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Pre-Market: Bank of America Reports 43% Decline in Profits; China Achieves 7.5% Second Quarter GDP Growth


Standard and Poor's says it is willing to resume talks with the US Justice Department.

Stock futures pointed toward a slightly higher open on Wednesday. Before the opening bell, Dow Jones (INDEXDJX:.DJI) futures rose 0.32% to 17,043. Nasdaq (INDEXNASDAQ:.IXIC) futures moved higher, rising 0.63% to 3,937.  Futures on the S&P 500 (INDEXSP:.INX) were up 0.40% to 1,975.80.


After two days of surprisingly strong earnings from the banking sector, Bank of America (NYSE:BAC) has finally precipitated the poor results many forecasters had predicted. The Charlotte, North Carolina-based bank reported a 43% dive in profits, its earnings pulled down by $4 billion in legal expenses across the quarter. Without those expenses, BAC would have likely reported a revenue much higher than the $2.3 billion, or $0.19 per share, it did, which fell short of analysts estimates. Looking ahead to other company earnings today, eBay (NASDAQ:EBAY) is scheduled to report its second quarter earnings after the closing bell. Analysts are expecting earnings of $0.68 per share on $4.38 billion in revenue. Two negative events in the second quarter are expected to take their toll on the e-commerce company: the May 21 hacking of eBay's network which resulted in the theft of personal information belonging to 145 million eBay shoppers, and Google's (NASDAQ:GOOG) penalization of eBay for some SEO tactics, which caused eBay's visibility in organic search to drop by as much as 50%. Shares of Bank of America fell 0.89% ahead of the opening bell. EBay rose 0.90%.

Samsung (OTCMKTS:SSNLF) will partner with Under Armour (NYSE:UA) in a move to counteract the ongoing collaboration between Apple (NASDAQ:AAPL) and Nike (NYSE:NKE). Samsung has been quick to establish itself in the wearable electronics market, releasing its Galaxy Gear smartwatch last September. Speculation about an Apple iWatch has remained, well, just speculation. In other collaboration news, Apple and IBM (NYSE:IBM) have announced a global partnership that will bring IBM big data analytics tools to iPhones and iPads. The partnership will yield over 100 industry-specific solutions including native apps and optimized cloud services, and will be focused primarily on enterprise solutions. Shares of Under Armour rose 0.17% ahead of the opening bell. Apple was up 2.13%. Intel rose 2.10%.

Ratings agency Standard & Poor's Financial Services (NYSE:MHFI) says it's willing to resume talks with the US Justice Department over a pending lawsuit regarding the inflated rates it gave to undeserving mortgage-backed securities -- which helped fuel the 2008 financial crisis. S&P is not in active talks with the Justice Department yet, but it's expected that when talks do begin, penalties ranging from a few hundred million dollars to a billion dollars will be the focus of discussions. Earlier talks between the Justice Department and S&P saw the Justice department demanding $1 billion and then, in a lawsuit filed in February 2013, $5 billion. In other legal news, a US appeals court has revived a lawsuit filed against BP (NYSE:BP) in which participants in four BP employee retirement savings plans claim they were duped into purchasing BP stock before and after the 2010 Deepwater Horizon disaster. Shares of BP were trading up by 0.72% in pre-market trading.


A busy day for economic indicators kicked off with the Mortgage Banker Associations read on purchase applications, which fell 8% in the week of July 11. The drop completely wiped out the 4% gain made in the week prior. The refinancing index remained relatively unchanged, falling 0.1% over the week. The Bureau of Labor Statistics reported the producer price index (PPI) rose 0.4% in June following a 0.2% decline in May. In June, the index for final demand goods rose 0.5%. At 9:00 a.m., the Treasury will deliver its data on international capital, or the flow of financial instruments into and out of the United States. At 9:15 a.m., the Federal Reserve will release its monthly index of industrial production and related capacity indexes covering manufacturing, mining, and electric and gas utilities. At 10:00 a.m., the Atlanta Federal Reserve will release its business inflation expectations, the National Association of Home Builders will release its housing market index, and Janet Yellen will continue her semi-annual monetary policy testimony before Congress. At 10:30 a.m., the Energy Information Association will deliver its weekly read on the country's petroleum inventories. At 12:00 p.m., Dallas Federal Reserve President Richard W. Fisher will deliver a speech on monetary policy in Los Angeles. At 2:00 p.m., the Fed will release its Beige Book.

Global Markets

China reported its second quarter GDP growth at the much-desired rate of 7.5%, beating forecasts of 7.4%. Wide-ranging stimulus measures are widely seen as giving the world's second largest economy the boost it needed to come in on target. Asian markets had a stolid reaction to the report, with stocks remaining little changed overnight. In Europe, stocks gained the most in more than five weeks amid strength in Portuguese banks. In England, the unemployment rate hit a five-and-a-half-year low, but compensation increased at its slowest pace since 2001. Today, European leaders are expected to approve broader sanctions against Russia since Moscow has not lived up to its promise to end fighting in eastern Ukraine. At the BRICS summit in Brazil, leaders of the participating emerging market nations launched a $100 billion development bank and a currency reserve pool.

Twitter: @brokawbrokaw
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