- More Lehman layoffs. Lehman (LEH) announced plans to fire 1,500 employees, approximately 6% of its work force. The layoffs will most likely happen before Q3 results are reported in mid-September. This will be Lehman's fourth round of layoffs this year, bringing the total to 7,500 employees since last June. Though perhaps in worse shape than other industry rivals, Lehman is not alone - banks and securities firms have cut more than 101,000 jobs this year.
- GDP jumps to 3.3%. Q2 GDP came in way above expectations, growing at a 3.3% seasonally-adjusted annual rate vs. the advanced estimate of 1.9%. The higher GDP numbers reflect stronger-than-expected exports and inventories that fell less sharply than anticipated, and suggest that the economy is perhaps doing better than conventional wisdom indicates. Conversely, the spread between GDP and GDI (gross domestic income) is the biggest in the post World War II era, which may signal talk of an economic recovery is premature.
- Stocks respond to GDP report. U.S. stocks rallied on Thursday, posting the biggest gain in three weeks on news that the economy grew faster than expected in Q2. Led by manufacturers and financials, the S&P 500 gained 1.5% to 1,300.68, and the Dow Jones Industrial Average gained 1.9% to 11,715.18.
- FDIC downplays banks' exposure to Fannie/Freddie. The FDIC played down the repercussions of a potential plunge in Fannie Mae (FNM) or Freddie Mac (FRE) preferred shares, saying the drop would have only a limited impact on the rest of the banking sector. Though banks' exposure is "not problematic," according to Chairman Sheila Bair, smaller institutions could be more vulnerable and are being monitored. Analysts are concerned that a drop in Fannie/Freddie preferred shares could cause another wave of bank write-downs this quarter.
- Delphi hopes dim; GM on the hook. Odds increase that Delphi, the #1 U.S. car-parts maker, will not emerge from bankruptcy protection. GM (GM), already wounded by Delphi's woess to the tune of $11B, could be saddled with billions more in debt. "The clock is ticking and time is getting short," Charles E.F. Millard, director of the government's pension-insurance agency says. "If this becomes a liquidation, then our $8B claim would swamp any claim the creditors have. We are trying to get everyone's attention."
- Dell disappoints. Dell (DELL) earnings failed to meet investors' expectations (see below). The world's second-largest producer of personal computers blamed the weak earnings on a drop in information-technology spending that has spread from the U.S. to Western Europe and Asia. Dell warned that it will continue to face significant costs as it realigns its business and invests in infrastructure and acquisitions, and expects slower spending in Europe and Asia. Shares fell more than 10% in extended after-hours trading, but rebounded and were up 0.5% at 8:00 PM.
- Microsoft says Ciao. Microsoft (MSFT) will spend $486M to buy online survey company Greenfield Online (SRVY). The deal gives Microsoft access to Ciao.com, a popular price comparison and consumer reviews site in Europe.
- MySpace draws more ad views. Fox Interactive's (NWS) collection of websites, including social network MySpace, has overtaken Yahoo (YHOO) for the No. 1 spot in online display advertising. MySpace and its parent company drew 56.8B advertising views in June, while Yahoo's sites had 53.1B ad views. The data shows how quickly ad viewership has been growing on MySpace - but analysts caution that the social network is struggling to land the premium ad rates that Yahoo usually commands.
- Nintendo boosts forecast on strong Wii sales. Nintendo (OTC:NTDOY) soared 8.4% in Japan after it raised its full-year earnings outlook by 26% to ¥410B ($3.8B) on a projected 42% jump in Wii sales. "This is a very big, positive surprise," a senior fund manager said. "It looks like Wii and DS are selling well, especially in Europe." Shares had fallen 17% since July 30, when Nintendo disappointed investors by leaving its full-year projections unchanged.
- Banks request larger Fed loans. Commercial banks borrowed more money the past week from the Federal Reserve's emergency lending program. Borrowing averaged $18.47B daily over the week, compared to a $17.51B average from the week before. On the other hand, Wall Street firms didn't borrow any money from the emergency program, extending their non-participation streak to four weeks.
- Corporate profits fall. Core inflation rose at 2.1% in Q2, while headline inflation jumped to 4.2%. Corporate profits dropped by $37.8B to $1.56T - the lowest in three years. Exports were up 13.2%, while imports fell 7.6%.
- Unemployment claims fall slightly. Weekly Jobless Claims were 425,000, in-line with consensus, down 10K from last week's revised 435,000. Continuing claims were 3.42M. 4-week moving average falls by 6K to 446,250.
- Euro-zone consumer inflation eased to 3.8% from 4% in July, 0.1% below consensus. Meanwhile, European consumer confidence fell more than expected - not surprising for an economy on the brink of recession. Driven by high oil and food prices, inflation is limiting consumer spending and squeezing profit margins.
- Inflation soars in Japan, sort of. Japan's core inflation climbed 2.4% Y/Y in July - an 11-year high - up from 1.9% in June. "If inflation continues to accelerate at this pace, we are heading toward 3% or perhaps even in excess of 3%, which is an absolutely unheard of level of inflation in Japan," economist Glenn Maguire says. "Operationally it will be next to impossible for them [Bank of Japan] not to raise rates if we are moving into that kind of inflation territory." But in Tokyo, considered a leading indicator, core prices were up a milder 1.5%, down from 1.6% in June. "We expect the BOJ to maintain its wait-and-see stance for quite some time," Lehman analysts said today.
- Japanese jump-start. Japan unveiled an ¥11.7T ($107.4B) stimulus package to prop up an economy weakened by slowing growth and high energy prices. Officials say the measures will reduce the impact of high oil prices, promote energy conservation, and strengthen agriculture.
Earnings: Friday Before Open
- Lukoil (OTC:LUKOY): Q2 net income surges 64% to $4.13B, short of $4.72B consensus. Revenue was up 59% to $20.13B despite a 3.1% drop in production. Lukoil is 20% by ConocoPhillips (COP). Shares are down 2.8% in Moscow. [WSJ]
Earnings: Thursday After Close
- Dell (DELL): FQ3 EPS of $0.31 misses by $0.05. Revenue of $16.4B vs. $15.95B. Shares +0.5%. [PR]
- Marvell Technology (MRVL): Q2 EPS of $0.24 beats by $0.02. Revenue of $843M vs. $837M. Shares -3.1%. [PR]
- Novell (NOVL): FQ3 EPS of $0.06 beats by $0.01. Revenue of $245M vs. $241M. Shares -1.6%. [PR]
- OmniVision Technologies (OVTI): FQ1 EPS of $0.25 misses by $0.03. Revenue of $174M (+3.1%) vs. $171M. [PR]
- PetSmart (PETM): Q2 EPS of $0.30 beats by $0.02. Revenue of $1.24B (+11.2%) vs. $1.22B. [PR]
- Sigma Designs (SIGM): Q2 EPS of $0.47 beats by $0.07. Revenue of $58.2M (+36.9%) in-line. [PR]
- Wind River Systems (WIND): Q2 EPS of $0.17 beats by $0.09. Revenue of $92M (+8.6%) vs. $88M. [PR]
- Asia closes higher. Nikkei +2.39% to 13,073. Hang Seng +1.38% to 21,262. Shanghai +2.01% to 2,397. BSE Sensex +3.67% to 14,565.
- Europe is up at midday. London +0.48%. Paris +0.48%. Frankfurt +0.19%.
- U.S. futures at 6:30 AM: Dow -0.15%. S&P -0.19%. Nasdaq -0.16%. Crude +1.34% to $117.14. Gold +0.57% to $842.
Friday's Economic Calendar
- 8:30 Personal Income and Outlays
9:00 NAPM - NY Report
9:45 NAPM Chicago Business Barometer
10:00 University of Michigan Consumer Sentiment
10:00 ISM-Milwaukee Business Survey
10:30 ECRI Weekly Leading Index
3:00 PM Farm Prices
Seeking Alpha editor Eli Hoffmann contributed to this post.
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