Market briefing --- Lane (medium)
Texas Instruments --- Bob (fast)
Greenspan's testimony --- Su (fast)
>> welcome to "world financial report." i'm lane bajardi. thanks for joining us. texas instruments released the much-anticipated mid quarter update today, and bob bowdon joins me now with a summary. bob, some key news here.
>> indeed. thank you, lane. two stories. the midpoint of the earnings forecast goes up, but the midpoint of the revenue forecast goes down. the company now repredicting nernings a range between 27 and 29 cents a share. the previous forecast had the low end of the range one penny a share lower starting at 26 cents a share. it's particularly relevant because if you look where analysts were expecting, they were down there at the low end of the previous forecast at 26 cents a share, so it's clear now that earnings will surpass analysts estimates. now we turn to the revenue news where it was a set of-instead of bullish, it was bearish. revenue coming in at $3.1 to $3.24 billion. a previous forecast was $3.2 billion to $3.44 billion. and analysts were looking for $3.3 billion towards the top of the previous range. in other words, a new revenue range makes it clear that t.i. will miss analysts forecasts for revenue. the mirror image of the fact they will exceed analysts forecasts for earnings. an analyst who followed shares of texas instruments from raymond james attributed the revenue miss to ongoing inventory problems.
>> this is an ongoing inventory shift in china and an ongoing inventory component correction going on elsewhere. and the overall handset market we see that cycle similar to the p.c. market maturing as well. and growth rates from 20% this year to the low teens next year. i think t.i., given their exposure in that segment will feel the impact.
>> checking texas instruments shares in the after hours trading, it's clear investors focus more ton good earnings news than the bad revenue news. t.i. shares are up 33 cents and now 34 cent at $19.17. want to look at other chip makers and see how they're doing. intel up by cents. xilinx up 14 cents and micron up six cents a share. qualcomm, motorola, and nokia up in the extended hours trading. also wanted to bring you chip equipment stocks and show you applied materials is up six cents. k.l.a.-tencor is down six cents in the after hours. once again, that's what this is. the reason i'm bringing you in particular the chip equipment stock is because of a late breaking news ton bloomberg terminal. t.i. says that capital spending down 30% in the second half of the year. also, t.i. sees capital spending l t.i. says capital spending was above $750 million in the first half of the year, but it sees that spending down 30% in the second half of the year. well, moving on, i also want to show you the bloomberg terminal in the after hours chart and where t.i. shares are trading. it closed in the regular session at $18.83. thats a right here. right now since the news broke of the mid quarter update, we have seen shares in the $19 to $19.20 range up here. certainly a positive move of this mixed message. people are taking the-seeing the glass half full, you might say, on t.i. news. lane, back to you.
>> sko, bob, all this comes ton heels of what we heard from intel last week, so this is key following that. thank you very much, bob bowdon. federal reserve chairman alan greenspan says the u.s. economy is picking up and the spike in oil prices is not causing inflation to accelerate. that is the other big story this hour and bloomberg's su keenan has more on greenspan's testimony before the house budget committee. s snurks.
>> all right, lane. some economists say that the fed may not raise rates at as fast a pace as expected for late they are year.
>> the message he's trying to send to the financial markets is look out for another rate hike. the fed is very slikely to hike rates on september 21. and he wants to make that clear to the markets .
>> greenspan said the economy has regained traction and despite the summer surge in oil prices "inflation and inflation expectations have eased." he also says that it's difficult to gauge the impact of record energy prices ton consumer and the economy.
>> i don't think anybody has got a number which i would feel comfortable with. in other words, i know it has an effect. i know it's there. but i'm almost certain that at $30 oil, we would be doing better than we are today. but by how much, i think that's extraordinarily difficult to judge.
>> some aspects of greenspan's testimony, including the quote that enumerable areas of the economy are doing poorly were interpreted as signaling g.d.p. will slow to his projections of 3.9%.
>> seems like we're on track and greenspan is suggesting we're on track nor that as well and it doesn't seem he was nearly as optimisting at the hum humphrey hawkens testimony.
>> others say there were few surprises.
>> he said what we knew already and mainly that july and august were better months than june and the economy is basically on the pretty sound footing. we've got still some soft areas to go. i'm not sure that he was declaring the soft patch over yet.
>> in response to questions about the deficit, greenspan did express concern.
>> the prospects for the federal budget over the longer term remain troubling. with the baby boomerers starting to retire in a few years and health spending continuing to soar, our budget position will almost surely deteriorate substantialfully coming years if current policies remain in place.
>> a lot of reaction coming in today from billionaire financier carl icon had this reaction. we all have to real ties economy can go either way, he said. lane back to you.
>> all right, su keenan. still to come here, stocks fell as lower profit forecasts from companies such mckesson, dean foods, and coca-cola enterprises overshadowed fed chairman's alan greenspan's comments. the dow jones industrial average down on the day 29 points, 10,313. the s&p 500 and the nasdaq down nearly half a percent. nasdaq lower by eight point. s&p down five. volume at the new york stock exchange almost identical to the previous session. 1.25 billion shares. take a look at nasdaq volume and 1.44 billion shares changing hands there. take a look at other ind kaytors of the market . you see the nyse composite down a third of a percent. the amex down fractionally and the russell 2000 lower by nearly 1%. small caps underperformed.
>> and the dow jones wilshire 5000 showing a loss of 52 points or a half a percent. treasuries gained after the greenspan comments sounded less optimistic than some investors had expected if 10-year treasury yielding 4.16%. the five-year up 13/32 yielding 3.36%. and the two year up 5/32 on the day. u.s. consumers more than doubled the pace of borrowing through charge cards and installment loans in july. the federal reserve reported consumers added nearly $11 billion to nonmortgage debt. measured at an annual rate, borrowing rose 6.4% in july after rising 2.6% in june. the level of outstanding credit stands at over $2 trillion. news from the airline industry, delta airlines cutting as many as 7,000 jobs as part of a plan to avoid bankruptcy. the nation's number three carrier also outlined plans to restructure half of delta's network by january and will boost by a third the number of planes operate bid the low cost song unit. all this is part of a drive to save $5 billion annually. without those lower costs, chief executive says that delta may have to file for chapter 11 bankruptcy protection. the airline has been trying for more than a year now to get the pilots to accept a 1/3 pay cut and pension changes worth $1 billion annually. verizon is selling the canadian phone directory unit for $1.5 billion. the buyer is boston-based bain capital. it's subject to regulatory approval sand expected to be completed by the end of the year. verizon plans on using the money to invest in high-speed internet internet access and the fiber line. they may increase spending four fold next year. the stock has gained 15% so far this year, well outpacing the major market averages. alan greenspan says the economy is gaining traction. not so says our next guest. we'll hear from the economic center for research institute coming up next.
