Wall Street Opens Higher after Spanish Deal

Arthi Gupta
10 Jul, 2012
New York City

U.S. indexes traded higher in cautious trading after ministers in the euro zone agreed to release bailout funds of

[R]9:35 AM New York – U.S. indexes traded higher in cautious trading after ministers in the euro zone agreed to release bailout funds of €30 billion. China reported slowing international trade data. Alcoa swung to quarterly net loss.[/R]

U.S. indexes edged higher in early trading after euro zone ministers agreed to accelerate the release of €30 billion to Spain and also reiterated their commitment to buy more bonds through the bailout fund.

European indexes gained after ministers extended the deadline for the “correction of the excessive deficit” in Spain by one year to 2014 and also reiterated a commitment to permitting the bailout fund buy government bonds.

The ministers agreed to release €30 billion to banks in Spain by the end of this month through the European Financial Stability Facility. Final approval is expected by July 20.

The yields on Spain’s benchmark 10-year bonds declined 17 basis points to 6.90%. The small declines in Spanish bond yields after the agreement announcement indicated market remained cautious and the yield could spike up again above 7%.

Separately, the European Central Bank signed an agreement with the ESFS, the existing bailout fund to act as its agent for buying government bonds on the secondary market.

The unemployment rate in the 17-nation euro zone increased to an all-time high of 11.1% in May, an increase of 0.1 percentage point from April. The latest data released by the Organization for Economic Cooperation and Development also noted rate of 24.6% in Spain, 15.2% in Portugal and 14.6% in Ireland.

The rates for Portugal and Ireland were unchanged from April and increased 0.3 percentage points in Spain.

The OECD-wide jobless rate forecast to remain high at 7.7% in the fourth quarter of 2013, a new report from the Organization for Economic Co-operation and Development showed today.

The youth unemployment rate was just over 16% and the jobless rate in OECD countries remained steady at 7.9% in May.

For the U.S., the agency projects a gradual decline in the jobless rate for the fourth quarter of 2013 to 7.4%.

Asian markets edged lower dragged by reports showing Chinese export growth eased in June.

China''s exports grew 11.3% from a year ago in June compared to the 15.3% growth recorded in May, data from the General Administration of Customs showed.

Annually, imports rose 6.3% in June after a 12.7% gain in May.

The trade surplus increased to $31.73 billion in June following the surplus of $18.70 billion recorded in May.

Intel to Buy Stake in ASML

Intel Corporation is participating in a multi-party development program with ASML Holding N.V. to accelerate the development of 450-millimeter wafer technology and extreme ultra-violet lithography.

Intel commits €829 million or approximately $1.0 billion to ASML''s research and development programs and will also initially purchase 10% of pre-transaction issued shares of ASML for €1.7 billion or $2.1 billion.

The chipmaker also commits to purchase an additional 5% of post-transaction issued shares, if it wins shareholder approval for €838 million or $1.0 billion.

Intel will then hold a total of 15% of ASML''s issued shares. Total R&D funding and equity investment agreements are €3.3 billion or approximately $4.1 billion

Earnings Review

Advanced Micro Devices, Inc. ((AMD)), the chipmaker estimated second quarter revenue to decline 11% sequentially.

Alcoa Inc. ((AA)), the aluminum producer said second quarter sales fell 9% compared with second quarter a year ago t $6 billion. Net loss in the quarter swung to $2 million or breakeven per share compared to net income of $322 million or 28 cents per share for the year-ago quarter.

Helen of Troy Limited ((HELE)), the personal care products maker reported first quarter net sales revenue increased 10.6% to $300.21 million from the same period of the prior year. Net income for the quarter fell 4.6% to $23.47 million or 74 cents per diluted share from $24.61 million or 78 cents per share in the prior year first quarter.

The Shaw Group Inc. ((SHAW)) stated third quarter revenues improved 7% annually to $1.6 billion. Net loss narrowed 77% to $16 million or 24 cents per diluted share compared to a net loss of $70 million or 89 cents per share last year.

Wolverine World Wide, Inc. ((WWW)), the footwear and apparel marketer reported second quarter revenue increased 0.8% from a year ago quarter to $312.7 million. Net earnings for the quarter declined 14% t0 $20.5 million or 42 cents per diluted share from $23.96 million or 48 cents per share a year before.