US FINANCIAL MARKET
Wall Street gains modestly at the open after two-day selloff
- U.S. equities retreated a second day yesterday amid growing investor concern that stocks have rallied too fast after benchmark indexes ended last week at all-time highs.
- The Fed will publish at 2 p.m. New York time minutes of its June 17-18 meeting, when officials trimmed monthly bond purchases to $35 billion.
- Recent data from employment to housing is indicating the world’s largest economy is recovering after the worst contraction in GDP since 2009.
- The S&P 500 has not had a drop of 10 % in more than two years. The gauge trades at a valuation of 18 times reported earnings, the highest since 2011 when it was in the middle of a 19 % slide, its biggest during the current five-year bull market.
Alcoa pledges finished products push as results beat Wall Street
- Releasing second-quarter results on Tuesday, Alcoa said it earned $138 million, compared with a loss of $119 million a year earlier.
- Sales were flat at $5.8 billion.
- Alcoa sees bigger aluminum deficit on China cutbacks.
Amazon Offers Authors E-Book Proceeds Amid Hachette Spat
- Amazon blocked pre-orders for some of Hachette’s books earlier this year.
- While physical book sales in the U.S. are projected to fall to $19.5 billion this year from $26 billion in 2010, e-book revenue is anticipated to jump more than eightfold to $8.7 billion, according to Forrester Research.
Apple Gives Up Dividend Advantage Over S&P 500
- Apple no longer provides a higher dividend yield than the Standard & Poor’s 500 Index.
- Apple ended yesterday’s trading at a 1.86 % yield, and the S&P 500 yielded 1.91 %.
- The main reason is Apple’s stock performance.
- Apple’s stock climbed 27 % from April 23, when the higher dividend was announced along with a 7-for-1 stock split, through yesterday. The S&P 500 gained 4.7 % in the same period.
Allergan Planning Cost Cuts amid Valeant Defense
- A broad restructuring plan is set to be outlined during Allergan’s earnings announcement later this month.
- The changes are among moves aimed at boosting profit in the coming months as well as forecasts for future years to convince shareholders that the company is better as a standalone investment.
- Allergan is battling criticism from Valeant and activist Ackman’s Pershing Square Capital Management LP as the hostile bidders seek a shareholder vote this year to oust most of the incumbent board to get a deal done.
PetSmart Activists Wave Cash Flow at LBO Firms: Real M&As
- Activists are trying to sell PetSmart before it gets to the point where it needs reviving.
- Same-store sales at the $6.8 billion pet-care company fell last quarter for the first time in at least a decade as competition with Amazon.com and other retailers intensified.
- PetSmart’s high free-cash-flow yield and low debt relative to earnings open up several ways to boost returns.
Emirates finalizes $56 billion order for 150 Boeing 777X planes
- The 777X is the latest version of Boeing’s best-selling widebody jet, a so-called mini-jumbo, which carries a list price of up to $320 million.
- The current versions are capable of seating up to 550 passengers in a single-class configuration.
- In a more typical three-class configuration, the jet family seats up to 386 passengers and has a range of up to 9,395 nautical miles.
- The deal includes purchase rights for an additional 50 airplanes which, if exercised, could increase the value to about $75 billion at list prices.
- It follows the surprise cancellation in June of a $16-billion order by Emirates to buy 70 of Airbus’ A350 aircraft, which delivered a blow to Airbus.
American, Southwest signal solid demand ahead of earnings
- American Airlines and Southwest Airlines forecast growth in an important revenue measure for the second quarter.
- Unit revenue, also known as passenger revenue per available seat mile, is expected to grow between 5.5 % and 6.5 %.
Citigroup may pay $7 billion to resolve U.S. mortgage probes
- Citigroup is close to paying about $7 billion to resolve a U.S. probe into whether it defrauded investors on billions of dollars’ worth of mortgage securities in the run-up to the financial crisis, a source familiar with the matter said on Tuesday.
- A settlement of around $7 billion for Citigroup would be higher than analysts had expected.
- JPMorgan Chase paid $13 billion in November to resolve a range of probes from the task force.
Shale boom confounds forecasts as U.S. set to pass Russia, Saudi Arabia
- Four years into the shale revolution, the U.S. is on track to pass Russia and Saudi Arabia as the world’s largest producer of crude oil, most analysts agree.
Uber Faces Challenges in NY with Lyft Debut, Price Caps
- Lyft said yesterday it will start offering ride-sharing services on July 11 in New York with 500 drivers, bringing more competition to Uber.
- Uber has been operating in the city since 2011.
- The company was valued at $17 billion in its latest financing round.
- Uber also reached an agreement with New York Attorney General Eric Schneiderman to limit its peak-pricing tactics and cap fees during emergencies, potentially restricting revenue.
US ECONOMY & POLITICS
Mortgage applications rose in latest week
- The MBA’sseasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, rose 1.9 % in the week ended July 4.
- Fixed 30-year mortgage rates averaged 4.32 % in the week, up 4 basis points from 4.28 % the week before.
EUROPE & WORLD
Carlos Slim bows to Mexico telecoms reform
- Slim’s America Movil said on Tuesday it is ready to divest assets in an unprecedented step to cut its market share in Mexican telecoms below 50 % and escape the burden of tougher regulations.
- America Movil is Latin America’s biggest telecoms company.
- The Mexican government hailed the decision, saying it was a direct result of its drive to improve competition.
- Investors also welcomed news of the divestiture. Shares of America Movil, which has about 70 % of Mexico’s mobile business and 80 % of its fixed line market, rose more than 5 % after markets opened on Wednesday.
TODAY in HISTORY
- Argentina formally declared independence from Spain (1816)
- The British Parliament proclaimed that as of Jan. 1, 1901, the six Australian colonies would be united at the Commonwealth of Australia (1900)
- Boxer Mike Tyson was temporarily banned from boxing for biting Evander Holyfield’s ear (1997)
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