U.S. GDP Growth Rate Drops to 2.2%, Amazon Net Falls 35%

Arthi Gupta
27 Apr, 2012
New York City

U.S. indexes traded sideways after economy expanded less than estimated in the first quarter. Intuit agreed to acquire Demandforce for $423.5 million and Wells Fargo plans to buy Merlin Securities.

[R]10:25 AM New York – U.S. indexes traded sideways after economy expanded less than estimated in the first quarter. Intuit agreed to acquire Demandforce for $423.5 million and Wells Fargo plans to buy Merlin Securities.[/R]

U.S. indexes traded sideways in early trading after the U.S. economy slowed more than estimated in the first quarter. Procter & Gamble lowered full-year outlook and reported a decline in quarterly earnings.

The European indexes turned losses to gains after Italy successfully completed another short term bond offering but the yields rose. Spanish yields rose and unemployment jumped above 24%.

Standard and Poor’s downgraded Spanish credit ratings by two notches to ''''BBB+/A-2'''' from ''''A/A-1'''', citing further deterioration of the country''s public finances amid economic contraction and said the outlook is ''''negative'''' indicating more downgrades are likely.

Investors have largely learned to ignore the rating agencies moves after years of missteps and the rating actions are now considered lagging indicators.

The agency further said that Spain’s government will need to provide further fiscal support to the banking sector.

S&P estimates the Spanish economy to contract in real terms by 1.5% in 2012 compared to its previous forecast of a real GDP growth of 0.3% in 2012.

Adding to the country’s woes, Spain said its unemployment rate soared to 24.44% in the first quarter.

Asian stocks traded lower. The Bank of Japan expanded monetary stimulus program to ease economic growth concerns.

The Bank of Japan raised the total size of its asset purchase program by 5 trillion yen, which will take the total to 70 trillion yen by end-2013. The central bank boosted its risky asset purchase program by 10 trillion yen to 40 trillion yen.

The size of the total asset purchase program for end-2012 will remain at 65 trillion yen according to the central bank and also trimmed its separate program to provide funds of 5 trillion yen to banks on weak demand.

Samsung Electronics Co. Ltd., the South Korean conglomerate said first quarter net surged 81%, boosted by improved margins and strong sales of its Galaxy smartphones and the Galaxy Note mini tablet.

U.S. GDP Growth Eases

Gross domestic product in the U.S. rose at an annual rate of 2.2% in the first quarter compared to the 3% growth in the final quarter of 2011, according to data released by the U.S. Commerce Department today.

Exports of goods and services surged 5.4% in the first quarter, from the 2.7% growth in the fourth quarter. Imports of goods and services increased 4.3% in the first quarter compared with an increase of 3.7% in the fourth quarter.

Intuit to Acquire Demandforce

Intuit agreed to purchase Demandforce, a San Francisco-based company that helps small- and medium-sized businesses online.

The cash transaction is valued at approximately $423.5 million and is expected to add one to two percentage points to Intuit''s revenue growth in fiscal year 2013 and to be neutral to modestly dilutive for earnings per share in fiscal years 2012 and 2013 according to the company.

Wells Fargo to Buy Merlin Securities

Wells Fargo Securities, the capital markets and investment banking business of Wells Fargo & Co. announced an agreement to acquire Merlin Securities, LLC, a San Francisco and NYC-based prime brokerage services and technology provider. Terms of the agreement were not disclosed.

Earnings Review

Amazon.com, Inc. ((AMZN)), the online retailer said first quarter net sales rose 34% to $13.18 billion from $9.86 billion in the same quarter last year. Net income in the quarter declined 35% to $130 million or 28 cents per diluted share compared to net income of $201 million or 44 cents per share for the year-ago quarter.

Chevron Corporation ((CVX)), the integrated energy company said first quarter total revenues and other income advancing 0.6% to $60.70 billion from $60.34 billion in the year-ago quarter. Net income in the quarter rose 4.2% to $6.47 billion or $3.27 per share compared with net income of $6.21 billion or $3.09 per share the prior-year quarter.

Ford Motor Company ((F)), the automaker reported first quarter revenues slid 2.1% to $32.4 billion from $33.1 billion last year. Net income in the quarter plunged 45% to $1.40 billion or 35 cents per diluted share compared to net income of $2.55 billion or 61 cents per share a year-ago quarter.

Samsung Electronics Co., Ltd., the South Korean conglomerate reported first quarter total sales increased 22.40% to 45.27 trillion won from 36.99 trillion won last year. Net profit in the quarter surged 81% to 5.05 trillion won from 2.78 trillion won in the prior-year quarter.

The Procter & Gamble Company ((PG)), the consumer packaged goods company reported third quarter net sales increased 2% to $20.2 billion. Net earnings in the quarter fell 16% to $2.41 billion or 82 cents per diluted share compared with net earnings of $2.87 billion or 96 cents per share in the year-ago period.