Amex Drops on Loss of Costco Deal
In morning trade on Thursday, the shares of American Express Co. (AXP, -6.36%) dropped to a 4-month low. This came after the charge card company reported that they had lost their exclusivity deal with Costco Wholesale. As a result of this loss, the sales and profits of American Express will be negatively impacted for the next two years. American Express is a component of the Dow Jones Industrial Average (DJIA) and by midday, their shares were down almost 7 percent and trading at a low of $80 per share. This marked the lowest level for AMEX shares since the 15th of October. As a result, the DJIA dropped 31 points. Shares of American Express recovered slightly, trading down 5.7 percent or $4.89. According to the CFO of American Express, Jeffrey Campbell, the co-brand deal with Costco made up almost 20 percent of AMEX’s worldwide loans as well as almost 10 percent of all worldwide cards. As a result of this lost deal, Chief Executive Kenneth Chenault stated that earnings and revenue growth of AMEX will be negatively impacted over the next 2 years. Despite this, American Express is still confident that they will achieve their earnings-per-share growth target of between 12 to 15 percent over the long term.
As a result of news regarding a cease fire between Ukraine and Russia, U.S. stocks moved higher on Thursday. Adding to the positive investor sentiment was the increase in oil prices as well as news of merger talks between Expedia, Inc. (EXPE, +15.66%) and Orbitz Worldwide (OWW, +21.83%) travel companies. As a result of discussions of a $1.3 billion acquisition between the two companies, both share prices surged. In economic news, data showed that sales at retailers in the U.S. declined for the second straight month. This marked a clear indication that Americans are not spending despite lower gasoline prices. Also, the jobless claims came in higher than expected, increasing 25,000 to above 300,000. Despite this, the 4-week average indicated slower layoffs. As a result, the Dow Jones Industrial Average (DJIA) advanced with the majority of its components trading in the green. The top gainer was Cisco Systems which gained 8.5 percent. Meanwhile the S&P 500 index (SPX) traded higher within ten points of its record close while the Nasdaq Composite index (COMP) advanced to its highest level since 2000. This increase was boosted by a 1.6 percent gain in Apple Inc.
As a result of the poor jobless claims data as well as weak U.S. retail sales, the U.S. dollar (USD) traded lower against most major currencies on Thursday. Concerns regarding the future of Greece in the euro zone did however support the safe-haven greenback. In their report, the Commerce Department stated that retail sales had declined 0.8 percent in January. This was worse than expectations for a 0.5 percent decline while retail sales fell 0.9 percent in December. Also, core retail sales declined 0.9 percent in December which was also more than the forecast for a decline of only 0.4%. The USD traded lower against the British pound with GBP/USD trading at 1.5350, up 0.76% while USD/JPY fell 1.10 percent to trade at 119.12. Against the currencies in New Zealand and Australia, the greenback traded mixed with NZD/USD up 0.46% to 0.7401 and AUD/USD down 0.11% at 0.7708.
With an agreement between Russia and Ukraine to cease fighting after a 10-month conflict, crude oil futures rose on Thursday. Despite this, the supply glut in the U.S. prevented the commodity price from climbing higher. Crude oil futures for March delivery traded up 3.3%, or $1.59, to trade at $50.43 a barrel on the NYMEX. Over the last two trading sessions, NYMEX oil has declined almost 8 percent. Meanwhile on London’s ICE Futures exchange, Brent crude for delivery in March also advanced 4.3%, or $2.35, to trade at $57.01 a barrel. At the close of trading, the Brent March contract is set to expire.