U.S. Extends Global Markets Rally, Retail Sales Advance

Arthi Gupta
14 Sep, 2012
New York City

U.S. indexes extended gains for the second day after the Fed move sparked a global rally. U.S. retail sales and consumer prices rose but output fell in August. Western Digital lowered first quarter revenue forecast.

[R]10:20 AM New York – U.S. indexes extended gains for the second day after the Fed move sparked a global rally. U.S. retail sales and consumer prices rose but output fell in August. Western Digital lowered first quarter revenue forecast.[/R]

Global markets rallied after the Federal Reserve moved to lower chronic unemployment and with the help of unlimited bond purchase.

The monthly program of $40 billion was widely anticipated but the open ended nature of the plan surprised markets and lifted hopes for the global economic growth.

Markets in Europe opened strong and scaled up 1.8% and in Hong Kong surged to a 4-month high and in Tokyo advanced to a 3-month high and in India surged to a high last seen in February. The worldwide rally lifted markets in Sao Paolo, Toronto, London, Mumbai, Sydney and Tokyo.

In domestic economic data, U.S. retail sales rose more than estimated, consumer prices climbed and industrial production declined more than expected in August.

In the euro area, annual inflation increased to 2.6% in August but employment was stable in the second quarter.

U.S. Retail Sales, Consumer Prices Rise

U.S. retail sales rose more than estimated in August, according to data released by the U.S. Commerce Department.

Retail and food services sales for August, adjusted for seasonal variation and calendar rose 0.9% to $406.7 billion, from the previous month and 4.7% above August 2011.

Separately, the seasonally adjusted consumer price index for the U.S. rose 0.6% in August, the U.S. Bureau of Labor Statistics reported today.

The food index rose 0.2% in August after a 0.1% increase in July.

The energy index, which had declined in each of the four previous months, rose 5.6% in August. This was its largest increase since June 2009.

The index for all items less food and energy increased 0.1% in August, the same increase as in July.

U.S. Output Drops

U.S. industrial production declined more than expected in August, according to a report released by the Federal Reserve today.

Industrial production dropped 1.2% in August following a downwardly revised 0.5% increase in July.

G20 Economy Contracts

Gross domestic product growth in the G20 area slowed to 0.6% in the second quarter compared with 0.7% in the first quarter, the Organization for Economic Cooperation and Development said.

This marks the third consecutive quarter of slowing growth in the G20 area but masks diverging patterns across economies.

Earnings Review

Analogic Corporation ((ALOG)), the maker of advanced imaging and security systems reported fourth quarter revenue rose 12% to $151 million. Net income for the quarter increased to $12.1 million or 96 cents per diluted share compared with net income of $5.6 million 45 cents per diluted share a year-ago quarter.

For the full year, revenues rose 9% to $516.6 million compared with revenues of $473.6 million last year. Net income for the fiscal year soared to $43.1 million or $3.42 per diluted share compared with $17.8 million or $1.42 per diluted share last year.

The Home Depot, Inc. ((HD)), the home improvement retailer will record an after-tax charge of approximately $160 million or approximately 10 cents per diluted share in the third quarter as a result of seven big box store closings in China.

Western Digital Corp. ((WDC)), the computer hard disk maker said it will start paying quarterly cash dividends of 25 cents per share, and estimated first quarter revenue to be in the range of $3.9 billion to $4 billion compared with its prior expectation of $4.2 billion to $4.3 billion.