Week Ahead: July Employment Report, 2Q GDP, FOMC July Meeting

stock_marketOver the next several days investors will digest a wide variety of U.S. economic data about the world’s largest economy at a time when corporate earnings season is underway and the U.S. Fed Reserve has already charted its course for completing its massive quantitative easing (QE) stimulus program later in October.

Even despite last Friday’s pullback in the market, U.S. stock indices remain close to all time highs.

Year to date (YTD) the Dow has rallied 2.32 percent, the S&P 500 is up 7.03 percent, and the Nasdaq has jumped 6.54 percent.

On Wednesday the Federal Reserve will wrap up their July FOMC meeting and likely announce that they will keep short term rates at .25 percent until an undetermined period of time in 2015 that depends on how well the U.S. economy holds up during the months ahead.

Also on Wednesday the  U.S. Department of Commerce will give their initial GDP reading for the 2nd quarter in 2014 that is expected to show 3.6 percent GDP growth, according to economists from briefing.com.

First quarter 2014 GDP in the U.S. saw a contraction of -2.9 percent that was largely blamed on the cold weather  during the first 3 months of the year.

On Friday the July non-farm payroll employment report will be closely watched, especially since the U.S. unemployment rate in June dropped to 6.1 percent sooner than the Federal Reserve forecasted while job growth has been stable, averaging well over 200,000 in recent months.

According to briefing.com, the forecast is for 250,000 non-farm payroll jobs added to the economy in July while the unemployment rate is expected to hold steady at 6.1 percent.

The week ahead will see a flurry of new IPO”s with 22 new IPO’s scheduled.

Monday at 10:00 EST will see pending home sales for June.

On Tuesday the Case-Schiller Index for May will be announced at 9:00 a.m. EST followed by consumer confidence for July at 10:00 a.m.

On Wednesday GDP will be released for the 2nd quarter in 2014 followed by the ADP employment report for July and the Federal Reserve’s rate decision.

On Thursday initial claims and Chicago PMI will be reported.

Friday is the non-farm payroll report followed by the ISM index for July, Michigan sentiment in July, construction spending in June, and auto/truck sales for July.

-Johnathan Schweitzer



Facebook’s Profit Jumps, Boosted By Mobile Advertising

facebook3Facebook saw its profits more than double for the second quarter of 2014 as investors drove its shares to an all-time high yesterday in after hours trading after the world’s largest social media company reported financial results that exceeded Wall Street estimates.

“We had a good quarter” said Facebook CEO Mark Zuckerberg. “Our community has continued to grow, and we see a lot of opportunity ahead as we connect the rest of the world” Zuckerberg added.

Facebook’s decision to place more emphasis on mobile advertising has clearly paid off  for the company after the social site accounted for 5.8 percent of the world’s estimated $120 billion in digital advertising in 2013, according to eMarketer.

Mobile advertising revenue for Facebook represented approximately 62 percent of its advertising revenue during the 2nd quarter of 2014, up from approximately 41 percent in the second quarter of 2013.

Facebook is seeking to broaden its mobile advertising platform and even include ads on Instagram.

Facebook’s quarterly revenue from advertising was $2.68 billion, a 67 percent increase from the second quarter of 2013.

Total revenue was $2.91 billion, up 61 percent from $ 1.81 billion during the second quarter of 2013.

Facebook’s mobile users are spending more time on the social media site connecting with friends and viewing content.

Mobile monthly active users (MAU’S) were 1.07 billion as of June 30, 2014, an increase of 31 percent year over year.

Mobile daily active users (DAU’s) were 654 million on average for June 2014, an increase of 39 percent year over year.

Facebook Building Out Search

Facebook CEO Mark Zuckerberg said in the conference call that as of last month, on average, more than one billion search queries are made every day on Facebook.

“This is a great milestone and it shows we are in a unique position to answer a lot of questions for people. But this is just a start” Zuckerberg said.

“And over the next few years as we make progress on building out search and our broader efforts in artificial intelligence, I expect us to deliver even greater utility for people” he added.

In March Facebook spent $2 billion acquiring Oculus VR, a producer of virtual reality headsets.

In February Facebook spent $19 billion acquiring WhatsApp, a popular text messaging app.

-Johnathan Schweitzer



Apple 3Q Earnings: Mixed Picture As Company Prepares For New Product Launches In The Fall

apfulOn Tuesday Apple posted their 3rd quarter earning results that showed a mixed picture in a typically slow quarter with a new product launches expected to be released later in the fall.

For the quarter Apple’s revenues rose to $37.43 billion from $35.32 billion in the same quarter a year ago, slightly lower than the forecast of $37.98 billion, according to analysts from FactSet.

Apple posted a quarterly net profit of $7.7 billion compared to a net profit of $6.9 billion in the same quarter a year ago.

Sales of Apple’s iPhone, its most profitable product, increased 12.7 percent  for the quarter to 35.2 million units while Apple’s iPad sales decreased 9 percent to 13.2 million units compared with 14.6 million units in the same quarter a year ago amid rising competition from Android and saturation in U.S. and European markets.

iPhone sales rose 55 percent in BRIC (Brazil, Russia, India, China) countries and grew 48 percent in China alone, helped by a partnership to sell the smartphone through China Mobile, the world’s largest wireless carrier.

Apple CEO Tim Cook acknowledged the slower tablet growth with the iPad but emphasized that iPad popularity remain strong.

“We’re very bullish about the future of the tablet market” Cook said during the conference call and later admitted that Apple’s theory that the tablet market would eventually surpass the PC market is still intact.

Apple’s $3 billion acquisition of Beats is expected to close this quarter.

Concerning the Beats acquisition, CEO Cook said that “culturally it was a match.”

Apple new CFO Luca Maestri said that Apple expects the current quarter to be “a very busy quarter.”

“We’re very excited about what we have in the pipeline” Maestri added.

Looking ahead to the fall, Apple is expected to unveil a new iPhone 6 with larger with 4.7-inch and 5.5-inch screens, meeting the consumer demand for bigger smartphones.

Apple is also expected to finally release a new wearable device, the iWatch, and a new version of Apple TV.

“We believe the playbook going into September is the same as years past for expected product launches” said Gene Munster, an analyst with Piper Jaffray in a note to investors.

-Johnathan Schweitzer



EU Seeks Tougher Russian Sanctions As Plane Crash Victims Are Transported Home

carsAs a train carrying the remains of victims from Malaysian Airlines flight MH 17 moves away from the pro-Russian separatist controlled area of the plane crash site and to the Ukrainian city of Kharkiv, European Union foreign ministers have met today in Brussels to discuss the downing of the commercial Boeing 777 jet carrying 298 passengers and to consider imposing tougher sanctions against Russia for supporting the pro-Russian separatists accused by the West of shooting down the Malaysian jet.

EU foreign ministers are deciding if they want to match the United States’ recent decision last week to sanction Russia’s largest companies and a list of wealthy Russians with direct ties to the Russian president’s inner circle.

UK PM David Cameron along with other EU leaders are also urging for an arms embargo on Russia after France moved ahead in selling at least one of its Mistral helicopter carriers to Russia.

The current sanction list on the table in Brussels fall short of the sector focused stage 3 sanctions that are capable of crippling Russia’s economy but could also boomerang and hurt the gas dependent economies of the European Union since Russia supplies the EU with roughly 30 percent of its gas.

However, the proposed sanctions still send a strong message to Russian President Putin and his powerful business allies about the consequences of Russia’s decision in March to take over Crimea and then support the pro-Russian separatists in eastern Ukraine, moves that have hurt the Russian economy that teeters near recession and has witnessed investment capital flee the country.

Russia still denies that it is supporting the pro-Russian separatists despite western and Ukrainian intelligence that shows Russia supplying pro-Russian separatists with military equipment.

On Monday, Russia attempted to dismiss Western claims that Russian sponsored separatists were responsible for shooting down flight MH-17 as Russia’s state controlled media continues to send out stories about Ukraine’s military shooting down commercial flight MH-17, mistaking the large Boeing 777 for a Russian spy plane.

The Ukrainian government in Kiev has flat out rejected these Russian media reports.

Secretary of State John Kerry laid out a case on Sunday’s NBC’S Meet the Press for supporting the view that pro-Russian separatists were responsible for shooting down flight MH-17, saying that the U.S. detected a surface to air missile launched in the separatists controlled region during the time of the plane crash.

When speaking on Meet the Press, Secretary Kerry claimed that “we picked up the imagery of this launch” while acknowledging that the U.S. had earlier evidence of a SA-Buk weapons system being sent to the region from Russia.

“We know the trajectory. We know where it came from. We know the timing. And it was exactly at the time that this aircraft disappeared from the radar” Kerry added.

Kerry said that they detected the separatists were bragging about shooting down the plane moments after it crashed.

“We also know, from voice identification, that the separatists were bragging about shooting it down afterwards” Kerry said.

Valentyn Nalyvaichenko, head of Ukraine’s Security Service, said that Ukraine’s government was able to obtain intercepted phone calls between members of Russia’s intelligence agency and pro-Russian separatists that includes a discussion of the plane being shot out of the sky, according to the Kiev Post.

-Johnathan Schweitzer



EU Considering Tougher Sanctions Against Russia

removingOver the week-end, British PM David Cameron chaired an emergency meeting on the downing of Malaysian Airlines flight MH17 and had several discussions with other world leaders, including a phone conversation with Russian President Vladimir Putin on Sunday evening.

According to a statement from PM Cameron’s office, Britain’s Foreign Secretary will attend the Foreign Affairs Council in Brussels on Tuesday where he will be working with other EU colleagues to apply pressure on Russia through further sanctions.

Europe’s three heavyweights, Germany, France, and Great Britain have all agreed that the European Union must “reconsider” its approach to Russia following the downing of flight MH 17 on July 17th as accusations grow louder that pro-Russian separatists shot down the plane using a Russian supplied SA-11 Gadfly surface to air missile system.

The European Union has the ability to impose far reaching economic sanctions on Russia compared to the United States.

Russia supplies approximately 30 percent of the European Union’s gas.

Oil and gas account for 70 percent of Russia’s exports.

The European Union also holds many more business and trade pacts with Russia compared to the United States.

Four days ago, President Obama sanctioned Russia’s largest companies just hours before the downing of Malaysian Airlines flight MH 17 while the European Union sanctioned new development loans to Russia and wealthy Russians.

New Jersey Democratic Sen. Robert Menendez, chairman of Senate Foreign Relations Committee, appeared on Fox News Sunday and urged the West to take a tougher stance towards Russia.

“Before the shoot down, I was an advocate of further reaching sanctions to stop Russia’s aggression and let Putin know the consequences of continuing that form of aggression. The West, including the United States, has to have a far more significant response than we’ve seen to date” Menendez said.

On Meet the Press aired on NBC, U.S. Secretary of State John Kerry acknowledged that Russia is playing a significant role supporting the separatists as they battle the Ukrainian military for greater control over southeastern Ukraine.

“It is clear that Russia supports the separatists, supplies the separatists, encourages the separatists, trains the separatists,” Kerry said.

Secretary Kerry pointed out that the area where Malaysian Airlines Flight MH 17 was downed last week is controlled by pro-Russian separatists and Russian military convoys were observed being transferred to the separatists to assist them gaining control over the region.

“In the last month, we have observed major supplies moving in. Several weeks ago, about a 150-vehicle convoy, including armored personnel carriers, tanks, rocket launchers, artillery, all going in and being transferred to the separatists” Kerry said.

“So there’s a stacking up of evidence here, which Russia needs to help account for. We are not drawing the final conclusion here. But there is a lot that points at the need for Russia to be responsible” Kerry added.

International observers were permitted to visit more of the crash sites in southeastern Ukraine on Sunday but the armed separatists have not granted full access to all of the plane wreckage.

On Monday the U.N. Security Council is planning to schedule a vote on a new resolution that would condemn the downing of Malaysian Airlines Flight MH 17 in Ukraine last week, demand access to the plane wreckage site from the armed pro-Russian separatists guarding the area, and ask states in the region to cooperate with an international investigation trying to search for evidence about the cause of the plane crash.

-Johnathan Schweitzer



U.S., Russian Leaders Press For Ending The Conflict In Ukraine

REBELSFollowing the July 17th crash of Malaysian Air Flight MH 17 over the Donetsk region in southeastern Ukraine, pressure is building on Russian President Vladimir Putin to reign in the pro-Russian separatists that are believed by a growing body of world leaders to have shot down flight MH17 by means of BUK-M surface to air missile weapon with sophisticated technical support coming from Russia.

Although pro-Russian separatists in Ukraine deny taking responsibility for the downing of flight MH-17 and claim that Ukraine’s military shot down flight MH 17 because they thought it was a Russian spy plane, military experts believe that the Russian made radar guided BUK-M weapon, also known as SA-11 Gadfly, was witnessed being used by pro-Russian separatists earlier in the week in the same separatists controlled region when they shot down a Ukrainian cargo plane and has the capability to strike down Malaysian Air Flight MH 17 from its cruising altitude of 33,000 feet.

The separatists’ theory about Ukraine’s military shooting down flight MH 17, thinking it was a Russian spy jet, doesn’t seem plausible since the flight originated from the Netherlands in the west and didn’t follow a flight path through Russia.

Moreover, a large Boeing 777 commercial jet is rarely mistaken for a spy plane.

Vitaliy Nayda, a Ukraine state security official, said today in Kiev that pro-Russian separatists had at least 3 BUK-M weapons in their possession last week.

UK Prime Minister David Cameron’s office said in a statement that both the UK and Netherlands will take a closer look how their two countries approach Russia following the crash of  Malaysian Air flight MH-7.

“The PM and PM Rutte agreed that the EU will need to reconsider its approach to Russia in light of evidence that pro-Russian separatists brought down the plane” PM Cameron’s statement reads.

Since the Malaysian Air plane crash over Ukraine on July 17th, pro-Russian separatists have been witnessed  blocking access to the plane wreckage for investigators.

Dutch Prime Minister Mark Rutte told journalists on Saturday that President Putin must now take responsibility after pro-Russian separatists have blocked access to the crash site.

Russian President Vladimir Putin recently encouraged the armed separatists to cooperate with investigators.

U.S. Secretary of State John Kerry held a phone call with Russian Foreign Minister Sergei Lavrov on Saturday and the two leaders pressed for investigators to gain full access to the crash site.

Kerry and Lavrov also encouraged the two sides in Ukraine to work closer towards achieving the goals of a April 17th diplomatic meeting in Geneva aimed at ending the armed conflict in Ukraine.

A statement from the April 17th Geneva meeting states that the parties would refrain from “violence, intimidation, or provocative actions” and that all “illegal armed groups will be disarmed.”

The statement further reads: “All illegal armed groups must be disarmed; all illegally seized buildings must be returned to legitimate owners; all illegally occupied streets, squares and other public places in Ukrainian cities and towns must be vacated.”

Yesterday President Obama made a case for ending the conflict in Ukraine through supporting a pathway to peace originated by the Ukrainian government.

Obama said yesterday during a White House press conference, “I think it’s important for us to recognize that this outrageous event underscores that it is time for peace and security to be restored in Ukraine.  For months, we’ve supported a pathway to peace, and the Ukrainian government has reached out to all Ukrainians, put forward a peace plan, and lived up to a cease-fire, despite repeated violations by the separatists — violations that took the lives of Ukrainian soldiers and personnel.”

-Johnathan Schweitzer






World Leaders Search For Answers About The Shooting Of Malaysian Air Commercial Jet

crashA Malaysian Air passenger jet that crashed yesterday in a volatile region of Ukraine, killing all 298 aboard, was shot down from the sky by a missile, according to U.S. and Ukrainian officials.

International leaders are now demanding an investigative probe to determine who was responsible for the downing of the Malaysian Air commercial jet that was headed from Amsterdam to Kuala Lumpur.

The plane crash occurred less than a day after U.S. President Obama imposed a new round of sanctions on some of Russia’s largest companies for Russia’s provocations in Ukraine, a claim that Moscow denies.

Russian President Vladimir Putin had a recent telephone call with Dutch Prime Minister Mark Rutte and asked for a “thorough and unbiased” investigation into the Malaysian airliner crash in eastern Ukraine, according to Reuters on Friday.

Over 150 Dutch passengers were aboard the flight when it crashed near the Ukrainian-Russian border in Donetsk, a pro-Russian separatist controlled area that has witnessed fierce fighting in recent weeks along with an escalation of sophisticated weaponry.

Dutch Prime Minister Mark Rutte ended his vacation early in Germany to console family members of the Dutch crash victims back in Amsterdam.

“This beautiful summer day has ended in the blackest possible way” Rutte said at Schiphol Airport.

Valentyn Nalyvaichenko, the head of Ukraine’s Security Service, said that Ukraine’s government was able to obtain intercepted phone calls between members of Russia’s intelligence agency and pro-Russian separatists that includes a discussion of the plane being shot out of the sky, according to the Kiev Post.

Pro-Russian separatists near the crash site were opposed to allowing Ukrainian officials to approach the crash site to carry out an investigation but they are now considering a 3 day truce with Ukrainian forces.

Earlier in the week, pro-Russian separatists shot down a Ukrainian cargo plane using a surface to air missile fired from a Russian Buk launcher.

Russian President Vladimir Putin has denied that Russia is aiding and supplying the pro-Russian separatists that are seeking to control large areas of eastern Ukraine.

The United States along with its EU partners and a host of world leaders believe that Russia has armed and supported pro-Russian separatists in Ukraine.

Australian Prime Minister Tony Abbott demanded on Friday that Moscow respond to questions about the “Russian-backed rebels” that he said were behind the plane crash.

U.S. President Barack Obama said on Thursday in Delaware that the U.S. is prepared to offer any support to help figure out what happened with the plane crash.

“The United States will offer any assistance we can to help determine what happened and why” Obama said.

Johnathan Schweitzer


U.S. Sanctions Russia Over Ukraine

obbbPresident Obama imposed tougher sanctions on Russia yesterday for its provocations in Ukraine, targeting some of Russia’s largest companies and financial institutions as Moscow builds up more troops along the Ukraine-Russian border and stands accused of supporting the separatist movement in Ukraine over the past several weeks.

President Obama made it clear that the new sanctions are being issued due to Russia’s support for separatists in Ukraine and violations of Ukraine’s sovereignty.

“Along with our allies, with whom I’ve been coordinating closely the last several days and weeks, I’ve repeatedly made it clear that Russia must halt the flow of weapons and fighters across the border into Ukraine; that Russia must urge separatists to release their hostages and support a cease-fire; that Russia needs to pursue internationally-mediated talks and agree to meaningful monitors on the border” President Obama said on Wednesday before reporters.

The new sanctions target some of  Russian President Vladimir Putin’s closest business allies and prevents Russian oil companies such as Rosneft Oil, gas producer Novatek, and Gazprombank from accessing American capital markets.

“We are freezing the assets of several Russian defense companies.  And we are blocking new financing of some of Russia’s most important banks and energy companies” Obama said on Wednesday.

Also included in the sanction list are a state owned bank, VEB, several Russian defense companies, and four Russian government officials.

President Obama said that the actions are being taken in close consultation with our European allies and the sanctions are “designed to have the maximum impact on Russia while limiting any spillover effects on American companies or those of our allies.”

But the response from leaders of the European Union in Brussels has been less confrontational thus far, targeting only wealthy Russian individuals and new development loans to Russia.

European Union leaders have told Putin in recent weeks to stop sending troops and weapons across the border into Ukraine while encouraging a cease fire.

Washington claims that up to 12,000 Russian troops have returned to the Ukrainian-Russian border and Russian weapons are crossing the border to arm the separatists.

Russian President Putin responded to the U.S. imposed sanctions and spoke to reporters from Brasilia where he was gathered in a meeting with other leaders from BRIC nations (Brazil, Russia, India, China).

“Sanctions have a boomerang effect and without any doubt they will push U.S.-Russian relations into a dead end, and cause very serious damage, and it undermines the long term security interests of the U.S. State and its people” he told reporters.

-Johnathan Schweitzer





Retail Sales and Fed Chair Yellen’s Testimony In Focus

ssdOn Tuesday the release of retail sales for the month of June at 8:30 a.m. EST followed by Fed Chair Janet Yellen’s testimony before the Senate Banking Committee at 10:00 a.m. EST are expected to move U.S. stock markets.

The forecast for retail sales in June is expected to rise 0.7 percent, according to briefing.com, higher than May’s 0.3 percent increase that missed estimates.

Later in the morning, Fed Chair Janet Yellen will give a prepared speech about the Fed’s monetary policy and face some questioning about whether the U.S. central bank should maintain its stance of keeping short term interest rates at historic lows of .25 percent since the depths of the recession in late 2008 as the U.S. economy picks up steam, the unemployment rate has dropped to 6.1 percent, the lowest level since 2008, and inflation has moved to 1.8 percent, ever closer to the Fed’s inflation target of 2.0 percent.

In March Fed Chair Yellen admitted that interest rate increases could begin in the first half of 2015, around six months after it winds down its quantitative easing asset purchases, an earlier timeline that some economists had expected.

But Yellen has since backed down from the “first half of 2015″ scenario that initially caused a stir in global markets.

During the release of the June Fed Minutes last week, the Fed Committee released a vague statement indicating the Federal Reserve will maintain the federal funds rate at the historic low of .25 percent “for a considerable time after” the QE3 asset purchase program ends in October and “some time after” the rate of inflation nears its 2 percent mandate and maximum employment is reached.”

Some other data for Tuesday morning includes Empire manufacturing, business inventory, and trade reports with export/import prices.

On Wednesday Fed Chair Yellen will speak before the House Financial Committee beginning at 10:00 a.m.

-Johnathan Schweitzer

Wells Fargo 2nd Quarter Profits Rise Matching Estimates; Quarterly Revenue Declines

wellsWells Fargo kicks off second quarter earnings for America’s largest banks with several other major banks reporting earnings next week.

Wells Fargo reported a 2nd quarter profit of $5.73 billion or $1.01 a share, compared with a profit of $5.52 billion or .98 cents a share in the same quarter a year ago.

Wells Fargo’s 2nd quarter results matched consensus estimates of  $1.01 a share.

The San Francisco based bank posted a 3.8 percent increase in profits as costs declined although quarterly revenue dropped to $21.1 billion compared with $21.4 billion in the same quarter a year ago.

Wells Fargo ended a 17 quarter winning streak of rising earnings per share compared with the previous quarter.

“By continuing to serve customers we grew loans, increased deposits and deepened our relationships. Our results also reflected strong credit quality driven by an improved economy, especially the housing market, and our continued risk discipline,” Wells Fargo CEO John Stumpf said.

-Johnathan Schweitzer