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Market Update

Yellen Stresses Rate Hike Pace, China Expands at 7% Rate


Author: Nichole Harper
ticker.com
Last Update: 2:37 PM ET July 15 2015

2:30 PM – Market indexes on Wall Street struggled near the recent highs and Fed Chair Janet Yellen reiterated central bank’s commitment to raise rates. Yellen stressed that the future pace of increases are more important than the timing of the first increase. China said economy expanded at 7% rate in second quarter.

Stocks on Wall Street struggled to advance after first two hours of trading and widely followed indexes gave up most of the gains of the day.

Federal Reserve Chair Janet Yellen reiterated central bank’s commitment to raise rates as early as this year but she did not give the time frame.

Yellen stressed that the timing of rate increase is less critical than the pace of future increases and she said Fed estimates for higher rates in the current year are projections and “not statements of intent to raise rate at any particular time.”

The seasonally adjusted Producer Price Index in June jumped 0.4% followed by 0.5% increase in May but 0.4% decrease in April, the Department of Labor said.

Industrial production in June rose 0.3% from May. Manufacturing production was unchanged and mining production rose 1% and utility output grew 1.5%.

Total industrial production in June jumped 1.5% from a year earlier and capacity utilization for total industry increased 78.4%, Federal Reserve Bank reported.

On Wall Street, Tollbooth Strategy Index rose 15.47 to 10,926.02.

S&P 500 index edged up 1.66 to 2,110.53 and the Nasdaq Composite Index gained 0.2% or 7.77 to 5,112.58.

Crude oil in New York fell $1.25 to $51.79 a barrel and gold slid $9.40 to $1,144.10 an ounce.

U.S. Movers

Bank of America Corp (BAC) jumped 3% or 52 cents to $17.65 after the financial services provider reported total revenue in the second-quarter ending in June decreased 1.7% to $22.12 billion from a year ago period.

Net income in the quarter soared 132.3% to $5.32 billion or 45 cents per diluted share compared to $2.29 billion or 19 cents from the same quarter last year.

The bank said consumer banking deposits in the quarter jumped 6% to $547 billion and Merrill Edge brokerage assets climbed 15% to $122 billion. Global banking loan balances advanced 7% to $307 billion.

Celgene Corporation (CELG) soared 9.6% or $11.61 to $134.61 after the biopharmaceutical company agreed to acquire rival Receptos Inc for $7.2 billion, a 12% premium to closing price of July 14.

The transaction is expected to close in the third-quarter.

Shares of Receptos Inc surged 10.3% to $228.59.

Delta Air Lines, Inc (DAL) slipped 1.7% or 72 cents to $42.94 after the air transportation company reported revenue in the second-quarter ending in June edged up 0.8% to $10.71 billion from a year ago period.

Net income in the quarter surged 85% to $1.49 billion or $1.83 per diluted share compared to $801 million or 94 cents from the same quarter last year.

Yum! Brands, Inc (YUM) slumped 2.5% or $2.31 to $89.27 after the quick service restaurants operator said revenue in the second-quarter ending in June fell 3% to $3.11 billion from a year ago period.

Net income in the quarter plunged 30% to $235 million or 53 cents per diluted share compared to $334 million or 73 cents from the same quarter last year.

The company's sales at established KFC and Pizza Hut restaurants in China declined by 10% including declines of 12% at KFC and 4% respectively.

Same-store sales in the quarter at Taco Bell jumped 6%. KFC same-store sales increased 3% while Pizza Hut same-store sales were flat.

Worldwide system sales rose 3%.

European Markets

European markets edged lower as Greece prepares to approve the latest agreement with international lenders.

At least 30 members of the ruling coalition are expected to vote against the accord, however Prime Minister Alexis Tspiras is expected to win the backing of opposition members.

The governing coalition is so fractured after the Tspiras made turn around and accepted all the conditions offered by the lenders but rejected by the popular referendum only a week ago.

The latest agreement calls for pension and tax reforms and streamlining of bankruptcy laws and widening tax net, that many believe will not be enough to revive the Greek economy.

Greece in the past has failed to implement majority of reforms demanded by international lenders. And asking more of same in exchange of additional $95 billion over the next three years is not expected to solve the problem.

After five years of three bailouts of $300 billion, Greek economy has contracted 25% and jobless rate is over 24% in a nation of 10 million people.

In London trading, FTSE 100 index edged down 2.24 to 6,751.41 and in Frankfurt the DAX index gained 0.3% or 36.16 to 11,553.04.

In Paris, CAC 40 index rose 0.4% or 18.23 to 5,050.63.

U.K. unemployment rate for three months to May jumped 5.6% from 5.5% in the previous three months but dropped from 6.5% in a year ago period, Office of the National Statistics said.

ASML Holding NV increased 2.8% to €96.82 after the Netherlands-based semiconductor equipment maker reported net sales in the second-quarter ending on June 29 edged up to €1.65 billion from €1.64 billion in a year ago period.

Net profit in the quarter declined 7.3% from a year ago to €369.7 million compared to €398.7 and diluted earnings per share decreased to €0.85 from €0.90.

ASML forecasted net sales for the third-quarter in the range of €1.5 billion to €1.6 billion and a gross margin of around 45%.

BHP Billiton Plc gained 1.7% to 1,257 pence after the U.K. and Australia based mining company announced a write down of its U.S. onshore petroleum business for about $2 billion after-tax for fiscal 2015 after developing a gas field in Texas is deemed to be more complex and expensive than previously expected.

BHP also estimated to produce 255 million barrels of oil equivalent in second-quarter to June.

Asian Markets

Nikkei average advanced after the Bank of Japan left its reference rate on hold and left its target to stimulate the economy unrevised. However, the central bank lowered its annual growth estimate to 1.7%.

Nippon Prologis quarterly revenues rose 6% and Fujifilm expanded its stock repurchase plan.

Nikkei average in Tokyo advanced after the Bank of Japan left its interest rate and stimulus policy and targets unchanged and China reported better than expected economic growth.

As widely expected, after a two-day policy meeting the Bank of Japan kept its benchmark lending rate on hold at 0.1% and the central bank lowered its growth estimate for the year to 1.7% from the previous estimate of 2%.

Separately, the bank also left its target unchanged for the stimulus program and expand the monetary base at an annual pace of about 80 trillion yen.

China’s second quarter growth was 7% and industrial production rose at 6.8% and retail sales surged 10.6%, according to the latest data released by the statistics bureau.

The Nikkei 225 Stock Average gained 78 or 0.4% to 20,463.33 and the broader Topix index rose 7.70 to 1,646.41.

The yen closed at 123.45 against a dollar.

Takashimaya Company, Limited soared 4.2% to 1,171 yen after the department store operator said sales in June jumped 2.9% and sales at four regional stores in Okayama, Gifu, Yonago and Takasaki increased 2.6%.

Sensex in Mumbai extended gains in the week after wholesale inflation index declined for the eight month in a row and investors shifted focus to domestic earnings.

Rupee weakened 2 paisa to 63.41 against one U.S. dollar.

The Sensex Index jumped 265.39 or 0.9% to close at 28,198.29. The CNX Nifty gained 69.70 or 0.8% to 8,523.80.

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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