HEADLINE HITS-Updated 10-Aug-10

12:05 ET 

Wholesale Inventories Grow as Sales Tumble

Merchant wholesale inventories increased 0.1% in June, down from 0.5% growth in May. The Briefing.com consensus forecast called for wholesaler inventories to increase 0.4%.

Much of the data were already estimated in the Q2 GDP report.

The lack of inventory growth is a little disconcerting when coupled with the 0.7% decline in May's wholesale sales. Wholesalers have stopped purchasing new inventories and the upward trend is only developing because sales are weakening.

The lack of inventory growth may signal that wholesalers anticipate further reductions in demand over the coming months. The details of the data confirm this.

Just about every sector that saw negative sales growth also saw positive inventory gains. Likewise, most sectors that reported strong sales also reported inventory losses.

09:58 ET 

ASEI Q1 Results Fall Short of Expectations

American Science & Engineering (ASEI 75.85 -4.99) reported first quarter earnings of $0.74 per share, $0.29 worse than the Thomson Reuters consensus of $1.03.

On the top line, revenues fell 1.7% year-over-year to $53.6 million, well below the $65.2 million consensus.

09:53 ET 

RAX Reports In-line Q2 Earnings Results

Rackspace (RAX 18.37 -1.11) reported second quarter earnings of $0.08 per share, in-line with the Thomson Reuters consensus of $0.08.

Revenues rose 23.2% year-over-year to $187.3 million versus the $186.8 million consensus.

The company said, "With the first two quarters of the year completed, we feel optimistic that we will deliver on our financial goals for 2010. As we look out toward the last two quarters, we remain focused on growing revenue while maintaining our current margin profile. For the full year of 2010, the company continues to expect total capital expenditures of $185 to $235 million."

09:46 ET 

ABK Reports Q2 Loss

AMBAC Financial (ABK 0.69 -0.21) reported second quarter ($0.20) versus the ($8.24) in last year's quarter.

The second quarter 2010 results reflect loss and loss expenses in consumer asset-backed securities, other structured finance exposures and a transportation transaction and a net operating loss in the financial services segment, partially offset by a positive change in fair value of credit derivatives.

Total assets decreased by approximately $5.8 billion during the second quarter of 2010, from $35.8 billion at March 31, 2010 to $30.0 billion at June 30, 2010, primarily due to the cash outflow related to the commutation of the CDO of ABS portfolio and other exposures, and the reduction of VIE assets by approximately $2.6 billion, related primarily to commuted CDOs of ABS that had been consolidated in compliance with ASU 2009-17 in the previous quarter.

09:41 ET 

MBI Beats by $6.94

MBIA (MBI 9.87 +0.68) reported second quarter earnings of $6.32 per share, excluding non-recurring items, $6.94 better than the Thomson Reuters consensus of ($0.62).

MBI's Adjusted Book Value, a non-GAAP measure, was $35.76 per share at June 30, 2010 compared with $36.01 per share at March 31, 2010. Subsequent to the end of the second quarter, MBI reached an agreement with a CDS counterparty for the commutation of three multi-sector CDO-squared transactions.

The agreement eliminated $4.4 billion in gross insured exposure in exchange for a one-time payment by MBI. of $72 million. The impact of the $72 million payment, which is $34 million after reinsurance, will be reflected in the Company's results for the third quarter of 2010.

The company said, "In the second quarter, we saw both our paid losses and new delinquencies on insured RMBS exposures continue to decline. In addition, more market participants are recognizing that many of the loans in these securitizations should never have been in them in the first place, and that the seller/servicers must repurchase them. After the quarter's close, we reduced our exposure to multi-sector CDO-squareds by about 50%, and settled a small portion of outstanding putback receivables. The net incurred loss on insured exposures demonstrates that credit stress continues to be a reality, but the volatility of losses appears to be declining."

09:36 ET 

Nonfarm Productivity Declines For the First Time Since 2008

Nonfarm productivity declined for the first time since the fourth quarter of 2008 as output per hour fell 0.9% in the second quarter of 2010. The Briefing.com consensus called for productivity to increase a minor 0.1%.

Economic reactions to declines in productivity are not pleasant. The data suggest that firms are oversupplied with labor for the amount of output they are creating. At the very least, employment will hold at its current level without any motivation from firms to hire more workers.

Consumption forecasts for the third quarter will probably be revised lower as a result of this decline in productivity.

Productivity in the first quarter of 2010 was revised higher from 2.8% to 3.9%.

When taken together, the upward revision to the first quarter and the lower expected productivity level in the second quarter would seem to offset the consensus forecast, but that may not be the best way to look at the numbers.

The consensus had already known that the output portion from the first quarter was going to be revised higher due to the recent revisions to the GDP data. Economists would have also kept the number of labor hours steady, as proved to be correct by the BLS, because there was no data suggesting a change in the labor component.

Therefore, the consensus forecast of 0.1% growth would have already been based upon the upwardly revised first quarter productivity level, so it can be said the net decline in productivity was completely unexpected.

Unit labor costs increased 0.2%. That is first increase in labor costs since the second quarter of 2009. The consensus expected labor costs to increase 1.4%.

The lack of labor cost growth will help firms remain profitable during a time of weakening productivity, but it will also depress income growth and pressure future consumption.

source:brieging