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US FINANCIAL MARKET

U.S. Stocks Decline at the Open as Amazon, Visa Results Miss Forecast

  • Amazon plunged 11 percent after trailing analysts’ predictions for the second successive quarter.
  • Visa sank 4.6 percent after lowering its full-year revenue forecast.
  • Data today showed orders for U.S. business equipment rose in June.
  • Investors have also been watching geopolitical tensions in the Middle East and Ukraine.

S&P 500 Earnings Top Estimates at 77% Pace Led by Ford

  • Starbucks, Ford, and American Airlines posted profits that exceeded analysts’ estimates.
  • Of S&P 500 companies that have reported so far, Facebook, Boeing, and Alcoa were among the 20 biggest positive earnings surprises.

Amazon Loss Widens as Bezos Pours Money into New Services

  • The world’s largest online retailer had a second-quarter loss of $126 million, wider than analysts’ $66.7 million average estimate and a $7 million loss a year earlier.
  • Sales climbed 23 percent to $19.3 billion, while operating expenses increased 24 percent to $19.4 billion.
  • CEO Bezos’s strategy since Amazon’s inception has been to invest heavily to expand and earn customer loyalty.
  • Amazon began posting quarterly losses in 2012 after being consistently profitable for almost a decade.
  • Amazon had earned only $274 million for all of 2013 on sales of $74.5 billion.
  • Looking ahead, Amazon projected sales of $19.7 billion to $21.5 billion for the current quarter. Operating losses are projected to be $810 million to $410 million.
  • Bezos is spending to take Amazon further away from its roots as an online seller of books.
  • The company is increasingly competing with large technology companies such as Apple, Google, Microsoft, and Samsung.
  • Piper Jaffaray’s analyst Gene Munster thinks fundamentals on Amazon’s long term margins are still intact.

Starbucks Profit Beats Estimates after Food Menu Boost Sales

  • The world’s biggest coffee-shop chain reported a 23 percent gain in quarterly profit after selling more food in the U.S., topping analysts’ estimates.
  • Net income climbed to $512.6 million from $417.8 million a year earlier.
  • Revenue jumped 11 percent to $4.15 billion in the period, which also surpassing estimates.
  • The company raised its forecast for fiscal 2014 profit.
  • Revenue will grow at least 10 percent in fiscal 2015, with earnings per share climbing as much as 20 percent, Starbucks said.
  • In May, Starbucks began selling grilled cheese, beef brisket baguettes and grilled-chicken sandwiches in 178 of its cafes. The chain plans to introduce new lunch fare nationwide in fiscal 2015.

Visa Lowers Revenue Estimates as Profit Beats Estimates

  • The world’s largest payments network said net income rose 11 percent to $1.36 billion from $1.23 billion a year earlier. That topped analysts’ estimates.
  • Total operating revenue rose 5.1 percent to $3.16 billion.
  • Revenue for the fiscal year ending Sept. 30 will climb 9 percent to 10 percent from a year earlier, according to the statement. That’s down from an April forecast of 10 percent to 11 percent.
  • Card spending rose 11 percent to $1.2 trillion.

Lear easily beats Wall St earnings expectations

  • Maker of auto seats and electrical power systems beat Wall Street’s earnings expectations for the second quarter and increased its full-year outlook.
  • Net income rose to $148.5 million from $137.3 million a year earlier.
  • Lear said revenue for the quarter was $4.59 billion, which exceeded expectations of $4.44 billion.
  • The company said it expected sales for the year to range from $17.6 billion to $17.9 billion. It had previously forecast $17.2 billion to $17.7 billion.

Lower printer sales hurt Xerox’s revenue

  • Net income fell to $266 million for the quarter from $271 million a year earlier.
  • Revenue fell to $5.29 billion from $5.39 billion a year earlier.

Facebook goes express to mega-cap status – now valued more than AT&T, Coke

  • Now the company’s $190 billion market value makes it bigger than such bellwethers as Coca-Colaand AT&T.
  • It’s not a member of the Dow industrials, but if it were, it would be larger than two-thirds of that index’s 30 members.
  • Apple, the S&P 500’s most valuable company, needed nearly three decades before its market value finally rose to more than $190 billion, surpassing that level in late December 2009.
  • Google’s move was swifter. The company went public in August 2004, and posted a closing market value of more than $190 billion for the first time in October 2007.

US ECONOMY & POLITICS

U.S. durable goods orders rebound, core capital goods rise

  • Durable goods orders increased 0.7 percent as demand increased from transportation to machinery and computers and electronic products.
  • Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, rebounded 1.4 percent after declining 1.2 percent the prior month.

California Water Prices Soar for Farmers as Drought Grows

  • After three years of record-low rainfall, 82 percent of the state is experiencing extreme drought.
  • Farmers in California’s Central Valley, the world’s most productive agricultural region, are paying as much as 10 times more for water than they did before the state’s record drought cut supply.
  • Costs have soared to $1,100 per acre-foot from about $140 a year ago in the Fresno-based Westlands Water District, which represents 700 farms.
  • Agriculture consumes about 80 percent of all delivered water in the most-populous U.S. state.
  • California’s 80,500 farms and ranches supply everything from milk, beef and flowers to some of the nation’s largest fruit and vegetable crops, including almonds, avocados and strawberries.

EUROPE & WORLD

IMF Cuts 2014 Global Forecast After Slowdowns in China, U.S.

  • The world economy will advance 3.4 percent in 2014, the IMF said, less than its 3.6 percent prediction in April and stronger than last year’s 3.2 percent.
  • Next year growth will be 4 percent, compared with an April forecast for 3.9 percent, the fund said.
  • Growth in emerging markets is projected to be 4.6 percent this year, compared with an April forecast for 4.9 percent, the IMF said.
  • China’s economy is seen growing 7.4 percent this year, less than the 7.5 percent forecast in April.
  • Next year, growth in China will slow further, to 7.1 percent.
  • In Japan, the economy’s projected 1.6 percent advance this year may be followed by 1.1 percent from in 2015, “mostly due to the planned unwinding of fiscal stimulus,” the IMF said.
  • In the 18-country euro region, Italy and France were cut while Spain was revised higher to 1.2 percent, up from 0.9 percent.
  • U.S., which was cut to 1.7 percent from an April prediction of 2.8 percent because of a first-quarter contraction. The forecast for 2015 was unchanged at 3 percent.

European Stocks Fall as LVMH Leads Luxury Retailers Lower

  • LVMH fell the most in nine months after the world’s largest luxury-goods company also said demand weakened in Asia.

Emerging ETFs Turn Positive for 2014 as Outflows Reversed

  • Flows into the funds turned positive for the year yesterday, by $109 million, reversing investor flight that had drained as much as $13.9 billion in the first 2 1/2 months of the year amid financial crises in Ukraine, Argentina and Turkey.

Russia Unexpectedly Raises Key Rate Third Time on Ukraine

  • The central bank in Moscow increased its one-week auction rate to 8 percent from 7.5 percent.
  • None of the economists surveyed by Bloomberg predicted an increase, with 22 of 23 seeing no change and one forecasting a quarter-point cut.

Japan’s Export-Champ Days Are Left Behind, Chart Shows

  • Japan’s exports stagnated even as Germany, South Korea and the U.S. saw their shipments surpass levels registered from the 2008 credit crisis.
  • The CHART OF THE DAY shows the value of Japan’s exports is 23 percent below a March 2008 peak.
  • On a separate note, consumer prices excluding fresh food rose 3.3 percent from a year earlier after a 3.4 percent gain in May.
  • The increase matched the projection in a Bloomberg News survey of 32 economists.
  • A slowdown in electricity price gains to 9.9 percent from 11.4 percent in the previous month dragged on core inflation.
  • Fresh seafood prices rose 15 percent, and gasoline gained 10.6 percent.

TODAY in HISTORY

  • The United States tested the first underwater atomic bomb at Bikini Atoll (1946)
  • Puerto Rico became a commonwealth of the United States (1952)
  • The world’s first test-tube baby, Louise Joy Brown, was born in Lancashire, England (1978)
  • Soviet cosmonaut Svetlana Savitskaya became the first woman to walk in space(1984)
  • The supersonic airliner Concorde crashed after takeoff outside Paris (2000)
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