What’s the Story

by CC August 14, 2012 9:07 am • Commentary


Retail sales rose in July for the first time in four months as demand rose broadly for everything from cars to electronics, a sign that consumers could drive faster economic growth in the third quarter.

Retail sales rose 0.8 percent last month, the Commerce Department said on Tuesday.

It was the biggest gain since February and well above analysts’ expectations. Economists polled by Reuters had expected retail sales to rise 0.3 percent.

The report bolsters the view that the slowdown in economic growth during the second quarter will prove temporary.


On the data front, gross domestic product from major euro-zone economies beat analyst expectations and inspired investors to buy into the region’s equity market. In France, GDP showed that the economy stagnated in the second quarter, but still exceeded expectations of a 0.1% decline. See: French economy stagnates in second quarter of 2012.

The German economy grew 0.3% on a seasonally-adjusted basis in the second quarter of 2012, beating forecasts of a 0.2% rise. Compared to the same quarter last year, GDP rose 1% on a calender-adjusted basis. See: German GDP expands 0.3% in second quarter.

The growth rate in Europe’s largest economy is, however, still too weak to support longer-term growth in the region, Milligan said.

“The German economy really needs to be growing close to 2% a year to pull Europe out of the crisis,” he said. “The U.K., Scandinavia, Switzerland and the euro zone are all looking to export to Germany as a way to get economic activity.”

For the euro zone, GDP contracted by 0.2% in second quarter, dragged by a 1.2% decline in Portugal and a 0.4% fall in Spain. See: Euro-zone GDP falls 0.2% in second quarter

Meanwhile, the German ZEW economic sentiment indicator dropped to its lowest reading since December.


But a 1 per cent fall in economic output in Finland, a close ally of Germany in the battle for greater austerity in Europe, illustrated how the sovereign debt crisis that has been troubling southern Europe is spreading to the bloc’s economically stronger core northern states.

Economists warned that the resilience displayed by Germany and France was not sustainable and output was likely to drop sharply in coming months.

The eurozone emerged from recession in the third quarter of 2009 but growth turned negative in the final quarter of 2011. In the first quarter of this year output remained unchanged — defying fears of a recession. However, after falling into negative territory in the second quarter it is expected to stay negative in the current quarter, resulting in another technical recession.


Groupon Inc.’s (GRPN) once-torrid daily deals business slowed in its latest quarter, fueling investor concerns about the onetime Web commerce star and sending shares to a new low. The stock was last down 23% to $5.84 premarket, below the lowest closing price since Groupon went public in November at $20 a share.

Michael Kors Holdings Ltd.’s (KORS) fiscal first-quarter earnings nearly tripled, comfortably beating expectations, as the company saw double-digit same-store sales gains in both North America and Europe and also recorded a rise in licensing revenue. Shares surged 13% to $47.76 in recent premarket trading.

Estee Lauder Cos.’ (EL) fiscal fourth-quarter earnings rose 25% as the beauty-products company saw a strong rise in revenue across all regions and major segments. Shares climbed 7.1% to $58.89 in recent premarket trading as results slightly topped estimates, though the company issued a cautious forecast.

Knight Capital Group Inc.’s (KCG) average daily trading volume fell 6.4% in July from June despite an overall stock market increase. The reading is the first from Knight since it was forced to seek a $400 million rescue earlier this month to salve huge losses caused by a bug in new trading software. Shares were down 3.2% to $2.75 premarket.

Home Depot Inc.’s (HD) fiscal second-quarter earnings rose 12% despite pressure on sales growth, as its laser focus on productivity continued to bolster margin and whittle down overhead costs. The biggest home-improvement retailer in the country also raised its full-year earnings estimate. Shares rose 2.9% to $54.36 premarket.

Envivio Inc. (ENVI) said its fiscal second-quarter revenue will miss its earlier expectations due to a slowdown in spending by its service-provider customers, particularly in North America and Western Europe. Shares of the company, which provides Internet video-networking technologies, slumped 44% to $3.20 after hours.

Array BioPharma Inc.’s (ARRY) fiscal fourth-quarter loss narrowed as the drug company reported higher license-and-milestone revenue. Earnings beat Street expectations, and shares were up 5.7% to $4.82 premarket.

Natural gas-processor MarkWest Energy Partners LP (MWE) said it plans to offer 6 million common units and will use proceeds from the offering to purchase additional common units to fund its capital-expenditure program, for working capital and for other general partnership purposes.  Shares fell 4.6% to $50.30 premarket.

Mobile marketing advertising company Velti Plc (VELT) raised the low end of its full-year view after logging strong results for the second quarter, including a 71% jump in revenue. Shares were up 11% to $7.80 premarket.

Activist investor Carl Icahn criticized Forest Laboratories Inc. (FRX) for failing to disclose its latest warning letter from the U.S. Food and Drug Administration for a violation of promotional practices by the company’s sales representatives regarding its drug Daliresp. The company said Mr. Icahn’s statements are unreliable.

Green Mountain Coffee Roasters Inc. (GMCR) director William Davis resigned from the coffee company’s board Monday, citing personal reasons.