U.S. Economy Expands 3.4% in Q2

Elena
27 Jul, 2007
New York City

U.S. stock futures were pointing lower Friday, despite data showing better-than-expected gross domestic product and a drop in core inflation in Q2. The Commerce Department said that the U.S. economy was strong in Q2 as the drag from the housing sector lessened. GDP advanced 3.4%, slightly higher than the 3.3% growth expected by economists.

[R]9:00AM U.S. stock futures pointed lower, despite strong economic growth in Q2.[/R]

U.S. stock futures were pointing lower Friday, despite data showing better-than-expected gross domestic product and a drop in core inflation in Q2. The Commerce Department said that the U.S. economy was strong in Q2 as the drag from the housing sector lessened. GDP advanced 3.4%, slightly higher than the 3.3% growth expected by economists. However, although the GDP indicates a healthy economic growth, it also reduces the possibility of interest-rate cuts before the end of the year.

Among the few major companies posting quarterly results Friday, U.S. oil company Chevron ((CVX)) posted better-than-expected 24% earnings increase in Q2 on higher gasoline prices. Pharmaceuticam company Amgen ((AMGN)) also reported a stronger-than-forecast profit rise. Medco Health Solutions ((MHS)) lifted its 2007 profit outlook after reporting a 26% profit increase.

In merger-and-acquisition news, Medtronic ((MDT)) agreed to buy Kypkon ((KYPH)) for $3.9 billion, or $71 a share, a 32% premium to Kyphon's close on Thursday. Kyphon surged 27% in pre-market trading.

S&P 500 futures fell 8 points at 1,479.90 and Nasdaq 100 futures dropped 7 points at 1,994.00. Dow industrial futures dropped 69 points, retreating from the second-biggest drop this year. On Thursday, Dow Jones industrials dropped as much as 450 points before closing with a deficit of 311 points.


[R]8:15AM Medtronic agreed to buy Kyphon for $3.9 billion.[/R]

Medical technology group Medtronic Inc. ((MDT)) announced on Friday an agreement to buy Kyphon Inc. ((KYPH)) for $3.9 billion, or $71 a share. The transaction represents a 32% premium to Kyphon''s closing price of $53.68 on Thursday. The deal is expected to close in the first quarter of 2008. It is not expected to contribute to earnings in the first full year after the deal and provide a boost to the bottom line after that.

The acquisition is expected to boost the growth of Medtronic''s existing spinal business and enable it to provide physicians with a broader range of therapies, the company said. Separately Kyphon, a developer of medical devices to restore and preserve spinal function, said it earned 23 cents-a-share in Q2, up from 21 cents-a-share a year earlier.