What’s the Story

by CC September 11, 2012 9:09 am • Commentary


The U.S. trade deficit widened in July for the first time in four months as the global economic slowdown reduced demand for American-made goods.

The gap grew 0.2 percent to $42 billion, smaller than projected, from a revised $41.9 billion in June, Commerce Department figures showed today in Washington. The median forecast in a Bloomberg survey called for a $44 billion deficit. Exports fell by the most since April, outpacing a decline in imports that reflected cheaper petroleum.

A stagnant Europe and weaker economies in emerging markets such as China may be starting to sap demand for U.S. products, a source of strength for the expansion in the second quarter. At the same time, a rebound in crude oil prices may lead to a higher American import bill.

Calculated Risk

Both exports and imports decreased in July. Exports are 10% above the pre-recession peak and up 3% compared to July 2011; imports are just below the pre-recession peak, and up about 1% compared to July 2011.
Oil averaged $93.83 in July, down from $100.13 per barrel in June, and the lowest level since early 2011. Import oil prices will probably start increasing again in August. The trade deficit with China increased to $29.4 billion in July, up from $27.0 billion in July 2011. Once again most of the trade deficit is due to oil and China.

The trade deficit with the euro area was $10.2 billion in July, up from $7.7 billion in July 2011.


The National Federation of Independent Business’s Small Business Optimism Index for August increased to 92.9 from 91.2 in July, boosted by a large jump in the job creation sub-index.


Moody’s: US Rating Could Be Cut to AA1 If Debt/GDP Ratio Isn’t Lowered


American International Group [AIG  33.30    -0.69  (-2.03%)   ] – The Treasury Department sold nearly 554 million sharesat $32.50 each, or a total of about $18 billion. The government’s stake in AIG is now less than 22 percent, down from about 53 percent before the sale, and the Treasury has now recovered nearly $195 billion, more than the $182 billion cost of the bailout.

Legg Mason [LM  25.47    -0.42  (-1.62%)   ] – Chairman/Chief Executive Officer Mark Fetting will step down on Oct. 1. Lead independent director Allen Reed will become non-executive chairman, with head of global distribution Joe Sullivan becoming interim CEO while the board searches for a permanent replacement.

Bristol-Myers Squibb [BMY  33.14    -0.16  (-0.48%)   ] – The drugmaker’s stock has been upgraded to “Conviction Buy” from “buy” at Goldman Sachs, seeing “numerous growth catalysts” over the next 12 months.

Burberry – The luxury goods maker says its profits for the year will come in at the low end of analysts’ estimates. Burberry saw 6 percent growth in sales over the latest 10-week reporting period, but half that growth was due to new store openings. Burberry says the external environment is becoming “more challenging.”

Philips Electronics [PHG  24.04    -0.85  (-3.41%)   ] – The electronics maker is planning to cut another 2,200 jobs by 2014 to save $383 million per year. That’s on top of 4,500 cuts the company had already planned to implement between 2011 and 2014.

AmerisourceBergen [ABC  38.03    -0.15  (-0.39%)   ] – Goldman has downgraded the pharmacy services company’s shares to “neutral” from “Conviction Buy” on a valuation basis.

Five Below [FIVE  34.80    -0.58  (-1.64%)   ] – The company beat estimates with both its second quarter earnings and revenue, but nonetheless, the specialty retailer took an after-hours hit. The stock had run up about 10 percent last week in anticipation of upbeat earnings.

Shuffle Master [SHFL  15.43    0.20  (+1.31%)   ] – Shuffle Master earned $0.18 per share for its third quarter, two cents below estimates, with revenue also below consensus. The gambling equipment maker continues to see strong demand for its products, and profits did rise 14 percent from a year earlier, but analysts were anticipating even better results.

Federated Investors [FII  20.92    -0.74  (-3.42%)   ] – Federated has closed on a previously announced deal to acquire $4.4 billion in assets from a subsidiary of Fifth Third Bancorp [FITB  15.195    -0.115  (-0.75%)   ].

Zynga [ZNGA  2.82    -0.06  (-2.08%)   ] – Zynga has lost another high level executive, with Chief Marketing Officer Jeff Karp resigning. He follows Chief Operating Officer John Schappert and Chief Creative Officer Mike Verdu in leaving the social games creator in the last month.

Palo Alto Networks [PANW  71.75    1.01  (+1.43%)   ] – The security software maker earned $0.03 per share, excluding certain items, for its fourth quarter, versus analysts’ forecasts of a breakeven performance. Revenue was also above estimates, but the stock is under pressure as the company’s revenue growth rate slowed from prior quarters.

Sanofi [SNY  41.70    -0.70  (-1.65%)   ] – The drugmaker’s vaccine against dengue fever is proving less effective than hoped in clinical trials, according to researchers. Sanofi has previously said that the vaccine could generate about $1.3 billion in yearly sales.

A JPMorgan Chase report says the iPhone 5 could add 0.33 percent or more to gross domestic product for the fourth quarter all by itself. Apple [AAPL  662.74    -17.70  (-2.6%)   ] is expected to release the new phone at an event tomorrow.