Dow Jones Worst Session in 7 Months
Into the final half hour of trading on Thursday, Dow Jones Industrial Average
(DJIA) was on track for worst trading session since the U.S. election on
November 6, 2012, down over 350 points. NASDAQ fell to 3365 and S&P 500 dropped
to 1588. Major indices were negative, across the board. Volatility was roaring
on Wall Street today.
Ebix Gets Hammered
Ebix Inc. (EBIX), a financial software company, saw shares tank by 44% into late
afternoon trading on Thursday. Goldman Sachs Group Inc. (GS) announced that they
terminated a previously agreed-upon merger, a proposed $820 million deal to take
the firm private, due to an investigation by a U.S. Attorney’s office into Ebix,
a U.S. criminal probe of the companies accounting practices. Chairman and CEO
Robin Raina in a statement, "We believe the allegations in the class action
suits are without merit. "The Company's balance sheet remains strong and we
believe the Company is well positioned for future growth and success." The SEC
probe comes while the commission has begun to focus on the type of gray areas
that have been essential to Ebix’s success, namely the company’s use of an
accounting policy that allows it to report relatively high book earnings while
minimizing taxable income. Under the leadership of CEO Raina, no regulatory
allegations have been filed against the company, and none of Ebix’s four
auditors during the past decade has issued anything other than a clean opinion
of its financials. According to SEC filings, several overseas subsidiaries have
fallen behind in filing audited numbers. Ebix Singapore, which accounted for
$25.2 million of pretax income for Ebix last year and per the filings, they
still have not filed audited figures for 2011 or 2012. Ebix India, which
recorded $35.7 million of the company’s pretax income in 2012 still have not
filed audited figures for 2012. EIH Holdings, Ebix’s Swedish subsidiary, is
being liquidated by Swedish regulators for lack of timely filings. However,
according to SEC filings approved by Cherry Bekaert, the Swedish unit earned $7
million of Ebix’s $78 million in pre-tax income last year.
U.S. Labor Department reported on Thursday that the number of people who applied
for unemployment benefits last week climbed by 18,000 to 354,000, putting
initial jobless claims near recent average. Labor also reported average of new
claims over the past month, rose by 2,500 to 348,250. For week ended June 8,
continuing jobless claims fell by 40,000 to a seasonally adjusted 2.95 million.
Purchasing Managers Index
Markit said Thursday the U.S. flash manufacturing purchasing managers' index
came in lower to a 52.2 reading in June from 52.3 in May. Chris Williamson,
chief economist at Markit said, "The U.S. manufacturing sector appears to have
remained stuck in a low gear in June, rounding off the weakest quarter since the
third quarter of last year."
Existing Home Sales
The National Association of Realtors reported Thursday that existing-home sales
rose 4.2% in May to a seasonally adjusted annual rate of 5.18 million, striking
the highest rate since November 2009. Median existing-home price hit $208,000
during May for the highest since 2008. Existing home inventories rose 3.3% in
May to 2.22 million. Inventories for existing homes for sale declined to 5.1
months in May from 5.2 months in April.
Leading Economic Index
The Conference Board said Thursday that the leading economic index for the U.S.
rose 0.1% in May to 95.2%. Three of the 10 indicators improved including credit
availability, interest rate spread and stock prices. Board economist Ataman
Ozyildirim said, "Widespread gains in the leading indicators over the the last
six months suggest there is some upside potential for economic activity in the
second half of the year." The coincident index, which measures current
conditions, rose 0.2% in May, while the lagging index advanced 0.3%.
The Philadelphia Federal Reserve reported Thursday that manufacturing activity
in the Philadelphia region jumped in June to 12.5 to its highest level since
April 2011. Index for new orders rose to 16.6 in June from negative 7.9 in May.
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June 20, 2013