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EBay's earnings fall short of Wall Street expectations

Doug Cubberley, Special to CNBC.com
Thursday, 18 Jul 2013 | 4:45 PM ET
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Recapping the day's news and newsmakers through the lens of CNBC.

EBay's missed forecast sinks shares

Notes:

EBay's shares sank on Thursday shedding around seven percent on a disappointing third-quarter forecast.

Some analysts have responded by lowering their ratings on eBay because the expected rise in demand for its services domestically probably won't make up for a slowdown abroad. There was also some talk that eBay's new fee structure has alienated some sellers. At least one market watcher thinks the dip is a buying opportunity, however.

Quotes:

"We are bullish about the future and the business and we are in a great market and we have forecasted mid-teens growth for the second half of the year."
—John Donahoe, president and CEO of eBay

"I'm going against the grain here. I'm saying this is a buying opportunity because the numbers were terrific, PayPal was terrific, but they were cautionary going forward … because they wanted to rein in the bulls."
—CNBC's Jim Cramer

Indexes hit all-time highs

Notes:

One day after Ben Bernanke's assuaging words on tapering the Fed's bond buying program and the market is back to showing its strength. The S&P 500 and the Dow have reached their highest levels ever as the Fed chairman entered his second day of congressional testimony, saying that monetary policy will stay consistent for the time being and that there is no set schedule for tapering. Between Thursday's positive jobless claims numbers (see below) and Bernanke's encouraging words, stocks surged.

Quotes:

"With inflation below target and with unemployment still quite high—and by some measures with unemployment in some ways being even too optimistic a measure of the state of the labor market—both sides of our statutory mandate are suggesting that we need to maintain a highly accommodative monetary policy for the foreseeable future and that's what we intend to do."
—Fed Chairman Ben Bernanke

"This is what we talked about for weeks on end. At first the taper sounds scary and then people realize the only way it happens is if things are improving. And all of the sudden, the narrative shifts to 'hey, let's say they buy less bonds in September.' It means things are getting better, it means I'm more comfortable with a stock portfolio."
—Josh Brown of Fusion Analytics

Labor market gains momentum … or does it?

Notes:

The number of Americans seeking unemployment benefits for the first time dropped sharply last week, to its lowest level in four months. This could signal an accelerated strengthening of the labor market or just a miscalculation that factored in expected factory shutdowns for summer retooling (mostly automakers, which are running flat-out to meet demand) that actually didn't happen.

The Labor Department reported that initial claims for state jobless benefits were down 24,000 to a seasonally adjusted low of 334,000. Economists expected the tally to come in at about 345,000. You can choose to read the number as a big improvement or the economy simply chugging along in spite of tax hikes and government budget cuts, which took their toll in the first half. Of course, with a better jobs market comes an increased risk of the Fed tapering its bond purchases. But with stocks well into positive territory on Thursday that appears to be a secondary concern right now.

Quotes:

"It is, you know, a humongous drop. I'm sure the stock market will probably rally on this. It should. It's good economic news, but who knows anymore?"—CNBC's Rick Santelli

"This number is to be taken with a huge grain of salt. You may want to trade on this number because it's sort of an 'all-clear.' What's going on is seasonal distortions. You have the July 4 holiday, an expectation in the data for factory shutdowns that are not happening. The spike up last week was irrelevant; the spike down this week probably irrelevant."—CNBC's Steve Liesman

Google headed to $1,000?

Notes:

One analyst says Google shares should touch $1,000 even without the monetization of current projects like its Google Glass eyeglasses or its self-driving car. The reason? There are very few large-cap tech companies in the U.S. that are growing revenue at a pace comparable to Google's and the company continues to innovate in the online advertising space, as well as integrate Motorola, which could pay off soon.

The earnings Google released after the closing bell on Thursday weren't immediately helping to make that case, though.

Google reported second-quarter adjusted earnings of $9.56 a share versus Wall Street estimates of $10.78 a share. Revenue of $14.11 billion missed forecasts for $14.41 billion.

Average cost-per-click, which measures how much an advertiser pays when users click on ads, fell 6 percent from the year-ago quarter and declined 2 percent from the first quarter.

Paid clicks, which measures how often users click on Google ads, rose about 23 percent over the second quarter of last year but were up only 4 percent sequentially.

In the year-earlier quarter, Google earned $10.12 a share on revenue of $9.61 billion.

While Google's advertising business continues to grow, its operating expenses rose to $4.92 billion in the quarter from $3.89 billion a year earlier.

Shares were down sharply in after hours trading.

Quotes:

"When you look across the market, you look at technology, there's a real dearth of large cap names in technology that are consistently growing revenue at 20 percent. You can count them on your fingers. I think there's scarcity value in Google and, yeah, the stock has been great. We've loved it. We're overweight it now. We do think it's going to $1,000."
— Barclays analyst Anthony DiClemente

"Trees don't grow to the sky but this company is coming close in terms of the steadiness of the top line."
—DiClemente

It's official: time to flip houses again

Notes:

John Paulson, the man who made a billion dollars betting against housing, now says you should go all-in with the sector. It seems many others have come to that conclusion as well; RealtyTrac, in a report that will be released tomorrow, found that flipping houses was up 19 percent in the first half of this year and that the gross profit from a flip was up 245 percent from a year ago. One big reason for the change is rising home prices. Time to go house hunting, but just remember that "flipping" means buying and selling within six months, so choose carefully.

Quote:

"I still feel buying a home is the best investment any individual can make. Affordability is still at an all-time high. So if anyone bought a home last year, let's say for $100 you put down $20, today that home is worth $112 so you made $12 on that $20 investment, a 60 percent return."
—John Paulson of Paulson & Co.

By Doug Cubberley, Special to CNBC.com

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