US FINANCIAL MARKET
U.S. Stocks Fluctuate at the Open amid Facebook, Caterpillar Results
- The Standard & Poor’s 500 index rose to an all-time high yesterday, as Apple boosted technology companies and health-care shares rallied amid earnings.
- The S&P 500 has advanced 7.5 % this year amid better-than-estimated corporate results and central-bank support.
- Profits at S&P 500 members probably rose 6.2 % in the second quarter, while sales gained 3.3 %.
- The index trades at 18.4 times the reported earnings of its members, the highest since 2010.
- Facebook jumped 5.2 % after saying second-quarter sales surged 61 %.
- AT&T dropped 1.3 % as earnings missed forecasts.
- Caterpillar sank 2 % after forecasting full-year profit that fell short of estimates.
- Qualcomm declined 6.5 % after forecasting quarterly profit that may trail projections.
- Global equities advanced today after reports showed euro-area manufacturing and services grew this month while Chinese factory activity rose to an 18-month high in July.
Facebook Posts Second-Quarter Revenue, Profit Topping Estimates
- Facebook’s revenue surged 61 % in the second quarter, fueled by mobile advertising.
- Sales rose to $2.91 billion for the period from $1.81 billion a year earlier, topping the average analyst estimate of $2.81 billion.
- Facebook’s costs and expenses in the quarter increased 22 % to $1.52 billion.
- Facebook reported profit that more than doubled. Net income rose to $791 million from $333 million a year earlier.
- Promotions on wireless devices accounted for 62 % of advertising sales. That was up from 59 % in the prior period and from almost nothing at the time of the company’s 2012 IPO.
- Facebook accounted for 5.8 % of worldwide digital ad revenue in 2013, up from 4.1 % in 2012, according to EMarketer Inc.
- Digital ad spending worldwide rose 14.8 % to $120 billion last year and is projected to reach $140 billion this year.
- Facebook said it now has 1.32 billion monthly active users, up from 1.28 billion in the prior quarter, with 654 million using the product daily on mobile phones.
- Revenue per user was $2.24, up from $2 in the prior quarter and $1.60 a year earlier.
AT&T Misses Earnings Estimates as Customers Shift to Phone Financing
- The second-largest U.S. wireless carrier said sales rose 1.6 % to $32.6 billion, below the $33.2 billion average estimate.
- Net income slid to $3.5 billion from $3.8 billion a year earlier.
- The company added more than 1 million monthly wireless subscribers.
- That surpassed the 816,000 average of analysts’ estimates, though it fell short of Verizon’s gain of 1.4 million.
- AT&T’s additions included about 700,000 smartphone subscribers, compared with Verizon’s 304,000 new phone subscriptions. About half of the smartphones AT&T sold were through Next plans.
- The average monthly wireless-phone bill fell to $62.28 from $67.49 a year earlier.
- AT&T’s wireless-service profit margin expanded 0.2 percentage point from a year earlier to 42.6 %.
- In AT&T’s landline video-and-broadband business, called U-verse, the company added 488,000 Internet users and 190,000 video subscribers. That compared with 641,000 U-verse Internet customers and 233,000 TV customers added a year ago.
Union Pacific Profit Meets Estimates as Recovery Spurs Freight
- Union Pacific posted second-quarter profit that matched analysts’ estimates as an economic rebound drove cargo demand and boosted sales to a record.
- Net income rose 17 % to $1.3 billion from $1.1 billion a year earlier.
- Sales increased 10 % to a record $6.02 billion.
- Union Pacific’s carloads rose 8.2 % during the quarter.
- Gains were led by shipments of agriculture and general merchandise known as intermodal.
- It joined CSX and Norfolk Southern in posting record quarterly revenue.
Qualcomm’s Profit Hurt by Dispute over China Royalties
- Qualcomm shares fell as much as 7 %.
- Qualcomm’s disclosure signals an escalation of its challenges in China, a market the company has been touting as a main driver of future earnings growth.
- Qualcomm is in a dispute with a large customer over license revenue, and other customers are under-reporting the amount of phones sold that they should have paid license fees on.
- Qualcomm predicts industrywide shipments of 1.3 billion 3G and 4G mobile devices in 2014. Of that total, the company estimates that customers will report 1.04 billion to 1.13 billion units as the basis for license revenue calculations, meaning Qualcomm won’t get paid for the technology on as many as 260 million phones this year unless it can solve the disputes and sign up new licensees.
- Third-quarter net income rose 42 % to $2.24 billion.
- Sales rose 9 % to $6.81 billion, only the second time quarterly revenue has increased less than 10 % since 2010.
3M Profit Matches Estimates amid Emerging Markets Focus
- Net income rose 5.8 % to $1.27 billion from $1.2 billion a year earlier.
- Total sales climbed 4.9 % to a record $8.13 billion as revenue rose across all business lines and geographic regions. Analysts had estimated an average of $8.08 billion.
Caterpillar Sees No Sign of Upturn in Mining Industry
- Full-year sales and earnings fell short of analysts’ estimates as it said there’s no sign of an upturn in the industry in 2014.
- Mining companies have cut billions of dollars of capital spending amid surplus commodities production and a drop in prices for coal, iron ore and other metals.
- Caterpillar said that the industry remains “weak” and order levels are still low.
- Caterpillar second-quarter sales dropped 3.2 % to $14.2 billion, trailing the $14.5 billion average estimate.
- Net income rose to $999 million from $960 million a year earlier.
Lilly Profit Beats Estimates on Sales of Diabetes Drug
- Second-quarter net income fell 39 % to $734 million from $1.21 billion a year earlier.
- Although revenue overall declined 17 % to $4.9 billion, Humalog sales jumped 11 % to $700.1 million, compared to analyst estimates of $682.7 million.
- Revenue for the antidepressant Cymbalta were $401.3 million in the quarter, beating estimates of $388.5 million.
- In December, Lilly lost exclusive marketing rights for the antidepressant Cymbalta, which had $5.08 billion in 2013 sales and is projected to sell $1.51 billion this year.
Bristol-Myers Tops Earnings Estimates on Drug Sales
- Net income for the quarter fell 37 % to $333 million from $536 million a year earlier.
Ford Profit Tops Estimates Europe Delivers Surprise Gain
- The second-largest U.S. automaker posted profit that topped analysts’ estimates as sales in China increased and the company reported its first profit in Europe in three years.
- Ford sales in China soared 35 % in the year’s first half to a record 549,256 vehicles, while deliveries rose 6.6 % in Europe. Ford reported its 21st consecutive profitable period, with net income of $1.3 billion compared with $1.23 billion a year earlier.
- Ford earned $42.3 billion in the last five years after losing $30.1 billion from 2006 to 2008.
- The company’s operating margin in North America improved to 11.6 %, from 10.6 % a year ago.
- Revenue was $37.4 billion compared with $37.9 billion a year ago.
GM’s profit falls on recall costs, victims’ compensation fund
- GM reported a much lower second-quarter profit due to numerous recalls and the expected cost of at least $400 million for a compensation fund for those killed or injured by a defective ignition switch linked to at least 13 deaths.
- GM’s revenue rose to $39.6 billion from $39.1 billion a year earlier, missing the $40.6 billion average estimate of six analysts.
- Net income fell to $278 million from $1.4 billion during the same quarter a year earlier.
American Airlines declares first dividend since 1980 as profit rises
- The carrier reported net income rose to $864 million from $220 million a year earlier, when the company was not merged.
US ECONOMY & POLITICS
Jobless Claims in U.S. Unexpectedly Drop to Eight-Year Low
- Jobless claims fell by 19,000 to 284,000, the fewest since February 2006 and lower than any economist surveyed by Bloomberg forecast.
- The four-week average of jobless claims, considered a less volatile measure than the weekly figure, decreased to 302,000, the lowest since May 2007, from 309,250 in the prior week.
- The number of people continuing to receive jobless benefits declined by 8,000 to 2.5 million, the fewest since June 2007.
U.S. factory activity expands in July: Markit
- Markit’s preliminary U.S. Manufacturing Purchasing Managers Index (PMI) was 56.3 in July, down from the June reading of 57.3 and below analyst expectations for a reading of 57.5.
- The output subindex dipped slightly, to 60.4 from 61 in June.
Sales of U.S. New Homes Fell in June after Large Revision
- Sales of newly built homes declined 8.1 % to a 406,000 annualized pace, the fewest since March and less than any economist surveyed by Bloomberg.
- The median price of a new home increased 5.3 % last month from a year ago to $273,500.
- Sales of new properties, which are tallied when purchase contracts are signed, are considered a more timely measure of the market than sales of previously owned dwellings, which are counted when a sale is final.
EUROPE & WORLD
Global economy starts second half on solid footing: PMIs
- China’s factory activity expanded at its fastest in 18 months.
- HSBC/Markit Flash China Manufacturing Purchasing Managers’ Index (PMI) suggested that government stimulus was working.
- It rose to 52 in July from 50.7 in June, and beating the consensus forecast of 51 in a Reuters poll.
Euro zone business on solid footing in July but firms cut prices – PMI
- Markit’s Composite Purchasing Managers’ Index (PMI) rose to 54.0 in July from 52.8, its highest since April.
- Europe PMI is based on surveys of thousands of companies across the region and a good early indicator of overall growth.
- Factory activity strengthened in Germany and contracted at the fastest pace this year in France.
TODAY in HISTORY
- Brigham Young and the first members of the Church of Jesus Christ of Latter Day Saints (Mormons) arrived at the Great Salt Lake (1847)
- Tennessee became the first Confederate state to be readmitted to the Union (1866)
- The U.S. Supreme Court unanimously ruled that President Richard Nixon had to turn over White House tapes to the Watergate special prosecutor (1974)
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