Facebook Tripped Circuit Breakers|
Facebook Inc. (FB) tumbling shares tripped Nasdaq short-sale circuit breakers on
Friday after share price dropped more than 10% from previous sessions closing
price - short interest positions on Facebook are currently at 13.4%. The
short-sale circuit breakers are aimed at shielding stocks from manipulation by
short sellers. The Securities and Exchange Commission said when it introduced
the short-sale circuit breaker in 2010, “When triggered, it will prevent short
selling, including potentially manipulative or abusive short selling, from
driving down further the price of a security that has already experienced a
significant intra-day price decline, and will facilitate the ability of long
sellers to sell first upon such a decline.” Into late afternoon trading on
Friday, Facebook shares were off by 12% as investors remain nervous that the
company did not provide an outlook. After hours on Thursday, Facebook reported
it swung to a Q2 loss of $157 million or 8 cents a share, from a net income of
$240 million or 11 cents a share, same quarter in 2011. Adjusted earnings came
in at $295 million or 12 cents a share while revenue grew 32% to $1.18 billion.
In a conference call following the earnings release, Chief Executive Mark
Zuckerberg discussed the important role that mobile plays for Facebook, noting
that mobile users engage the site more often than via personal computers.
“Mobile not only gives us the potential to connect more people with our
services, but it also gives us the ability to provide more value and a more
deeply engaging experience,” Zuckerberg said. Other comments during the call
from Zuckerberg were "Our largest developers tend to become our largest
advertisers,” as they look to increase the visibility on the site. Facebook
chief operating officer Sheryl Sandberg said on the call, “Ads in news feeds and
sponsored stories are more effective than ads in the right hand column” of a
user’s page and called those two initiatives the 'cornerstones' of Facebook’s
social ad strategy. When asked on the call to describe how they are rolling out
sponsored stories, Sandberg replied, “we look at social context, make sure
they’re relevant… we’ve been cautious.” In fact, Facebook has yet to roll out
sponsored stories in all the countries in which Facebook has users. Facebook
faces a difficult balancing act on how to make money off other people’s content
without offending them because if they do offend people, users are likely to
take their posts and photos elsewhere. Investors need to take Zuckerberg at his
word as he said that the company will put the quality of a user’s experience
ahead of profit concerns. Based on the $157 million net loss Facebook just
reported, this could be believed. CFO David Ebersman couldn’t have been clearer
on the call that Facebook’s operating model is going to get less attractive in
the short-term. After revealing that operating expenses were up 60%
year-over-year if stock-based compensation costs were excluded, Ebersman said
that spending in the second half of 2012 will be up at a 'slightly higher rate'
of growth, as the company continues an 'aggressive pace of investment'. Based on
Thursday’s conference call, unless Facebook can generate a revenue surge to
offset its rising expenses, its net margins are going to remain thin or negative
for the rest of this year.
According to the California Department of Justice, McKesson Corp. (MCK) has
agreed to pay California and 29 other states a total of $151 million to settle
allegations that it inflated prescription drug prices, causing states' Medicaid
programs to overpay pharmacy reimbursements by millions of dollars. The payment
is in addition to an April settlement that had McKesson paying more than $190
million to the federal government to resolve similar claims. McKesson previously
said that it didn't violate any laws or manipulate drug prices. The states
alleged that McKesson, a drug wholesaler, deliberately inflated average
wholesale drug prices it reported to First Data Bank, a publisher of drug
prices, by as much as 25%. McKesson's actions caused the state of California to
overpay on branded prescription drugs from August 2001 through December 2009.
California's Medicaid program, known as Medi-Cal, sets the reimbursement rates
for pharmacies based on reported wholesale drug prices. Along with the District
of Columbia, the other 29 states involved in the settlement include New York,
Illinois, and Pennsylvania with California's recovery of the settlement at
roughly $23.6 million.
University of Michigan-Thomson Reuters final reading of the July consumer
sentiment came in slightly stronger than forecast, rising to 72.3 however, still
down from a 73.2 reading in June and the worst of the year.
The Commerce Department reported on Friday that, according to a preliminary
government estimate, the U.S. economy grew 1.5% in Q2, down from 2% in the prior
period, as consumers and businesses spent at a slower rate. Consumer spending
climbed 1.5% compared to a 2.4% increase in Q1. Business investment in
nonresidential structures rose by 5.3% vs. a 7.5% increase in Q1. Inventory
spending rose to an estimated $66.3 billion in Q1 after a $56.9 billion gain.
Government spending at all levels fell by a combined 1.4%; exports rose 5.3%
while imports climbed 6.0%; real final sales in the U.S. excluding imports and
inventories, was halved to a 1.2% increase. As measured by the consumer PCE
index, inflation dropped to 1.6% from 2.4%. Excluding food and energy, the index
rose 1.8% compared to 1.9% in Q1. Real disposable income rose 3.2% in Q1 and
personal savings rate climbed to 4.0%. Growth in Q1 was revised to 2.0% from
1.9% and Q4 of 2011 was revised up to 4.1% from 3.0%.
The White House said Friday that reduced government spending will cut the U.S.
budget deficit to $1.21 trillion in 2012 or nearly $116 billion lower than
projected in February and down slightly from the $1.30 trillion deficit logged
in 2011. The Office of Management and Budget said in its mid-session review of
the budget, the reductions in spending were due to delays in enacting some of
the job proposals passed in February while some of the spending cuts were offset
by a reduction of $27 billion in receipts due to the weaker economy. OMB
predicted that the unemployment rate would average 8% in 2012 before inching
lower to 7.7% in 2013 and to 7.3% in 2014. The White House forecasts growth will
rise by 2.3% this year before increasing to 2.7% in 2013 and 4% in 2014.
In a joint statement on Friday by German Chancellor Angela Merkel and French
President Francois Hollande, they stated they are determined to do 'everything
possible to protect the euro zone'. The leaders said this requires compliance by
member states and European institutions "in their own area of expertise."
Germany and France "are deeply committed to the integrity of the euro zone," the
statement said. Both countries called for the quick implementation of decisions
made at a summit of European leaders in late June.
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July 27, 2012