Wall Street Breakfast
Amazon Punished After Massive Loss
Oct. 24, 2014 6:31 AM ET | 1 comment | Includes: AMCX, AMZN, C, DDAIF, ELNK, GM, HMC, HSBC, JCOUF, LMT, MSFT, QQQ, RBS, RRCEF, SAFRY, SAN, SD, SPY, TKTDY, TM, TSLA, ZLPSF
Economy
A NYC doctor, who returned to New York ten days ago after treating Ebola patients in West Africa, has tested positive for the virus. Late in the trading session yesterday, stocks gave back some of their big gains on a report he had been hospitalized with Ebola-type symptoms. Meanwhile, Mali has confirmed its first case of Ebola, becoming the sixth West African country to report a case of the virus.
China's $50B Asian Infrastructure Investment Bank launched this morning, as the U.S. said it had concerns about the new rival to Western-dominated multilateral lenders, such as the World Bank. The new infrastructure bank aims to give project loans to developing nations. "We have concerns about the ambiguous nature of the AIIB proposal as it currently stands, that we have also expressed publicly," said State Department spokeswoman Jen Psaki.
ISIS makes its fortune by selling oil from seized territory to its enemies, including middlemen from Turkey, Kurds in Iraq and the regime of Bashar al-Assad, says Treasury official David Cohen. The Treasury estimates ISIS is earning at least $1M a day through oil sales, and since it funds itself, it is far harder for western authorities to sever the flow of money to the group. The U.S. government is still working on tracking the oil routes, and will "target for financial sanctions anyone who trades in stolen oil," reports Cohen.
Thirty-one banks are set to participate in the Fed's 2015 stress tests, which will see how they can withstand pressures such as a spike in oil prices, a rise in the U.S. unemployment rate or an increase in risky corporate loans. The capital plans are due in January. Among the banks that failed last year's tests are Citigroup (NYSE:C), HSBC (NYSE:HSBC), Santander (NYSE:SAN) and RBS (NYSE:RBS). This Sunday, the ECB will release results for stress tests of 130 eurozone banks amid a deteriorating economic outlook for the region.
Stocks
Amazon's surge in spending on new-product development, music and video licensing, and other parts of the company’s expansion strategy led to a net loss of $437M in the Q3, its largest quarterly loss in 14 years. The wider loss came despite a 20% jump in revenue to $20.58B. Amazon (NASDAQ:AMZN) also took a $170M charge on its Fire smartphone, which was released in July but is selling poorly. AMZN -10.6% premarket.
Microsoft reported higher-than-expected quarterly revenue, boosted by stronger sales of its phones, Surface tablets and cloud-computing products for companies, while keeping its profit margins largely intact. Despite a $1.1B charge related to mass layoffs announced in July, Microsoft (NASDAQ:MSFT) reported profit of $4.5B, or $0.54 cents per share, beating estimates of $0.49 per share. Full-year opex guidance is unchanged at $34.2B-$34.6B. MSFT +3.1% premarket.
Toyota is now the next automaker to sell a stake in Tesla (NASDAQ:TSLA), although it did not disclose the timing or amount of the sale. Daimler (OTCPK:DDAIF) unloaded its remaining 4% stake in the electric car company earlier in the week for $780M. Toyota (NYSE:TM) invested $50M in Tesla in May 2010 (giving it a 2.5% stake at the time), ahead of the company's IPO in June that year.
Lockheed Martin and U.S. defense officials have reached agreement on the terms of a contract worth about $4B for an eighth batch of 43 Lockheed (NYSE:LMT) F-35 fighter jets, Reuters reports. The new contract lowers the cost of the jets by about 3%. Both sides had expected to reach a deal early in the summer, but negotiations slowed after an engine failure in June grounded the entire F-35 fleet for weeks. LMT +0.6% premarket.
Rolls-Royce has finalized an initial 25-year deal to form a JV with Safran's (OTCPK:SAFRY) Hispano-Suiza unit to design and develop accessory drive train transmissions for Rolls-Royce's (OTC:RRCEF) full range of future aircraft engines. A production plant will be built in a competitive country starting next year, with the aim of starting operations in late 2016 or early 2017.
AMC Networks has acquired a 49.9% stake in BBC America with an investment of $200M. Under the deal, AMC Networks (NASDAQ:AMCX) will have operational control of BBC America, including affiliate and advertising sales, and the network will be operated as a stand-alone channel within AMC's portfolio. BBC Worldwide will retain a 50.1% stake in BBC America.
The in-house financing arm of General Motors, GM Financial, says it received additional subpoenas in September from state attorneys general and other authorities over its subprime auto lending and securitization practices. GM (NYSE:GM) received a similar subpoena from the U.S. Department of Justice in July.
Honda does not have plans to abandon Takata, and will continue to do business with the airbag supplier despite an expanded recall affecting 5M Honda cars nationwide. Decisions will be made after gauging the results of the regional vehicle recalls in the U.S., says a top Honda (NYSE:HMC) exec. Toyota (TM) declared its commitment to stick with Takata (OTCPK:TKTDY) yesterday, issuing a similar statement.
Top Ideas
EarthLink (NASDAQ:ELNK) - new article by Alpha Shrugged »
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Today's Markets:
In Asia, Japan +1% to 15292. Hong Kong -0.1% to 23302. China flat at 2302. India closed.
In Europe, at midday, London -0.4%. Paris -0.6%. Frankfurt -0.5%.
Futures at 6:20: Dow -0.1%. S&P -0.3%. Nasdaq -0.3%. Crude -1% to $81.30. Gold +0.3% to $1232.40.
Ten-year Treasury Yield -3 bps to 2.25%
Today's economic calendar:
10:00 New Home Sales
Notable earnings before today's open: AAN, AVY, B, BMY, CHH, CL, COG, DLPH, DTE, EDU, ERIC, F, FLIR, FNFG, IDXX, IMGN, IMS, LEA, LPNT, LYB, MCO, MGLN, NDAQ, OCR, PG, SFE, SHPG, STT, SXC, TCB, UPS, VTR, WBC, WYN
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