Stocks extend losses (7/8/14)
Investors continued their profit taking after the markets’ recent highs. Technology stocks were particularly hard hit, with momentum stocks seeing the biggest declines. Twitter (TWTR) and Pandora (P) were each down 7%, LinkedIn (LNKD) fell 6%, and Facebook (FB) lost 3%.
The Dow fell 117 points, with 26 of its 30 components losing ground; the S&P 500 Index dropped 13; and the Nasdaq declined 60. Decliners led advancers by nearly three to two on the NYSE and by four to one on the Nasdaq. The prices of Treasuries strengthened. Gold futures slipped $0.50 to close at $1,316.50 an ounce, and the price of crude oil lost $0.13 to settle at $103.40 a barrel.
In Earnings News:
- Earnings season unofficially kicks off after the bell today when aluminum maker Alcoa releases its second-quarter results. Analysts expect earnings of 12 cents per share on revenue of $5.61 billion. The stock (AA) rose 0.7% in anticipation of the news.
In Other Business News:
- Small business owners’ optimism dropped in May as overall business conditions are not expected to improve. The National Federation of Independent Business’s small-business optimism index dropped to 95.0 in June from 96.6. Economists expected the reading to increase to 97.0. The index also noted an increase in business owners who expected to raise prices over the next few months, which may be an indicator of rising inflation.
- U.S. job openings reached their highest level since June 2007, increasing to 4.64 million in May, up from 4.46 million in April, according to the Labor Department. New hires slipped to 4.72 million from 4.77 million, and separations (quits and layoffs) fell to 4.5 million from 4.55 million.
- Crumbs Bake Shop, a chain that capitalized on the cupcake craze that has faded over the years, closed all of their stores on Monday and may file for bankruptcy. The company has 48 stores in ten states and had been delisted from the Nasdaq on July 1.
- Tesla Motors Inc. is being sued for trademark infringement by Chinese businessman Zhan Baosheng who registered the “Tesla” trademark in China. Tesla believed that the dispute had been resolved and began delivering sedans to China in April; however, Zhan has requested that the company halt all sales and marketing. A Chinese court will take up the matter on August 5. Tesla’s shares (TSLA) fell 1%.
*****
A few years ago, UPS updated their slogan to “We (heart) logistics.” Considering how they map out drivers’ routes, they take that to heart. Left turns are inefficient, costing the company time and fuel, and each route is calculated to eliminate as many left turns as possible. (I feel like this is a setup for the scene in National Lampoon’s European Vacation. “Look kids! Big Ben! Parliament!”)
Finding these efficiencies plays an important role in most organizations, and even the small suggestions—like avoiding left turns—can add up to big savings.
There’s a story that years ago, an American Airlines CEO had one olive removed from each in-flight salad. The change saved $100,000 in fuel costs. It may just be an urban legend, but FiveThirtyEight crunched some numbers to see how much an airline could save by making small changes.
The airline used in their simulation: Southwest Airlines. The route: Boston to Denver. The plane: a Boeing 737-700 at 85% capacity (122 passengers). Based on their assumptions, total fuel costs for this route equal $7,600. Each additional pound added would increase fuel costs by a little less than five cents. Peanuts (no pun intended). But as FiveThirtyEight points out, Southwest flew 1.3 million flights in 2013. Given this information, how could the airline save money?
· Don’t provide in-flight entertainment. Obviously, it costs a lot of money to install the screens in each seatback, but each device weighs seven pounds. Annual estimated fuel cost savings: $39.7 million.
· Discourage people from drinking water. All of those free bottles of water take up a lot of room and cost $2.4 million in fuel. Charging for them decreases the number of bottles the plane needs to carry, plus there’s extra revenue.
· If they’re not drinking water, they’re not using the bathroom. FiveThirtyEight estimated that if every passenger took care of business before the flight, they’d each be 0.2 liters lighter—a savings of $2.1 million. European discount airline Ryanair almost implemented a plan to charge passengers to use the bathroom. The idea got, um, flushed.
Is this the future awaiting airplane passengers? Bored, parched, and needing to use the bathroom (even though you haven’t had anything to drink because you refuse on principal to pay that much for a tiny bottle of water, and if you’re not paying for water then you’re definitely not paying to use the bathroom)? The next think you know, the airlines will start charging passengers based on what they weigh. Oh wait…one already does. Samoa Air, where “A kilo is a kilo is a kilo.” Well, if the swimsuit isn’t motivation enough to shed those extra pounds before vacation, maybe a few extra bucks will be.
