstanding debt, offset by tax benefits noted below.

The stock portion is comprised of 6,074,833 Cree shares.

The acquisition allows Cree to extend its leadership position and increase the adoption of energy-efficient LED lighting.

Earnings Review

Dollar Tree, Inc. ((DLTR)), the operator of discount variety stores stated second quarter consolidated net sales rose 11% to $1.54 billion, from $1.38 billion a year ago. Comparable store sales increased 4.7%,

Net income in the quarter increased 22% to $94.9 million or 77 cents per diluted share compared to net income of $78.0 million or 61 cents per share last year.

Limited Brands, Inc. ((LTD)), the women''s apparel and personal care products retailer said second quarter net sales rose 10% to $2.46 billion from $2.24 billion in the same quarter last year. Same-store sales for the quarter increased 9%.

Net income in the quarter climbed 29% to $231.2 million or 73 cents per diluted share compared to $178.7 million or 54 cents per share for the year-ago quarter.

NetApp Inc. ((NTAP)), the data storage management company reported first quarter revenues rose 26.3% to $1.458 billion, from $1.154 billion a year ago. Net earnings declined 7.4% to $139.5 million or 34 cents per diluted share compared to net earnings of $150.7 million or 40 cents per share last year.

Sears Holdings Corporation ((SHLD)), the retail conglomerate reported second quarter total revenues, from merchandise sales and services, declined 1.2% to $10.33 billion from $10.46 billion last year. Net loss in the quarter widened to $146 million or $1.37 per share compared to a net loss of $39 million or 35 cents per share in 2010.