What’s the Story?

by CC June 28, 2012 9:11 am • Commentary


The U.S. economy grew 1.9 percent in the first quarter, reflecting a gain in consumer spending that now shows signs of cooling as the labor market weakens.

The revised gross domestic product reading matched the increase previously calculated by the government, Commerce Department figures showed today in Washington. Corporate profits were revised to show a drop, the first in more than three years…

…The median forecast of economists surveyed by Bloomberg News was 1.9 percent following a 3 percent increase in the prior quarter. Projections of the 75 economists polled ranged from 1.5 percent to 2.3 percent. The government’s GDP estimate is the third and final for the first quarter.


Jobless claims decreased by 6,000 to 386,000 in the week ended June 23, in line with the median forecast of economists surveyed by Bloomberg News, according to data from the Labor Department. The prior week’s reading was revised up to 392,000 from 387,000, matching an April figure as the steepest of 2012.


The euro hit a fresh three-week low against the dollar and Japanese yen Thursday after a brief, sharp selloff in early European trading as investors pared back their expectations for meaningful progress at a key summit of European leaders in Brussels.


Shares of several bank stocks traded in the U.S. fell on Thursday morning after a report said internal sources at J.P. Morgan Chase & Co. said the firm’s models show its loss from a soured derivatives position could reach $9 billion. The New York Times reported Thursday that J.P. Morgan Chase JPM +3.00% has already exited more than half of the soured position, having previously stated that it aimed to clear the position by early 2013.


Germany may be willing to move sooner than expected to accept shared liability of euro-zone debt and would support short-term measures to deal with the acute financing problems facing some of the region’s governments, German Finance Minister Wolfgang Schäuble said in an interview with The Wall Street Journal ahead of today’s European summit.

Mr. Schäuble said Germany could agree to some form of debt mutualization as soon as Berlin is convinced that the path toward establishing centralized European controls over national fiscal policy is irreversible. That could happen before full implementation of treaty changes.

“We have to be sure that a common fiscal policy would be irreversible and well coordinated. There will be no jointly guaranteed bonds without a common fiscal policy.”

Such a fundamental change—in effect, a grand European bargain between Germany and other euro members—would require countries to give up a large degree of sovereignty over their budgets. Many European policy makers are asking how far Berlin is willing to go in return to putting its financial strength at the disposal of the euro zone.

“We are willing to go as far as we need to in order to get a sustainable agreement in Europe,” Mr. Schäuble, speaking in his spartan Berlin office, said.

His comments indicate that Germany is more flexible than many observers in Europe think after Chancellor Angela Merkel told German lawmakers early this week that there would not be full mutualization of European debt in her lifetime.


News Corp. [NWSA  22.31        ] – The company’s board has officially approved a split of the company in two, separating out the film and TV businesses. Shareholders will get one share in the new, second company for each share they hold in the current News Corp.

Family Dollar [FDO  69.13        ] – The low-price retailer reported quarterly profit of $1.06 per share for its latest quarter, one cent below estimates. The company says its new initiatives to broaden product offerings had little impact in the quarter, but should start to do so in the current quarter.

JPMorgan Chase [JPM  36.78        ]The New York Times says the losses from the bank’s derivatives trades may reach as high as $9 billion, compared to initial estimates of about $2 billion.

Big Banks – Separately, Citi analysts have cut second quarter earnings estimates and price targets for JPMorgan Chase, as well as Bank of America, Goldman Sachs, and Morgan Stanley.

RadioShack [RSH  4.07        ] – Chief merchandise officer Scott Young has resigned from the electronics retailer, according to a U.S. Securities and Exchange Commission filing. Young took that job in April 2010.

Comcast [CMCSA  31.04        ] – The Federal Communications Commission has resolved a compliance investigation with conditions related to Comcast’s purchase of a majority stake in NBCUniversal (the parent of CNBC and CNBC.com). The resolution extends by a year the requirement that Comcast offer a reasonably priced broadband service option to consumers who do not buy cable service from the company.

Banks Involved in Libor Probe – U.K. Finance Minister George Osborne says four banks besides Barclays are being probed in the ongoing Libor manipulation case: HSBC, UBS, Citigroup, and Royal Bank of Scotland. Barclays had agreed to pay $454 million yesterday to settle the case with U.K. and U.S. authorities.

AMR – Union leaders at the American Airlines parent will let pilots vote on a company proposal to slash spending on labor, avoiding a bankruptcy judge ruling that could have imposed even tougher terms on the pilots.

Onyx Pharmaceuticals [ONXX  66.39        ] – The U.S. Food and Drug Administration has granted a priority review to Bayer’s new colorectal cancer drug. Onyx is Bayer’s U.S. marketing partner for the drug. A priority review cuts the usual 10 to 12 month period down to about six months.

Boeing [BA  71.87        ] – European rival Airbus is planning to build its first U.S. plant in Mobile, Alabama. Airbus would use the plant to assemble its A320 jet.

Nasdaq OMX [NDAQ  21.62        ] – Nasdaq will unveil its compensation plan related to the trouble-plagued Facebook [FB  32.23        ] initial public offering to the SEC next week, according to reports. Nasdaq has previously proposed to offer cash and discounted trading fees to cover $40 million in losses.