When Spanish 10-year bond yields pushed the 7% mark, analysts were warning that the country couldn't stay solvent long term paying such an abhorrent amount to finance itself. After Spanish banks received bailouts from the European Central Bank, the rates retreated below the 7% line of demarcation. However, it's apparent that six Spanish regions are now going to need bailout packages from the central government, sending investors fleeing for safe investments, primarily into U.S Treasuries and German bunds.
The day overall was spoiled with a heavy sell-off internationally as well as domestically. The Dow Jones Industrials (INDEX: ^DJI ) lost 200 points when markets opened, but the index continued to increase slightly as investors cooled on the euro debacle, ending the day down 0.79%. Oil, on the other, hand fell thunderously as Spain's sovereign-debt crisis was coupled with the Chinese central-bank advisor's prediction of even slower growth in the world's most populous nation.
Gain/ Loss %
|Dow Jones Industrial Average||(101.11)||(0.79%)|
|WTI Oil Futures||(3.44)||(3.69%)|
Source: Yahoo! Finance.
Starting in the Dow, McDonald's (NYSE: MCD ) reported lower-than-expected earnings of $1.32 per share, $0.03 under analysts' expectations, dropping the stock price 2.9%. The company was hurt by the strengthening dollar as well as higher commodity prices and slowing European sales. Investors should see this rare miss as an opportunity to jump on the fast-food company, with valuations still on the cheap side. The company sports a price to EBITDA under 12, and with a 3.10% dividend, the company still looks extremely attractive.
VMware (NYSE: VMW ) reported second-quarter earnings after the markets closed and reported an earnings slide of 13% compared with last year's quarter as margins were pinched. EPS came in $0.22 below analyst estimates of $0.66 per share. However, right before its earnings announcement, the software maker publicized its plans to acquire Nicira for $1.26 billion. The deal is expected to close in later this year.
Today was not kind for energy companies but Halliburton (NYSE: HAL ) bucked the trend after beating analyst estimates for the second quarter. The E&P service provider recorded revenues of $7.2 billion, a 22% increase year over year, and beat analyst estimates by $0.05 per share. Like Schlumberger last Friday, international revenues and operating margins gave Halliburton the additional lift.
Also in the energy sector, NRG Energy (NYSE: NRG ) acquired GenOn Energy for $1.7 billion, creating the largest independent power producer in the United States. Both companies increased precipitously on the day. The new, revamped company will keep NRG's name and will have generating capacity of 47,000 megawatts on both coasts. This acquisition is unique because the new company will have enough power for 40 million homes and, since it is an independent producer, will not have a regulatory body to determine rates the company will be able to charge. The trade-off while be more volatility in the pricing of its energy production.
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