Robust GDP Limits Pre-Market Losses

Elena
30 Aug, 2007
New York City

U.S. stock futures pointed to a weak opening Thursday after prior session

[R]09:00AM U.S. stock futures pointed to a lower opening. Robust GDP figures helped limit losses.[/R]

U.S. stock futures pointed to a weak opening Thursday after prior session’s strong rally on bargain-hunting. Market sentiment was hurt by growing uncertainty about how soon the Fed may cut interest rates. However, indexes pared losses after data showed that economy continued to grow in Q2 despite the subprime home-loan crisis.

The Commerce Department said that U.S. economy bounced back in Q2, growing at a 4% annual real growth rate, led by trade and business investment. The upward revision to GDP was attributed to an improved trade balance and to the biggest increase in investments in commercial buildings in 26 years. Consumer spending, government spending and inventories also contributed, while housing was the biggest drag. Economists had been expecting GDP in Q2 to be revised to 4.1% from the 3.4% growth rate originally estimated a month ago.

Lehman Brothers ((LEH)) also weighed on sentiment after cutting its profit estimates for 2007 and 2008. It also said that earnings at the U.S. biggest securities firms will be hurt by credit-market woes. Lehman reduced its earnings estimates for Wall Street's top investment banks. Following the news, Goldman Sachs Group ((GS)), Morgan Stanley ((MS)) and Merrill Lynch & Co. ((MER)) moved to the downside.

In corporate news, Motorola ((MOT)) shares rose 0.4% as Lehman Brothers upgraded its stock to overweight from equal-weight on recovery hopes. On the earnings news front, H&R Block ((HRB)) said its Q1 loss widened compared with last-year figures as it struggled with its mortgage lending arm. Mortgage giant Freddie Mac ((FRE)) posted Q2 net income drop of 45% mainly due to a higher provision for credit losses.

Another economic report showed that initial jobless claims unexpectedly rose in the latest week by 9,000 to 334,000 from last-week revised figure of 325,000. The 4-week moving average was 324,500, an increase of 6,250 from the previous week's revised average of 318,250.S&P 500 futures fell 7.9 points, below fair value. Dow Jones industrial average futures shed 58 points, and Nasdaq 100 futures fell 4 points.


[R]8:00AM Jewelry retailer Zale swung to profit in Q4, while Tiffany posted 10% profit drop inQ1.[/R]

Jewelry retailer Zale Corp. ((ZLC)) swung to a Q4 profit from a year-earlier loss although revenue and same-store sales fell 0.5%. Zale posted profit of $1.5 million, or 3 cents a share, compared with a loss of $27.4 million, or 57 cents a year ago. Company’s revenue declined to $488 million from $491 million. Analysts, on average, had expected a loss of 13 cents on $483 million of revenue. Looking ahead, for 2008 Zale forecast earnings $1.11 to $1.16 a share, with same-store sales higher by 1% to 2%.

Another jewelry retailer, Tiffany & Co. ((TIF)) reported Q1 net income drop of 10% to $37 million, or 26 cents a share, down from $41.1 million, or 29 cents a share last year. Excluding special charges, earnings from continuing operations were 45 cents. The company said quarterly net sales increased 19% to $662.6 million as same-store sales grew 17% in the U.S. and 7% internationally.

According the average analyst estimates, the jeweler was anticipated to post earnings of 34 cents a share and revenue of $643.4 million. For 2007, Tiffany predicted earnings from continuing operations of $2.64 to $2.69 a share on sales growth of 14%. In addition, the company said it had sold the land and business housing of its Tokyo flagship store for $328 million. As a result, it expects a pretax gain of 47 cents a share for Q3.