Ben Bernanke's Wednesday appearance before Congress tops our roundup of the day's top business news stories.
Bernanke to Congress: The Fed Will Taper Bond Purchases
CNBC reports that Federal Reserve Chairman Ben Bernanke, in his semiannual monetary report before the House financial services committee, will announce that the central bank anticipates beginning tapering bond purchases later this year. In prepared remarks, Bernanke said that the policy could change depending on the economic data. Speculation over whether or not the Fed would loosen its commitment to ultra-low interest rates has sent financial markets plunging and surging the past two months. Since the 2008 economic collapse. the Fed has kept its benchmark short-term interest rate near zero. It has also been buying $85 billion a month in mortgage and long-term Treasury bonds to try to reduce long-term rates and induce people and businesses to borrow and spend.
U.S. Housing Starts Fell in June
The Commerce Department Wednesday reported housing starts fell 9.9 percent in June, to the lowest level since August of last year. The seasonally adjusted annual rate was 835,000 units for June. May’s starts were 928,000 units. Predictions from Thomson/Reuters had expected 959,000 housing starts in June, so the actual numbers were more than 100,000 units below expectations. The report said the multi-family housing sector accounted for the lower groundbreaking and permit numbers.
Yahoo Trims 2013 Sales Outlook
Yahoo Inc. scaled back its outlook for 2013 revenue on Tuesday after reporting ongoing reductions in display advertising sales volume and prices in the second quarter. The company is now forecasting revenue of $4.45 billion to $4.55 billion this year, down from the original forecast of $4.5 billion to $4.6 billion. Yahoo also reported that second-quarter net revenue was down slightly at $1.071 billion, though it posted a better than forecast adjusted profit. Shares of Yahoo, which have gained about 70 percent since Marissa Mayer became President and CEO a year ago, were down 2 percent at $26.30 in after-hours trading on Tuesday.
Gas Prices Spike to Five-Week High
Fueled by the recent spoke in oil, gasoline prices rose to the highest price in five weeks Tuesday, CNN reports. The average price for a gallon of gas rose 2 cents to $3.635, the highest since June 10. This is 15 cents more expensive than a week ago and 24 cents more than drivers were paying at this time last year. Some states, such as California and Illinois have already crossed the $4 a gallon benchmark. Oil, up about 10 percent so far this month, has been driven higher by unexpectedly sharp drops in U.S. crude and gasoline inventories, which suggest stronger demand, CNN stated. The July military ouster of Egypt's president has increased concerns about supply disruptions from political instability in a country that controls the Suez Canal. Higher gasoline prices inhibit consumer spending, which represents 70 percent of the economy.
Bank of America issues strong second-quarter report
Higher revenue from equities sales and trading, as well as a drop in expenses, allowed Bank of America to report a stronger than expected 70 percent rise in second quarter profit Wednesday, Reuters said. Net income for common shareholders rose 32 cents per share, to $3.57 billion. Net income to shareholders was $2.10 billion, or 19 cents per share, in the second quarter of 2012. Revenue reportedly rose 3.5 percent to $22.73 billion. Analysts had predicted a rise to 25 cents per share, according to Reuters. Bank of America has undergone a severe cost-cutting program under Chief Executive Brian Moynihan, and operating expenses fell to $16.02 billion from $17.05 billion one year ago.
Abbott Laboratories earnings higher than expected
Strong demand for nutritional products helped Abbot Laboratories report better than expected second quarter earnings Wednesday, Reuters reported. The nutritional product sales helped offset lower sales of medical devices and generic prescription drugs. Analysts had expected earnings of 44 cents per share, but the second quarter numbers were 46 cents per share excluding special items. Abbott earned $476 million, or 30 cents per share, from continuing operations in June.