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US FINANCIAL MARKET

U.S. Stocks Fall as Home Sales Drop Amid Overseas Crises

  • U.S. stocks fell as pending home sales unexpectedly declined in June.
  • Investors watched crises overseas before this week’s Federal Reserve policy decision.
  • Cummins fell 3.2 percent to lead industrial shares lower.
  • Trulia jumped 8.6 percent as Zillow agreed to purchase the company for $3.5 billion.
  • Family Dollar Storessoared 22 percent after Dollar Tree agreed to buy it.
  • Outside the U.S., international pressure mounted on Israel to end its three-week offensive in the Hamas-controlled Gaza Strip.
  • In Europe, President Vladimir Putin faces intensifying U.S. and European sanctions aimed at forcing him to help end the separatist war in neighboring Ukraine.
  • The Fed’s Open Market Committee (FOMC) will scale back its monthly asset purchases to $25 billion from $35 billion on July 30, according to economists surveyed by Bloomberg.
  • Three rounds of monetary stimulus from the Fed and better than-forecast corporate earnings have driven the S&P 500 up 192 percent from its March 2009 bottom.
  • The S&P 500 is trading at 18.1 timesearnings of its members, around the highest valuation for the gauge since 2010.
  • The S&P 500 has rallied about 7 percent this year.
  • About 78 percent of U.S. companies that have posted results this season have beaten analysts’ estimates for profit, while 66 percent exceeded sales projections.
  • Companies in the S&P 500 have reported an 11 percent gain in second-quarter earnings.
  • Should the pace continue, the gain would exceed all periods since the third quarter of 2011.

Buying on Dips Pays Most in Five Years as Stocks Rebound

  • Losing streaks in the U.S. equity market are getting shorter.
  • Declines in the benchmark gauge for American equity are lasting an average of 1.5 days in 2014, the shortest since at least 2009.
  • Rising earnings from Apple, Biogen, and Chipotle last week helped send the S&P 500 to its 27th all-time high this year. More than $15 trillion has been added to U.S. equity values as the S&P 500 almost tripled from a 12-year low in 2009.
  • The S&P 500 is about 25 percent above its peak in 2007.
  • The S&P 500 has gone without a 10 percent loss for 33 months, the third-longest stretch since 1990.

Dollar Stores Agree to $8.5 Billion Merger after Icahn Prodding

  • Dollar Tree will pay $74.50 a share in cash and stock, 23 percent above Family Dollar’s closing price at the end of last week.
  • The transaction fulfills the ambitions of two billionaire activist investors, Carl Icahn and Nelson Peltz, who had acquired major stakes in Family Dollar and pushed for a sale.
  • The deal will save Dollar Tree about $300 million annually.
  • Family Dollar shareholders will own 12.7 percent to 15.1 percent of the outstanding stock of Dollar Tree when the deal is done.

Zillow to Acquire Trulia for $3.5 Billion in Stock

  • Trulia shareholders will receive 0.444 shares of Zillow for each share of Trulia.
  • That’s equivalent to Zillow offering $70.53 a share for Trulia, or 25 percent above Trulia’s closing price of $56.35 on July 25.
  • The deal positions a unified Zillow and Trulia to capture a larger share of digital real estate ads as more people shift house hunting onto the Web and property agents deploy more marketing dollars onto the Internet.
  • Zillow and Trulia help house hunters find information on homes, generating revenue by selling advertising and charging real estate agents to place their listing prominently.
  • The companies estimate total spendingon real estate advertising in the U.S. is $12 billion a year, of which Zillow and Trulia together currently have less than 4 percent of the market.
  • Zillow’s annual revenue is expected to reach about $311 million this year, an increase of about 58 percent over last year.
  • Trulia’s revenue is expected to rise 76 percent this year to about $253 million, after more than doubling the previous year.

Ryanair Boosts 2015 Goal After Quarterly Earnings Double

  • Europe’s biggest discount carrier rolls out more routes and reduces unit costs.

HBO Pushes Web Expansion as Bewkes Battles Murdoch Bid

  • Jeff Bewkes is looking to the Internet to accelerate growth at his prized TV network, HBO.
  • The $49-a-month Internet Plus trialintroduced last year with Comcast is the model for a new service, said the people. The package is aimed at the 10 million U.S. broadband customers.
  • HBO is typically marketed as part of a pay-TV package that costs $100 a month or more.
  • While it posted its best growth in 17 years in 2013, about 70 million U.S. pay-TV homes don’t subscribe HBO.
  • HBO generated $1.79 billion in operating income last year, with profit surging 16 percent from 2012 and making the network one of Time Warner’s fastest-growing units. Revenue advanced 4 percent to $4.9 billion.
  • Fox valued HBO at $20 billion in its bid.
  • Given its growth prospects, the network could be worth as much as $25.8 billion by 2016, Morgan Stanley.
  • HBO and its sister channel Cinemax added 2 million subscribers in the U.S. last year, bringing their domestic total to 43 million, the company has said. The two channels had about 127 million subscribers worldwide.

Amazon to open five new warehouses in India

  • Amazon operates two warehouses or “fulfillment centers” on the outskirts of Mumbai and Bangalore.
  • The new facilities will be opened in Delhi, Chennai, Jaipur, Ahmedabad and on the outskirts of Gurgaon.

JD.com to sell Microsoft’s Xbox One games console in China

  • JD.com, China’s second-biggest e-commerce company by market share, will accept pre-orders for Microsoft’s Xbox One games console in China.
  • The Xbox One will be the first gaming consoleto be released in mainland China since the government banned console sales in 2000.

Trendy Chipotle burritos show how pricing power belongs to the hip

  • Companies including Chipotle Mexican Grill, Apple and PepsiCo have shown they’re able to take advantage of quality, trendiness, and, in the case of Pepsi’s snack foods, market dominance, to maintain high prices or even raise them faster than the inflation rate.
  • Chipotle raised chicken-dish prices by 5 percent this year after leaving them untouched since 2011, and sales went up 29 percent last quarter.
  • Chipotle runs about 1,700 restaurants in the U.S.
  • Another pricing powerhouse, Apple, has studiously cultivated its high-end aura for years, and its iPhones and iPads continue to command a higher price tag on average than its rivals.
  • Apple has now around 37 percent with near-40 percent gross margins.

Tyson Foods to shut three factories, cut 950 jobs

  • The largest U.S. meat processor said that the closures were due to changing product needs.

US ECONOMY & POLITICS

U.S. services sector activity accelerates in July: Markit

  • Activity in the U.S. services sector held at its highest level in 4-1/2 years in July.
  • Markit’s preliminary services Purchasing Managers Index (PMI) was 61.0 in July, unchanged from June and above expectations for a reading of 59.8.
  • A reading above 50 signals expansion in economic activity.
  • The employment index fell from 56.1, the fastest rate on record, to 52.8 in July.

EUROPE & WORLD

Europe nervy as Russian assets hit by new sanctions talk

  • The euro was stuck near its lowest level since November and Russian markets tumbled for a third straight day on Monday as new European sanctionsfor Moscow chilled the already frosty relationship between the two.
  • The European Union reached an outline agreement on Friday on its first economic sanctions on Russia.
  • Russia warned the moves would hamper cooperation between the two and undermine the fight against terrorism.

Russian shares down, Rosneft underperforms after Yukos ruling

  • The Hague’s arbitration court ordered Moscow to pay $51 billion for expropriating the assets of the now-defunct oil producer Yukos, most of which were acquired by Rosneft in auctions.
  • The arbitration panel in the Netherlands said it had awarded shareholders in the GML group just under half of their $114 billion claim.
  • Russia’s Finance Ministry called the ruling “flawed”, “one-sided” and “politically biased” and said it would appeal the decision.

TODAY in HISTORY

  • King Henry VIII of England’s chief minister, Thomas Cromwell, was executed and Henry married his fifth wife, Catherine Howard (1540)
  • Perudeclared its independence from Spain (1821)
  • The 14th Amendment to the Constitution, which established the citizenship of African Americans and guaranteed due process of law, was ratified (1868)
  • Austria-Hungary declared war on Serbia, precipitating the start of World War I (1914)
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