Weak U.S. Economic Data Overshadow Positive Earnings

Bikram Pandey
19 Jul, 2012
New York City

U.S. indexes were flat after weak batch of economic data overshadowed generally positive earnings. Home sales fell in June and weekly unemployment claims rose. UK retail sales exceeded expectations and German lawmakers approved Spanish bailout with conditions.

[R]4:05 PM New York – U.S. indexes were flat after weak batch of economic data overshadowed generally positive earnings. Home sales fell in June and weekly unemployment claims rose. UK retail sales exceeded expectations and German lawmakers approved Spanish bailout with conditions.[/R]

U.S. indexes traded flat after weak economic data overshadowed earnings that were above expectations.

A day after two strong housing market reports, existing home sales declined. In addition, consumer confidence fell, unemployment claims increased and index of leading economic indicators fell more than expected and the Philadelphia region manufacturing contracted for the third month in a row.

The existing home sales declined 5.4% to a 4.4 million annual rate in June. The home sales surged to a record of 7.25 million in September of 2005 and plunged to a 3.39 million annual rate in July 2010.

International Business Machines Corporation ((IBM)) gained 4% after the computer peripherals maker reported total revenue in the second quarter ending in June slid 3.3% to $25.78 billion compared to $26.67 billion in the same period last year. Net income in the quarter rose 6% to $3.88 billion or $3.38 per diluted share compared to $3.66 billion or $3.04 per share a year ago.

IBM raised its expectations for full year 2012 earnings per share to at least $14.40 from at least $14.27.

Capital One second quarter net plunged 90% and eBay second quarter net jumped 144% to $692 million as more people shopped on its marketplace and used PayPal for online payment.

Johnson Controls net surged 17% and Morgan Stanley net swung to $564 million profit. Verizon second quarter net climbed 13.7% to $1.83 billion.

Fab.com, the online marketplace for design-centric goods, raised $105 million that valued the online retailer at $1 billion. At least five leading venture capitalists participated in the latest round highlighting the steady migration of customers to online.

In European trading, benchmark indexes generally closed higher. German lawmakers approved the Spanish bailout after Finance Minister Wolfgang Schaeuble assured lawmakers that Spain will remain liable for the bank aid and Bundestag will be involved in the next steps.

In voting, 473 parliament members backed the bill and 97 opposed.

Spain raised €2.98 billion but in secondary markets surged to a sixteen-year high. Veolia agreed to sell its U.S. solid waste business for $1.9 billion. Repsol agreed to divest its Chilean business for $540 million.

On the economic front, euro area current account surplus climbed in May. Swiss trade surplus rose in the second quarter. Dutch consumer sentiment improved in July but jobless rate increased in June.

The UK indexes were nearly flat as regulators around the world widen the Libor scandal investigation. UK gross mortgage lending declined but retail sales increased in June. Kingfisher slumped 2.6% on weak outlook.

Stocks in Japan closed higher in thin trading and the yen gained for the second day in a row against the dollar and the euro. Advantest and Tokyo Electron jumped after Intel lowered sales outlook below expectations.

Australian indexes, resource stocks and dollar advanced after oil futures rose for the seventh day in a row. The ASX 200 index increased 2% and the Australian dollar hit a new high against the euro and reached a high since May.

Commodities, Bonds and Currencies

The yield on 10-year bond traded higher to 1.51% and on 30-year bond increased to 2.61%.

The U.S. dollar inched lower to $1.227 to a euro and decreased against the Japanese yen to 78.59 yen.

Immediate delivery futures of Texas crude oil increased $2.54 to $92.41 a barrel and Brent crude gained $2.33 to $107.49, futures of natural gas fell 0.006 cents to $2.97 per mbtu and gasoline price increased 4.5 cents to 292.85 cents a gallon.

In metals trading, copper increased 5.5 cents to $3.52 per pound, gold gained $7.10 at $1,577.90 per ounce and silver added 6 cent to $27.16.