Warren Buffett’s Berkshire Hathaway Inc. (BRK.A) and (BRK.B) shares received a
downgrade by Standard & Poor’s Ratings Services on Thursday. S&P dropped the
firm one notch to 'AA' with a negative outlook. S&P credit analyst John Iten
said, “The lower credit rating on BRK better reflects our view of BRK’s
dependence on its core insurance operations for most of its dividend income. The
ratings reflect our view of Berkshire’s excellent business risk profile and very
strong financial risk profile, built on an extremely strong competitive position
and very strong capital and earnings.”
Cisco Systems, Inc. (CSCO: NASDAQ) shares were hosting a 12% gain into early
afternoon trading, striking the largest gain seen since August 2011. Cisco said
Wednesday afternoon that earnings rose more than 14% fiscal Q3 with revenue
rising 5% to $12.2 billion. Cash flows from operations were $3.1 billion for the
quarter and the company ended the quarter with nearly $47.4 billion in cash and
equivalents. Cisco reported net income of $2.5 billion, or 46 cents per share.
“There is no doubt that the pace of change in our industry is only increasing,”
CEO John Chambers said on a conference call on Wednesday afternoon. “Let me be
very clear. Change has always been good for Cisco. We use these times of change
to get closer to our customers, transform our business, and drive new
opportunities and at the same time, break away from our competition.” The
company expects adjusted earnings to come in the range of 50-52 cents per share
with expected revenues to grow between 4% and 7% from same period 2012. Cisco
added in its forecast that “while we like the trends, we are managing the
business to account for a continued slow steady recovery.”
Internal Revenue Service Commissioner Steven Miller is out. A congressional
source has said the IRS has identified two "rogue" IRS employees in the
Cincinnati office as being principally responsible for the "overly aggressive"
handling of requests by conservative groups for tax-exempt status. Miller met
with Senate Finance Committee Chairman Max Baucus of Montana on Tuesday to
discuss an appearance before Congress. Miller reportedly said the staffers have
already been disciplined and emphasized that the problem with IRS handling of
tax-exempt status for tea party groups was not limited to only two employees.
U.S. Attorney General Eric Holder on Wednesday who ordered a criminal
investigation into the situation and the conduct of IRS offices nationwide. "The
facts will take us where ever they take us," Holder said. Additionally, the
investigation will examine whether IRS officials lied to Congress about the
singling out of conservative groups. Holder said while the allegations
originated in the Cincinnati office, the Justice Department inquiry is based out
The U.S. Labor Department said Thursday that U.S. consumer prices fell a
seasonally adjusted 0.4% in April, as sharply lower gasoline costs offset a
small increase in food prices. Food prices rose 0.2% while energy prices sank
4.3%, led by a 8.1% drop in gasoline. Core CPI which excludes volatile food and
energy costs, rose slightly by 0.1%. Real or inflation-adjusted hourly wages
moved higher by a seasonally adjusted 0.5% during April while the average
workweek declined by 0.6%.
The U.S. Labor Department reported on Thursday that for week ending May 11, the
number of people who applied for new unemployment benefits surged higher by
32,000 to 360,000. The average of new claims over the past month smoothes out
weekly volatility, rose a much smaller 1,250 to 339,250 and remained near a
five-year low. For week ended May 4, continuing claims decreased by 4,000 to a
seasonally adjusted 3.0 million.
Philadelphia Federal Reserve on Thursday said business among manufacturers in
the Philadelphia region worsened in May with bank's business-conditions index
falling to -5.2. New orders index fell to -7.9; shipments dropped to -8.5 and
employment index decreased to -8.7.
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