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US FINANCIAL MARKET

U.S. Stocks Fall on Service Industry Data as Target Drops

  • The S&P 500 tumbled 2.7 percent last week, the most since June 2012.
  • Target lost 3.8 percent after second-quarter profit trailed its forecast as U.S. sales remained weak and its Canadian operations continued to struggle.
  • Coach surged 4.7 percent. The luxury handbag maker said it made a profit of 59 cents per share, excluding some items. That exceeded the 53 cents projected by analysts.
  • China’s service industries stagnated in July as a private index fell to a record low.
  • Service industries in the U.S. expanded in July at the fastest pace since December 2005, showing the economy was building more momentum at the start of the second half of 2014.
  • Another release showed factory orders rose 1.1 percent in June. Economists estimated an increase of 0.6 percent.
  • The S&P 500, which is up 4.3 percent this year, has gone without a 10 percent correction since 2011.
  • It trades at 17.5 times the reported earnings of its companies, near the highest level since 2010.
  • Of the S&P 500 members that have posted financial results so far this season, 76 percent have beaten earnings estimates and 65 percent have exceeded sales projections.
  • Profit for the S&P 500’s constituents probably climbed 9.4 percent in the second quarter, while sales increased 4.2 percent, analysts’ estimates compiled by Bloomberg show.

Target Says Profit Trailed Forecast on Weaker Sales

  • Profit per share in the quarter was 78 cents, less than the company’s projection of 85 cents to $1.
  • U.S. sales at stores open at least 13 months were “essentially flat,” and profit margin was narrower than expected.

CVS Beats Profit Estimates after Quitting Smoking

  • Second-quarter net income rose 11 percent to $1.25 billion from $1.12 billion a year earlier.
  • CVS’s total revenue rose 11 percent to $34.6 billion, with a 16 percent gain in the pharmacy benefit management unit and a 4.5 percent rise by retail stores. Same-store sales rose 3.3 percent.
  • The company also said it was raising its adjusted earnings per share forecast for the year.

Apple Buybacks Pay Most Ever as CEOs Spend $211 Billion

  • Apple is up 25 percent since it spent $18 billion repurchase in the first quarter and the $16 billion in the second quarter.
  • Apple’s repurchases are the two biggest buybacks by any company in data compiled by S&P starting in 1998.
  • S&P 500 constituents have spent $211 billion on their own stock this year amid concern the five-year bull market is prone to selloffs such as last week’s 2.7 percent retreat.
  • Cash held by S&P 500 companies excluding financials, utilities or transportation firms totaled a record $1.30 trillion at the end of last year

Goldman Sees End to Narrowing Spreads in Europe Periphery

  • Goldman Sachs joined investors saying the narrowing of yield spreads to Germanbunds is over.

BMW Has Best Car-making Profitability Since 2011 on SUVs

  • Second-quarter earnings widened to 11.7 percent of sales from 9.6 percent a year earlier.
  • Second-quarter EBIT increased 26 percent to 2.6 billion euros.
  • BMW plans to deliver more than 2 million vehicles in 2014.
  • The company reiterated a margin target range of 8 percent to 10 percent.

AIG profit rises, beats estimates on strong growth

  • Net income, which included a $1.4 billion after-tax gain on the sale of ILFC, rose to $3.07 billion in the second quarter from $2.73 billion a year earlier.

Michael Kors says margins to shrink as it expands in Europe

  • Fast-growing Michael Kors expects margins to shrink for the year as it invests more to open stores in Europe and increases the number of shops it has in department stores.
  • “We never believed that a 30 percent operating margin was a sustainable margin for the company,” Chief Executive John Idol said.

Airbus wins 980 gross orders, 705 net in Jan-July

  • Airbus overtook Boeing in unadjusted aircraft orders for 2014.
  • Airbus won 980 aircraft orders between January and July, and said it had 705 net orders.
  • Boeing reported 837 gross orders and 783 net sales after cancellations between January 1 and July 29.

US ECONOMY & POLITICS

Service Industries in U.S. Expand at Fastest Pace Since 2005

  • The Institute for Supply Management’s (ISM) non-manufacturing index increased to 58.7 from the prior month’s 56.
  • Faster payroll growth is helping fuel consumer demand, raising the odds a self-reinforcing cycle of increased hiring and spending is underway.
  • The business activity measure, which parallels the ISM’s factory production gauge, increased to 62.4, the strongest reading since February 2011, from 57.5 in June.
  • A report from the Commerce Department today showed factory orders in June climbed 1.1 percent, the most in three months and almost double the median projection in a Bloomberg survey.
  • The Commerce Department also said orders for durable goods, which are manufactured products expected to last three years and more, rose a sturdy 1.7 percent in June instead of the 0.7 percent rise reported last month.

EUROPE & WORLD

Israel Pulls All Troops from Gaza as New Cease-Fire Holds

  • Israel pulled its remaining troops out of the Gaza Strip after completing a campaign to destroy tunnels used by militants to stage attacks, bolstering a 72-hour truce that took effect early today.

Telefonica Offers $9 Billion for Vivendi Brazil Unit GVT

  • Telefonica is Europe’s second-largest phone company.
  • Demand for video streaming is boosting revenue at Brazil’s Web-access providers, while Telefonica’s sales are dropping in Spain amid intense competition.

Argentina economy will likely contract this year

  • Argentina’s economy probably will contract in 2014, the head of the United Nation’s body for Latin America and the Caribbean said on Monday.

Samsung Electronics to pass fewer orders to China supplier in child labor response

  • Samsung said it will do 30 percent less business with a parts supplier after uncovering employment of child workers at the China-based firm.

Toyota reliance on U.S. deepens as emerging markets falter

  • Toyota on Tuesday posted 692.7 billion yen ($6.76 billion) in April-June operating profit, up 4.4 percent year-on-year.
  • That exceeded the 637.3 billion yen mean estimate of 13 analysts.
  • North American operating profit rose 45 percent to 149.7 billion yen, surpassing Asia excluding Japan.

TODAY in HISTORY

  • For the first time, the U.S. government levied an income tax (1861)
  • The first electric traffic lights were installed in Cleveland, Ohio (1914)
  • Marilyn Monroe died (1962)
  • The United States, Britain, and the Soviet Union signed the limited Test Ban Treaty, which prohibited nuclear weapon tests in the atmosphere, in outer space, and underwater (1963)
  • The U.S. space probe Mariner 7 transmitted pictures of Mars (1969)

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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