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Pre-Market: Morgan Stanley Reports Strong Second Quarter; Microsoft Could Cut Up To 18,000 Jobs


US jobless claims post an unexpected decline.

Stock futures pointed toward a lower open on Thursday. Before the opening bell, Dow Jones (INDEXDJX:.DJI) futures fell 0.29% to 17,007. Nasdaq (INDEXNASDAQ:.IXIC) futures moved lower, falling 0.58% to 3,899.75.  Futures on the S&P 500 (INDEXSP:.INX) were down 0.49% to 1,965.10.


Morgan Stanley (NYSE:MS) delivered strong second quarter earnings, beating analyst estimates and bolstering its reign as the best-performing stock among the five largest Wall Street banks this year. The New York-based bank reported net income rose to $1.94 billion, or $0.94 per share, from $980 million, or $0.41 per share, in Q2 2013. Morgan Stanley saw less of a decline in fixed income trading than its competitors. While Citigroup (NYSE:C) and JPMorgan (NYSE:JPM) reported declines of 12% and 15% in fixed income trading profits respectively, Morgan Stanley suffered only an 8% decline. In other earnings news, Blackstone (NYSE:BX) reported its best second quarter ever with an 89% jump in year-on-year profits driven by private equity gains. UnitedHealth (NYSE:UNH), the United States' largest health insurer, reported a 7% rise in quarterly revenue as membership increased by 270,000 members. Morgan Stanley was up 2% in pre-market trading. Blackstone rose 2.71%. UnitedHealth rose 1.21%.

Microsoft (NASDAQ:MSFT) announced plans this morning to cut as many as 18,000 jobs, far exceeding the 6,000 jobs cuts expected earlier and casting a long shadow over the company's previous largest layoff of 5,800 employees in 2009. Microsoft is moving forward with 13,000 job cuts, with 21,500 cuts in the Nokia Devices and Services unit, which Microsoft acquired in April for $7.2 billion. A majority of the cuts will be completed in the next six months, and all layoffs will be fully implemented within a year. Microsoft said it expects it will pay $1.1 billion to $1.6 billion in severance and other costs in the next four quarters. The cuts come as Chief Executive Officer Satya Nadella looks to build a "leaner" business, with a focus toward cloud-computing and mobile-friendly software. Shares of Microsoft were down 1.75% ahead of the opening bell.

German automaker Volkswagen AG (OTCMKTS:VLKAY) has reportedly held talks with its Italian competitor Fiat Chrysler Automobiles (OTCMKTS:FIATY) regarding a potential buyout. According to the German monthly magazine Manager Magazin, Fiat wants to move away from its traditional automotive business and dedicate its focus to its Ferrari brand. VW and Fiat are nowhere close to a deal, however. In other auto industry news, Nissan (OTCMKTS:NSANY) CEO Carlos Ghosn has said his company will introduce self-parking cars by 2016 along with technology that allows cars to navigate congested highways. By 2018, Nissan will have cars that can change lanes automatically, and by 2020, its cars will be able to navigate intersections on their own, Ghosn said.

GlaxoSmithKline (NYSE:GSK) has admitted to firing about 30 staff members in the English pharmaceutical company's vaccine business in 2001 on the grounds of bribing Chinese officials. GlaxoSmithKline is currently under investigation by US and UK authorities for a much more widespread corruption scandal in China. In May, Mark Riley, the former head of GlaxoSmithKline's China division, was charged by the Chinese police with corruption. While GSK's recent revelation is not linked to ongoing investigations, it could welcome greater scrutiny by investigators. GSK fell 0.92% in pre-market trading.


Jobless claims fell unexpectedly in the week ending July 13, declining by 3,000 to 302,000. The number of people continuing to receive jobless benefits fell to a seven-year low, adding to signs of strength in the labor market. Housing starts, on the other hand, experienced a severe and unexpected decline, which, as opposed to a decline in jobless claims, is not a good thing. Construction on new US homes fell by 9.3% in June to an adjusted rate of 893,000. That's the slowest pace in nine months, and one that grossly missed analyst estimates of a 1.9% gain. At 10:00 a.m., the Philadelphia Federal Reserve will publish its business outlook. The Energy Information Association will release its weekly report on US natural gas inventories at 10:30 a.m. At 1:35 p.m., St. Louis Federal Reserve President James Bullard will deliver a speech on the economy and monetary policy in Owensboro, Kentucky. At 4:30 p.m., the Federal Reserve will release its balance sheet and the money supply.

Global Markets

Asian stocks moved higher for a fourth consecutive day, trading near but not reaching a six-year high. China is facing the second default in the country's bond market after Huatong Road & Bridge Group Co said it might miss a $64.5 million payment on July 23. The potential default shows signs of stress on the world's largest corporate debt market. European stocks fell and bonds rose as new sanctions hit Russia. The US announced new sanctions that restrict long-term financial flows to two state-owned banks and two state-owned oil companies in Russia in addition to freezing imports from several defense manufacturers. Russia's third-largest bank, Gazprombank, has said that the sanctions will not affect its operations. After the five BRICS countries created a new reserves fund for emerging countries yesterday, the International Monetary Fund has congratulated the BRICS and said it would like to work with the BRICS in the new fund.

Twitter: @brokawbrokaw
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