What’s the Story?

by CC July 13, 2012 9:11 am • Commentary


Stock futures rose on Friday, indicating the S&P 500 may snap its longest losing streak since May, after data in China allayed fears a slowdown in the economic giant could further hinder growth worldwide.

Data showed growth in China slowed for a sixth straight quarter to 7.6 percent, in line with expectations, but low enough to keep open the possibility that more action may be taken by policymakers.


Producer prices unexpectedly rose in June despite big drops in energy prices, a sign that some inflation pressures could keep the Federal Reserve on guard.

The Labor Department said on Friday its seasonally adjusted producer price index rose 0.1 percent last month. Analysts polled by Reuters expected the index to drop 0.5 percent.

The increase was driven by gains in consumer goods like household appliances, light trucks and pet food.

That led so-called core inflation, which strips out more volatile food and energy prices, to rise 0.2 percent, in line with expectations.


J.P. Morgan Chase & Co.’s second-quarter earnings fell 8.7% from a year ago, on a double-digit decline in revenue and a $4.4 billion trading loss at its Chief Investment Office.

The U.S.’s largest bank by assets also said it would restate its first-quarter results to reduce profits and revenue, amid questions about how traders at the unit marked their positions. Including the restatement, total losses on the Chief Investment Office trading hit $5.1 billion in the first half of 2012.

Finance chief Doug Braunstein on Friday put the trading loss through Thursday at $5.8 billion.


Italy passed a tough market test on Friday as its three-year borrowing costs fell well below 5 percent at an auction hours after Moody’s cut the country’s rating to two notches above junk status.

The U.S. rating agency surprised markets on Friday by lowering Italy’s sovereign debt rating to Baa2 amid persistent worries about Spain’s ability to sort out its banking problems, concerns about a Greek exit from the euro and doubts over Italy’s long-term resolve to push through much-needed reforms.


Lexmark LXK -7.53%  lowered its sales and earnings forecast for the second quarter and said it sees little prospect for improvement over the latter half of 2012. Management cited a “weaker- than-expected demand environment,” most notably in Europe, as well as “unfavorable changes” in foreign-exchange rates. As revised, the Lexington, Ky.-based company sees turning a quarterly profit of 87 cents to 89 cents a share on an adjusted basis, down from a prior estimate of 95 cents to $1.05 a share. Restructuring- and acquisition-related adjustments are pegged at about 34 cents a share for the latest quarter, up from the 30 cents previously forecast. On the top line, Lexmark said it now anticipates quarterly revenue will have dropped about 12% on a year-over-year basis. In April, management had projected the size of the drop in revenue at 7% to 9%. Lexmark said it will report second-quarter results July 24.

Also late Thursday, New York & Co. NWY +0.28%  said it anticipates a “significantly” narrower operating loss for the second quarter ending July 28. “We are encouraged by our second-quarter performance to date, which reflects strong product acceptance across our summer assortments, particularly during the Mother’s Day period, and continued progress on our strategic initiatives,” said Gregory Scott, chief executive of retailer specializing in women’s fashion apparel and accessories, in a statement. Among other things, management foresees improvement in New York & Co.’s gross margin of between four and five percentage points compared to the year-ago quarter. Operating loss is forecast to narrow to a range of $5 million to $7 million from the prior year’s $15.1 million. And quarterly comparable-store sales are expected to rise “slightly” from a year ago, with New York & Co.’s quarter-end store count reflecting six fewer outlets in operation. The retailer said it will report quarterly results in the third week of August.

Darden Restaurants Inc. DRI -0.36%  agreed to acquire the Yard House USA Inc. chain for $585 million in cash. Yard House, with 39 restaurants across 13 states offering contemporary American cuisine, will become part of Orlando-based Darden’s specialty restaurant group. The deal’s expected to dilute Darden’s earnings to the tune of 3 cents to 5 cents a share for fiscal 2013 and will contribute to the bottom line starting in fiscal 2014, the company said. Acquisition-related costs are expected to total about 7 cents to 10 cents a share. The total transaction price of $585 million to be paid to private-equity firm TSG Consumer Partners, management and investors includes about $30 million of cash tax benefits that Darden said it expects to realize over fiscal 2013 and fiscal 2014.

The board of Acme Packet Inc. APKT +1.56% authorized the company to buy back up to $200 million in common stock. The repurchase program will begin later this month run through the end of July 2013, the Bedford, Mass.-based company said. It “demonstrates the confidence that the board of directors has in the prospects of the company and further expresses its commitment to enhancing shareholder value,” said President and CEO Andy Ory in a statement. As of March 31, Acme Packet said, there were about 68.3 million common shares outstanding. The company also had $401.3 million in cash and equivalents as of the same date.

Unit Corp. UNT -4.60%  said it increased to $400 million the size of a private offering of 6.625% senior subordinated notes due 2021 for sale to institutional investors. The offering, previously pegged at $350 million, priced at 98.75% of par; it’s expected to be completed July 24. Net proceeds will go toward financing the acquisition of oil and natural-gas assets located in Texas and Oklahoma from Noble Energy Inc. NBL -1.67% , Tulsa-based Unit said. The $617 million deal was announced earlier this week. Read more.

Two Harbors Investment Corp. TWO -1.40%  said it would make a secondary public offering of 35 million common shares, with a 30-day greenshoe allowing for the purchase of nearly 5.3 million additional shares if investor demand warrants. Net proceeds will be used to facilitate Two Harbors making further acquisitions of residential mortgage-backed securities, residential mortgage loans and residential real properties, and for other general corporate purposes. The New York-based company had nearly 187 million weighted average shares outstanding in the first quarter ended March 31.

Ampio Pharmaceuticals Inc. AMPE -14.51%  priced at $3.25 each a secondary public offering of more than 4.6 million common shares. Ampio said it and certain stockholders granted underwriters a 45-day option to buy at the $3.25-a-share price as many as 692,310 additional shares if needed to satisfy investor demand. The offering’s expected to close on or about July 18. The Greenwood Village, Colo.-based company had more than 31.1 million weighted average shares outstanding in the three months ended March 31.