Facebook posted an increase in Q2 revenue of 32% to $1.18 billion, beating analysts’ expectations of $1.15 billion, however posted a quarterly net loss of $157 million and a net profit of 12 cents a share. Advertising revenue beat estimates by $1 million, coming in at $922 million. Investors and analysts are skeptical of the social media giant’s business model in that they do not have effective ways of monetizing their average of 552 active daily users. In my opinion, facebook is valuable and the collapse in stock price in such a short amount of time must have been to poor price projection by their underwriters.
David Cornes holds a degree in economics from the University of Montana.
As for the announcements today, GDP will be reported at 8:30am EST and Consumer Sentiment will be reported at 9:55am EST. The last estimate of GDP was 1.2% and the market does not expect to see much more than that today.
In better news the S&P 500 will open on an increase of 1.65%. 10-year treasuries and oil join the upward trend at 2.08% and 0.60% respectively while the dollar is down 0.20%.
Merck reported earnings today of 58 cents a share, beating Wall Street’s expectations but down from 65 cents last year. The drug company’s net income fell 1.4% due to restructuring and acquisition costs but despite the high expenses, Merck’s sales did rise this quarter.
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The Hang Seng topped the Nikkei by rising 2% today, however finished down 1.9% on the week. HSBC Holdings was the top boost for the day rising 2.6%; they are down 6.4% this month however up 8.7% on the year. The AIA group, Asia’s third largest insurer, slipped .2% today, however posted a larger than expected increase in value of new business in the first half of the year. The Banking sector rose today after Shanghai Securities News announced Chinese banks have until 2018 to meet new capital-adequacy rules. Industry and Commercial Bank of China rose 2.7% and Bank of China 2.1%.
Europe is having a choppy trading day, however the FTSEurofirst has managed a .1% gain on yesterday’s comments by European Central Bank Leader Mario Draghi. The day has been held back by a Spanish report showing unemployment staggeringly high at 24.6% in Q2, the highest on record. The Euro is up again today at 1.2309.
The SEC and department of justice are considering investigating retailers for breaches of anti-foreign bribery laws after allegations came in from Mexico against Wal-Mart.
Commodities are beginning mixed again today with crude and silver up as natural gas and silver are slacking at the moment.
Contributer Chris Rygh is currently pursuing his MBA in Wisconsin and has a passion for the Market. Comments can be directed to ryghcw19@uww.edu
More importantly, the Euro, a favorite short here at KOTM, spiked 1% against the dollar to reach a weekly high around $1.2285.
In corporate news, Sprint surged 19.44% after the telephone company announced a narrower than expected loss in the second quarter. Exxon Mobil raised 1.37% after the oil production company reported earnings rose by 49%. However, lower energy prices and production did diminish earnings slightly. Finally, shares of Zynga plummeted today, driving down 40% today and dragging down Facebook with it. Facebook shares shrank near 8% after Zynga’s drop and poor earnings in their earnings debut.
Crude-oil futures climbed 1.3% to $90.16 a barrel, while gold futures gained 0.7% to $1618 a troy ounce. The U.S. dollar fell against the euro, but edged up against the yen. The yield on the 10-year U.S. Treasury rose to 1.431% as demand fell.
In other corporate news, United Technologies (UTX) rose 0.27% after it agreed to sell some of its industrial products to BC Partners, among others. Sprint Nextel, the telecom company, surged 16% this morning after the company reported a smaller than expected second quarter loss on higher than anticipated revenue. Finally, Whole Foods Market (WFM) rallied near 10% after they reported fiscal third quarter earnings above Wall Street estimates.
The Irvine, California based hard-disk-drive maker’s adjusted earnings beat expectations of $2.47 a share by coming in at $3.35. WDC has a P/E ratio of 7.57 and had an increase in quarterly revenue of 97.8% since this time last year. The company shipped 71 million hard drives during the previous quarter with revenue of $4.75 billion, $.5 billion higher than expected. They reported a net income of $158 million or 67 cents a share.
Along with strong earnings, WDC and analysts project strong guidance for the coming quarter. Q1 sales are expected to be between $4.2 and $4.3 billion with an average adjusted EPS of $2.5.
David Cornes holds a degree in economics from the University of Montana.
In terms of the economy there are quite a few announcements today: • Durable Goods Orders at 8:30am • Jobless Claims at 8:30am • Bloomberg Consumer Comfort Index at 9:45am • Pending Home Sales Index at 10:00am • EIA Natural Gas Report at 10:30am • Kansas City Fed Manufacturing Index at 11:00am
The S&P 500 is down once again at 0.03% while the 10-year treasuries are up 1.43%. Oil is up as well at 0.74% and the dollar is down again at 0.83%.
What to watch for today in earnings? Facebook. After the company’s IPO was a disaster the market isn’t looking for the company to do much stock wise.
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