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Market Update

S&P 500 and Indexes Trim Losses, Verizon May Have Overapid for AOL

Author: Nichole Harper
Last Update: 2:02 PM ET May 12 2015

2:00 PM Market indexes on both sides of Atlantic traded lower as investors worried that the five-year long rally may be nearing an end as investors hover near record highs. Verizon Communications agreement to acquire to AOL Inc is likely to destroy shareholder value one more time.

Market indexes on Wall Street opened lower and Verizon agreed to acquire online content aggregator AOL Inc.

Stocks struggled and market indexes trimmed losses after volatile trading as earnings announcements flow slowed and investors focused on stretched valuations.

On Wall Street, Tollbooth Strategy Index slipped 0.3% or 34.39 to 10,664.21.

S&P 500 index slipped 5.24 to 2,100.10 and the Nasdaq Composite Index fell 14.26 to 4,979.32.

Crude oil in New York jumped $1.49 to $60.74 a barrel and gold climbed $9.90 to $1,192.90 an ounce.

U.S. Movers

The Gap, Inc (GPS) dropped 3.9% or $1.55 to $38.31 after the apparel retailer said net sales in April declined 9% to $1.21 billion from $1.33 billion in a year ago period.

For the first-quarter, the retailer said net sales slipped 3% to $3.66 billion compared to $3.77 billion in the same period a year ago.

The retailer forecasted earnings per share for the quarter in the range of 55 cents to 56 cents.

Verizon Communications (VZ) slipped 34 cents to $49.46 after the wireless communications services provider agreed to acquire online content provider AOL Inc for $50 per share or about $4.4 billion.

AOL, Inc stock surged 18.8% to $50.61 and investors worried that Verizon may have significantly overpaid for the company that has a grab bag of mediocre content properties and is not likely to generate any increase in revenues or earnings for the telecom company.

European Markets

European markets traded lower and International Monetary Fund confirmed that Greece paid its installment of 750 million euros as expected.

However, questions remains about the transaction and the multilateral agency declined to reveal the details.

In London trading, FTSE 100 index dropped 1.1% or 78.83 to 6,951.02 and in Frankfurt the DAX index declined 1.5% or 172.67 to 11,500.68.

In Paris, CAC 40 index slumped 0.9% or 48.40 to 4,979.47.

In corporate news, Allianz net climbed 11% to 1.8 billion on 11% increase in revenues. Carlsberg net loss widened. Deutsche Post profit fell 1% to 495 million. easyJet tumbled despite net swung to profit. K+S Group net soared 32%. ThyssenKrupp profit tumbled 82%.

Allianz SE dropped 2.3% to 145.95 after the Germany-based financial services provider said total revenues in the first-quarter ending in March soared 11.2% to 37.8 billion from 33.96 billion in a year ago period.

Net profit in the quarter climbed 11% from a year ago to 1.82 billion compared to 1.64 billion and diluted earnings per share jumped to 4 from 3.55.

Deutsche Post AG declined 4.6% to 28.39 after the Germany-based logistics services provider stated revenues in the first-quarter ending in March climbed 8.8% to 14.8 billion form 13.57 billion in a year ago period.

Net profit in the quarter dropped 1.4% from a year ago to 495 million compared to 502 million and diluted earnings per share fell to 0.39 from 0.40.

The logistic company forecasted operating profit for the year to increase between 3.05 billion to 3.2 billion and will increase by an average of more than 8% annually during the period from 2013 to 2020.

easyJet Plc tumbled 9.7% to 1,656 pence after the U.K.-based discount airline operator said total revenues in the first-quarter ending in March jumped 3.8% to 1.77 billion from 1.70 billion in a year ago period.

Net in the quarter swung to profit from a year ago to 5 million compared to a loss of 41 million and diluted earnings per share swung to 1.3 pence.

The company said total revenue per seat in the quarter gained 0.2% to 54.91 while costs per seat slipped 1.4% to 38.66.

The airline forecasted revenue per seat in constant currency for the second-half to drop by low single-digit percentage points.

Asian Markets

Nikkei average in Japan closed nearly unchanged and investors focused on another batch of corporate earnings.

Nomura said annual net rose 5% and revenues rose 4%. Ebara and Hoya jumped but Bridgestone, Takata and Taiyo Yuden declined on earnings.

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Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc