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US FINANCIAL MARKET

U.S. Stocks Rise at the Open as Intel to Time Warner Jump amid Deals

  • Merger and acquisition activity continued to thrive on Wall Street.
  • A partnership struck between IBM and Apple also helped boost indexes.
  • Time Warner surged 17 % as Rupert Murdoch’s 21st Century Fox made a takeover bid that was rebuffed.
  • Intel gained 5.9 % as its third-quarter sales forecast fueled optimism the personal-computer market is emerging from a two-year slump.
  • Apple and IBM rose at least 1.1 % after agreeing to develop applications for corporate users of wireless devices.
  • Bank of America dropped 2.2 %. The second-biggest U.S. bank said profit declined 43 % as it spent $4 billion to cover litigation costs.
  • Yahoo! fell 4.1 %. The U.S. Web portal reported second-quarter earnings and sales that fell short of analysts’ estimates.
  • Data today also showed China’s economic growth accelerated for the first time in three quarters.
  • U.S. industrial production climbed 0.2 % in June, capping the strongest quarter in almost four years.
  • Wholesale prices in the U.S. rose more than forecast in June, reflecting a jump in energy costs that is now abating.

Murdoch Is Open to Offer $75 Billion for Time Warner

  • Fox is willing to pay more than $85 a share.
  • Fox calculates the combined company could achieve more than $1 billion in cost savings.
  • A deal would reshape the media industry by giving the TV-and-film companies bargaining power in negotiations with cable operators such as Comcast and Time Warner Cable.

BofA Profit Declines on $4 Billion Costs for Litigation

  • Net income fell to $2.29 billion in the second quarter from $4.01 billion a year earlier.
  • Revenue dropped 4.3 % to $22 billion as expenses climbed 16 % to $18.5 billion because of the litigation costs.
  • U.S. prosecutors have asked for $17 billion to resolve probes into the lender’s sale of mortgage bonds before the financial crisis.
  • Bank of America has offered $13 billion to settle a probe into mortgage securities sold by the bank, the Wall Street Journal reported today.

Apple Puts IBM Rivalry to Rest with Corporate Sales Deal

  • The deal unveiled yesterday gives Apple access to an IBM sales force that will recommend Apple’s devices to customers in industries such as health care and banking, which have never been priorities for the consumer-focused iPhone maker.
  • A key element of the Apple-IBM deal is developing mobile-centric software tools for businesses.
  • IBM gets a boost in a long-running effort to sell software and services to companies seeking to manage workers’ smartphones and tablets.
  • The partnership helps Apple pursue a bigger slice of the market for corporate users of wireless devices.
  • Apple has already recognized the potential of the corporate market, touting that its devices are used by employees at 98 % of Fortune 500 companies. Deutsche Bank has almost 20,000 iPhones, while Siemens has 30,000, Apple said in April.
  • Apple and rival Samsung are seeking to further displace BlackBerry, which once held a strong grip on the corporate market.

Intel Rises as Sales Forecast Fuels PC-Market Optimism

  • Net income in the second quarter rose 40 % to $2.8 billion from $2 billion a year earlier.
  • Sales rose 8 % to $13.8 billion. Analysts had predicted sales of $13.7 billion.
  • Gross margin, or the percentage of sales remaining after deducting the cost of production, was 64.5 %.
  • The PC market has shown signs of improvement this year as corporate spending picked up and U.S. shipments returned to growth.
  • Revenue in the current period will be $14.4 billion, plus or minus $500 million. Analysts on average estimated sales of $14.1 billion.

CSX Sales Hit Record as Rail Cargo Shows Economy Strength

  • Record quarterly revenue from CSX, the largest railroad in the eastern U.S., signals a strengthening economy as companies shipped more goods, grain and domestic coal by rail.
  • CSX reported revenue of $3.24 billion in the second quarter.
  • Net income was $529 million compared with $521 million a year earlier.
  • CSX operates on about 21,000 miles of route track across 23 states east of the Mississippi River.
  • Coal rebounded during the quarter as the harsh winter and higher natural gas prices caused more utilities to burn more coal.
  • Shipments of crude oil produced in U.S. shale fields have also contributed to the increase of carloads.
  • The railroads, which usually don’t own oil tank cars, agreed in February to slow crude oil trains to 40 miles per hour from 50 mph in urban areas and install new sensors on oil routes to detect track defects.
  • The railroad is seeking to increase train speeds and boost on-time deliveries following a systemwide traffic jam caused in part by the harsh winter weather in the first quarter.

Yahoo to Keep More of Alibaba after IPO, Return Cash

  • Yahoo! said it would return at least half of the cash it reaps from Alibaba’s IPO to shareholders.
  • Yahoo’s sales, excluding revenue shared with partner websites, was $1.04 billion in the second quarter, missing analysts’ average estimate of $1.09 billion.
  • Net income was $269.7 million, down from $331.2 million a year ago.
  • Yahoo’s display ad sales fell 7 %.

Boeing Bounces Back at Show as Qatar Doubles 777-9X Order

  • Boeing, which lagged behind Airbus’s order haul on the first two days of the Farnborough Air Show, bounced back with a commitment from Qatar Airways to double planned purchases of the 777-9X model.
  • Qatar Airways said it wants to buy an additional 50 of the largest twin-engine model.
  • The value of the follow-up commitment is $18.9 billion, making it the single biggest deal yet at this year’s show.

 

US ECONOMY & POLITICS

Wholesale Prices in U.S. Increase More Than Forecast on Fuel

  • The 0.4 % increase in the producer price index (PPI) followed a 0.2 % drop in May.
  • Fuel costs climbed 2.1 %, the biggest gain since February 2013.
  • Crude oil prices have dropped this month as concerns about supply disruptions ease.
  • Compared with a year earlier, companies paid 1.9 % more for goods and services, matching the median forecast of economists.
  • The core measure, which strips out volatile food and fuel costs, climbed 0.2 %, matching the survey median.
  • The core index increased 1.8 % in the 12 months ended June.

Industrial Production in U.S. Climbed 0.2% in June

  • Industrial production climbed 0.2 % in June, capping the strongest quarter in almost four years and indicating manufacturers are providing a bigger spark for the U.S. economy.
  • The gain in output at factories, mines and utilities last month followed a revised 0.5 % advance in May.
  • Production rose at a 5.5 % annualized rate from April through June, the most since the third quarter of 2010.
  • The fastest pace of motor vehicle sales in eight years and a recent pickup in bookings for business equipment indicate further gains in output.
  • An improvement in overseas markets would also contribute to busier assembly lines and propel the economy in the second half of the year.
  • Manufacturing, which makes up 75 % of total production, grew 0.1 % in June, less than forecast.
  • In the second quarter, factory production advanced at a 6.7 % annualized rate, the fastest since the first three months of 2012.
  • Capacity utilization, which measures the amount of a plant that is in use, held at 79.1 % in June.

Homebuilder Confidence in U.S. Climbs to Six-Month High

  • The NAHB/Wells Fargo sentiment measure climbed to 53 from 49 in June.
  • The housing market is showing signs of improvement after higher mortgage rates and harsh winter weather stalled the recovery earlier this year.
  • A strengthening labor market, combined with wage gains and rising consumer sentiment, will probably support further progress in the industry
  • The measure of the six-month sales outlook rose to its highest level since September, climbing to 64 this month from 58 in June.
  • An index of current single-family home sales increased to 57, the best reading since January, from 53.

Yellen Watches American Paycheck for Signals on Shadow Slack

  • The central bank chief referred to the “slow pace of growth” in measures of hourly compensation in remarks to the Senate yesterday.
  • “You can’t have sustained inflation without sustained wage growth because then people have no purchasing power and higher prices just can’t stick,” said Aneta Markowska chief U.S. economist at Societe Generale.

 

EUROPE & WORLD

Japan’s Holdings of U.S. Treasuries Rose to Record in May

  • Japan’s holdings of U.S. government debt rose $10.4 billion to a record $1.22 trillion in May.
  • China’s holdings of Treasuries in May increased for the first time since January, gaining $7.7 billion to $1.27 trillion.

BRICS Agree on $50 Billion Bank with Something for Everyone

  • Leaders of the five BRICS nations agreed on the structure of a $50 billion development bank by granting China its headquarters and India its first rotating presidency.
  • The leaders also formalized the creation of a $100 billion currency exchange reserve.
  • Both initiatives, which require legislative approval, are designed to provide an alternative to financing from the IMF and the World Bank, where BRICS countries have been seeking more say.

China’s Economic Expansion Accelerates to 7.5%

  • Industrial production rose 9.2 % in June from a year earlier, topping the 9 % median estimate.
  • Fixed-asset investment excluding rural households increased 17.3 % in the first half from a year earlier. That compared with the median estimate of analysts for 17.2 % growth.

 

TODAY in HISTORY

  • The District of Columbia was established as the seat of the United States government (1790)
  • Russia’s Czar Nicholas II and his family were executed by the Bolsheviks (1918)
  • The first parking meters were installed in Oklahoma City (1935)
  • The first atomic bomb was tested in Alamogordo, N.M. (1945)
  • Apollo 11 took off on the first manned flight to the moon (1969)
  • Saddam Hussein became president of Iraq (1979)
  • John F. Kennedy, Jr., his wife Carolyn Bessette, and her sister Lauren, died in a plane crash near Martha’s Vineyard, Massachusetts (1999)

This information has been prepared from sources believed to be reliable, but no representation is being made as to its accuracy or completeness. The information provided should be used only as general information and is not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth in the material may not develop as predicted. All indices, such as the S & P 500, are unmanaged and may not be invested into directly. Sources: Reuters, Bloomberg.

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