What’s the Story?

by CC July 20, 2012 9:10 am • Commentary


The euro fell sharply Friday, dropping back below the key $1.22 level after Spain lowered its growth forecasts for 2013 and 2014, even as euro-zone finance ministers formally adopted Madrid’s bank bailout plan.

The common currency was recently trading at $1.2193, compared with $1.2280 late Thursday in New York. The dollar was at ¥78.55, compared with ¥78.59, while the euro was at ¥95.78 compared with ¥96.48. Meanwhile, the pound was trading at $1.5669, compared with $1.5724.

Calculated Risk

Also Friday, Spain’s government said it expects the economy to remain in recession next year as it steps up austerity measures. The yield on the Spanish 10 year bond is now above 7.2% – near the high.

More austerity. More recession. The beatings continue …


The benchmark 10-year Treasury yield fell three basis points, or 0.03 percentage point, to 1.47 percent at 8:12 a.m. New York time, according to Bloomberg Bond Trader prices. The 1.75 percent note maturing in May 2022 climbed 9/32, or $2.81 per $1,000-face amount, to 102 15/32. The yield dropped to a record 1.4387 percent on June 1.

The two-year rate was little changed at 0.21 percent after falling to 0.2096 percent, the lowest level since Jan. 30. The yield declined three basis points this week.


Portugal is “sounding out” the market as it prepares to resume sales of medium-term notes, the head of the nation’s debt agency said in an interview.

“It will depend on market conditions and on the appetite from specific investors,” Joao Moreira Rato, chairman of the Lisbon-based debt agency, said in an e-mailed response to questions. There is no scheduled date for issuing the notes, he said. “We are continuously sounding out the market.”

The debt agency plans to issue “a substantially lower value” than the total limit of 10 billion euros ($12.2 billion) for the debt agency’s medium-term-note program, Moreira Rato said. He declined to specify investors who might purchase the securities.


General Electric Co reported second-quarter profit slightly above expectations on Friday, offsetting weaker-than-forecast revenue growth, and said it was finding ways to grow despite a hazy economic outlook.

The largest U.S. conglomerate — as measured by revenues — didn’t change its full-year profit forecast of double-digit growth, buoyed by strong sales of railroad locomotives and electric turbines.


Chipotle Mexican Grill Inc. (CMG) said its customer traffic growth has slowed recently, raising the possibility that some people are trading down to less pricey fast-food restaurants as a result of the uncertain economy. Shares of Chipotle tumbled 17% to $334.98 premarket as chain’s second-quarter revenue growth and sales at established restaurants fell below Wall Street analysts’ expectations. The report also stoked concerns for fellow casual restaurant operator Panera Bread Co. (PNRA), which slumped 4.5% to $144.00 premarket.

SanDisk Corp.’s (SNDK) second-quarter earnings plummeted as the flash memory maker saw much weaker sales and profit margins, due to soft demand for the company’s memory chips from makers of mobile devices. But SanDisk’s results were not as bad as some analysts had feared, sending shares up 11% to $39 premarket. Rival Micron Technology Inc. (MU) also got a boost from the results, trading up 2% at $5.87.

Xerox Corp.’s (XRX) second-quarter earnings fell 3.1% as sales from its technology business declined and margins shrunk. The company also lowered its earnings forecast for the year, saying its expects economic uncertainty to continue to weight on its technology business. Shares fell 4% to $6.90 in premarket trade.

Google Inc. (GOOG) said its second-quarter profit jumped 11% thanks to growing interest in its Internet search business, even as the prices paid by search advertisers continued to drop. Shares rose 2.6% to $608.55 premarket as Google’s report topped many Wall Street estimates.

Baker Hughes Inc.’s (BHI) second-quarter profit climbed 30% as the company’s onshore U.S. operations helped to offset a seasonal slowdown in Canada, contributing to better-than-expected revenue. Shares jumped 7.3% to $44.80 premarket.

Cepheid’s (CPHD) second-quarter earnings fell 38% as the maker of biological testing systems was hurt by higher costs that masked strong revenue growth. The company also lowered its full-year earnings targets. Shares plunged 18% to $36 premarket.

Advanced Micro Devices Inc. (AMD) reported dismal second-quarter results and said the weakness would continue into the current period as the chip maker is hurt by softening consumer demand for PCs, particularly in China and Europe. The company also forecast third-quarter revenue below analyst expectations. Shares were down 2.7% to $4.73 premarket.

Align Technology Inc.’s (ALGN) second-quarter earnings more than doubled as the maker of Invisalign braces saw continued strength in shipments and revenue. Shares fell 5.4% to $30.00, however, after the company issued a downbeat outlook for the current quarter.

Freescale Semiconductor Ltd.’s (FSL) second-quarter loss narrowed as the chip maker strengthened its margins and saw fewer charges, masking a drop in revenue. Shares dropped 12% in premarket trading to $12.83 as the company projected current-quarter sales below analysts’ expectations.

Intuitive Surgical Inc.’s (ISRG) second-quarter earnings rose 32% behind continued strong sales growth for its surgical robots, but the company also cautioned that it’s seeing a decline in domestic prostate-cancer surgeries. Shares were off 4.5% to $$520.00 premarket.

SunCoke Energy Inc. (SXC) said its board has approved the formation of a master limited partnership, which will hold a portion of its interests in coke-making facilities in Ohio. Shares were up 6.5% to $16 premarket.

Swift Transportation Co.’s (SWFT) net profit jumped 72% as the trucking company saw revenue rise and it benefited from lower fuel prices. Adjusted earnings topped analyst expectations. Shares rose 4.9% to $8.35 premarket.