Amazon’s spending spree to hurt margins now, boost profit later: analysts

(Reuters) – Amazon.com Inc‘s spending spree will hurt margins in the near term but boost profit in the long run, analysts said, after the world’s No.1 internet retailer posted a loss on heavy spending on technology, infrastructure and digital content.

Amazon shares were set to open about 2 percent higher on Friday even though the company forecast weak sales ahead of the crucial holiday shopping quarter.

Analysts remained largely optimistic about Amazon‘s ability to post strong growth in its e-commerce and international business despite the economic slowdown in Europe that also contributed to the company’s third-quarter loss.

“The low 4Q12 revenue growth guidance presents an upside opportunity particularly given the continued solid customer and unit increases and the strong third-party business,” said Needham & Co analyst Kerry Rice, who has a “hold” rating on the stock.

Amazon’s current quarter could also benefit from strong e-commerce trends as more consumers shift online to make their holiday purchases, he added.

Barclays Capital Inc analyst Anthony DiClemente cut his target on the stock to $ 220 from $ 230, but said Amazon has regularly shown a tendency to set low expectations.

Susquehanna International, while cutting its price target on the stock to $ 255 from $ 275, said it was positive on Amazon’s growing presence in third-party retail, its digital business leading the transformation of books, music and videos, and its unrivaled network of distribution centers and web service.

RBC Capital Markets raised its price target to $ 250 from $ 245, and said it remained bullish on Amazon’s opportunities in worldwide retail as it expands in geographies and categories.

International sales rose 20 percent to $ 5.92 billion in the quarter from a year earlier.

(Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Don Sebastian)

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Moody’s warns may downgrade five big Canadian banks

NEW YORK/TORONTO (Reuters) – Moody’s Investors Service warned on Friday it could cut its ratings on five top Canadian banks on concerns about a softening economy and volatile capital markets, a blow to a banking system named the soundest in the world four years in a row.

But the outlook for the sector is no longer as rosy, Moody’s said, because of the risks presented by the macroeconomic environment and a business mix that leans heavily on domestic mortgages and other consumer lending.

Canadian consumer debt has risen to record highs in recent months, a situation reminiscent of the United States before its 2008 housing crisis. The household debt-to-income ratio jumped to 163.4 percent in the second quarter from 161.8 percent in the first quarter, Statistics Canada said a week ago.

Meanwhile, Canada’s housing market appears to be cooling after several years of red-hot gains.

“Domestically, we’re concerned about the high and increasing levels of consumer indebtedness and elevated housing prices, and we feel that they may tend to leave the Canadian banks more vulnerable to downside risks to the economy than they have been in the past,” David Beattie, Moody’s vice president and senior credit officer, told Reuters.

The warning applies to long-term debt ratings for Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada. It also applies to Caisse Centrale Desjardins, Canada‘s largest association of credit unions.

The ratings agency said any cuts would likely be only one notch. The sector’s ratings are still among the highest in the world.

“We continue to believe that the Canadian banks rank among the strongest in the world, and this review is based on concerns about system-wide and bank-specific risks that aren’t fully captured in their current ratings,” said Beattie.

The only bank not put on credit watch on Friday was Royal Bank of Canada, the country’s largest. That’s because Moody’s lowered RBC’s ratings by two notches in June as part of a review of 17 global banks.

Moody’s did place RBC’s supported subordinated debt ratings on review for downgrade, while affirming its other ratings.

CAPITAL MARKETS EXPOSURE

Moody’s also cited the sizable capital markets exposure of Scotiabank, BMO, CIBC and National Bank as reasons for the warning. Exposure to capital markets was the main reason behind RBC’s ratings cut earlier this year.

For TD, the highest-rated Canadian bank, Moody’s cited concern with its “less-strong” U.S. subsidiary. TD has about 1,300 branches in the United States, outnumbering its branch count in Canada.

TD’s long-term credit rating is currently Aaa, which is the highest rating. Scotiabank and Desjardins are rated Aa1, the next level down, while BMO, CIBC, and National Bank are rated Aa2.

Desjardins was cited because of its more “concentrated” franchise than its Canadian peers, which Moody’s said leaves it less flexibility to respond to profit pressures.

Desjardins has a dominant retail bank presence in the province of Quebec, but lacks the geographic diversity and business mix of the big banks.

Canada’s banks, which had held up much better than their peers during the global economic crisis, were named soundest in the world for four straight years by the World Economic Forum.

The second major debt rating agency, Standard & Poor’s, made a similar move in July, putting RBC, TD, Scotiabank and National Bank on “negative outlook” citing rising consumer debt and elevated housing prices.

Shares of the Canadian banks did not appear to be affected by the Moody’s report, which was released about an hour before markets closed on Friday.

Of the banks placed on review, only TD declined, slipping 0.1 percent to C$ 81.17 on the Toronto Stock Exchange.

CIBC would not comment on the review, while a TD spokesman said the bank “continues to be well capitalized and remains one of the safest and strongest banks in the world.”

The other lenders did not immediately respond to a request for comment.

(Additional reporting by Daniel Bases and Caryn Trokie; Editing by Leslie Adler and Tim Dobbyn)

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First Person: A Supportive Partner Makes All the Difference when Fighting Breast Cancer

To mark Breast Cancer Awareness Month, Yahoo News asked women who have had breast cancer or are going through treatment to write about the people in their lives who stood by them and cared for them. Here’s one story.

FIRST PERSON | It was Feb. 19, 2007, when I was told I had breast cancer.

I was just 32, with two children, Adam, 4, and Kaitlyn, 14, and a marriage that was close to ending after 15 years. We were living in Hillsborough, N.C., and moving to Efland.

Little did we know that move was a blessing in disguise for our whole family.

My husband, Kenny, and I had been having a lot of issues for a few years, most of them financial. We had started renting to own a home from a “friend,” and things were going well until he unexpectedly re-financed the house and our payment went up almost $ 400 a month. We tried to keep up, but we couldn’t, so we moved into a smaller home. This caused a lot more tension in between us, and it was almost the straw that broke up the marriage.

One day after moving, I was putting a box in the top of the closet and felt something “out of place” on the outside of my left breast. I mentioned it to my husband, and he told me to make a doctor’s appointment. Well, I brushed it aside but then Kaitlyn wanted to play soccer and had to have a physical so I figured I’d make myself an appointment too just to see what our doctor thought.

On my 32nd birthday, I went to see our family doctor. As soon as he felt it, he sent me for a mammogram the next day–Valentine’s Day. Kenny, Adam and I went to the imaging center at Duke. I thought it would be a cyst or something less severe, so why not bring my son along instead of finding a babysitter? Based on the imaging from the mammogram and ultrasound they all but said, “It’s cancer.” I was sent the next day to have a biopsy.

We got the call Monday afternoon. My husband answered, our family doc had called, and was told it was stage II intraductal carcinoma. I was in complete shock. My husband held me and let me cry. Starting that day, our relationship changed for the better. I always joked that cancer saved my marriage. But, in all reality, it did.

Kenny never missed a doctor’s appointment, which is one of the greatest things about having a good partner during this time. With chemotherapy, you will develop something called chemo brain. Yes, it is real! He remembered all the details from the appointments.

In March, I started chemotherapy. I would go every other week over an 18-week period, nine total rounds. A lot of those doctor’s appointments, especially chemo days, were very long days and if he weren’t there to keep me company I would’ve gone insane. We laughed, we talked, we spent a lot of time together, and got to know each other again. We learned to love again because you never know when tragedy can strike. And if he weren’t there, I don’t know who would’ve gone to get me french fries. He really was my rock. When I doubted I could do anymore or just needed to cry, he was always there and always telling me we would get through this. July 11, 2007, was my last day of chemo. I was so happy to have that part of it behind us but there was still more to go.

I am a stay-at-home mom, so my job is to cook, clean and take care of my family. I just didn’t have the energy to do that. But thanks to my wonderful husband and completely awesome daughter, I didn’t have to worry about that stuff at all. Another perk to having a supportive partner is that they understand you just can’t do a lot of what you are used to doing when you’re so exhausted from fighting cancer. And if ever you need to take time for yourself, it is during this time! My house got cleaned, food got served and kids got taken care of and that took a lot off of my worried mind!

After I had my bilateral mastectomy on Aug. 9, I thought I was a freak. I couldn’t do reconstruction right away, so here I was, a 32-year-old woman walking around with no breasts. I thought, “That’s a big part of what makes me a woman, now what?” But I was so wrong about that and Kenny let me know how wrong I was. I tell everyone if I had any doubt about how much he loved me this is when it all went away. I couldn’t take a shower or a bath for a few days after and I had these drain tubes that had to be emptied twice a day, which I couldn’t do on my own. My wonderfully supportive husband emptied my drains, measured the drainage and basically bathed me. If he didn’t love me I don’t think that would have ever happened. Today, we have been married almost 19 years and are happier than we’ve ever been. I know that sounds cliché, but it’s the truth. We let the little things go now and just love each other. It’s not always sunshine and lollipops. But we’re together, and we’re living and loving every day.

So I guess what I am saying here is there are so many areas in your life where you will need that supportive partner to help you fight cancer and to keep you going. Whether it’s keeping up with appointments, remembering what the doctor says, making you laugh, getting you french fries or just holding you, you need a supportive partner. It could be a sibling, a parent, even an adult child but you need someone. No one should go through this difficult, terrible journey on her own; it’s just too much for one person. I really like the term co-survivor because that is what you are doing: You are surviving this together.

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Moody’s warns may downgrade five big Canadian banks

NEW YORK/TORONTO (Reuters) – Moody’s Investors Service warned on Friday it could cut its ratings on five top Canadian banks on concerns about a softening economy and volatile capital markets, a blow to a banking system named the soundest in the world four years in a row.

But the outlook for the sector is no longer as rosy, Moody’s said, because of the risks presented by the macroeconomic environment and a business mix that leans heavily on domestic mortgages and other consumer lending.

Canadian consumer debt has risen to record highs in recent months, a situation reminiscent of the United States before its 2008 housing crisis. The household debt-to-income ratio jumped to 163.4 percent in the second quarter from 161.8 percent in the first quarter, Statistics Canada said a week ago.

Meanwhile, Canada’s housing market appears to be cooling after several years of red-hot gains.

“Domestically, we’re concerned about the high and increasing levels of consumer indebtedness and elevated housing prices, and we feel that they may tend to leave the Canadian banks more vulnerable to downside risks to the economy than they have been in the past,” David Beattie, Moody’s vice president and senior credit officer, told Reuters.

The warning applies to long-term debt ratings for Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada. It also applies to Caisse Centrale Desjardins, Canada‘s largest association of credit unions.

The ratings agency said any cuts would likely be only one notch. The sector’s ratings are still among the highest in the world.

“We continue to believe that the Canadian banks rank among the strongest in the world, and this review is based on concerns about system-wide and bank-specific risks that aren’t fully captured in their current ratings,” said Beattie.

The only bank not put on credit watch on Friday was Royal Bank of Canada, the country’s largest. That’s because Moody’s lowered RBC’s ratings by two notches in June as part of a review of 17 global banks.

Moody’s did place RBC’s supported subordinated debt ratings on review for downgrade, while affirming its other ratings.

CAPITAL MARKETS EXPOSURE

Moody’s also cited the sizable capital markets exposure of Scotiabank, BMO, CIBC and National Bank as reasons for the warning. Exposure to capital markets was the main reason behind RBC’s ratings cut earlier this year.

For TD, the highest-rated Canadian bank, Moody’s cited concern with its “less-strong” U.S. subsidiary. TD has about 1,300 branches in the United States, outnumbering its branch count in Canada.

TD’s long-term credit rating is currently Aaa, which is the highest rating. Scotiabank and Desjardins are rated Aa1, the next level down, while BMO, CIBC, and National Bank are rated Aa2.

Desjardins was cited because of its more “concentrated” franchise than its Canadian peers, which Moody’s said leaves it less flexibility to respond to profit pressures.

Desjardins has a dominant retail bank presence in the province of Quebec, but lacks the geographic diversity and business mix of the big banks.

Canada’s banks, which had held up much better than their peers during the global economic crisis, were named soundest in the world for four straight years by the World Economic Forum.

The second major debt rating agency, Standard & Poor’s, made a similar move in July, putting RBC, TD, Scotiabank and National Bank on “negative outlook” citing rising consumer debt and elevated housing prices.

Shares of the Canadian banks did not appear to be affected by the Moody’s report, which was released about an hour before markets closed on Friday.

Of the banks placed on review, only TD declined, slipping 0.1 percent to C$ 81.17 on the Toronto Stock Exchange.

CIBC would not comment on the review, while a TD spokesman said the bank “continues to be well capitalized and remains one of the safest and strongest banks in the world.”

The other lenders did not immediately respond to a request for comment.

(Additional reporting by Daniel Bases and Caryn Trokie; Editing by Leslie Adler and Tim Dobbyn)

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Lull in fighting between Israel, Gaza militants

JERUSALEM (AP) — A flare-up in fighting between Israel and militants from Gaza’s ruling Hamas movement has subsided.

Both sides say the government in Egypt helped to restore calm.

Israeli defense official Amos Gilad told Army Radio on Thursday that Egyptian security forces have “a very impressive ability” to convey to the militants that it is in their “supreme interest not to attack.”

Hamas spokesman Ayman Taha says Egypt conveyed Israel’s desire to contain the violence. He says Hamas told Egyptian that militants would cease fire if Israel would.

The Israeli military says militants haven’t attacked southern Israel since Wednesday night. It says the military hasn’t struck Gaza since Wednesday morning.

Militants fired some 80 rockets and mortars at Israel on Wednesday and Israeli aircraft struck four times.

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Tax gains lift Merck, but sales disappoint

(Reuters) – Merck & Co Inc reported a higher-than-expected third-quarter profit, as a favorable tax rate and lower merger costs helped offset plunging sales of its former flagship product, Singulair, an asthma drug that began facing cheaper generics in August.

But overall company sales came in slightly below Wall Street expectations, as Singulair’s decline outpaced already grim predictions for it.

Merck, the No. 2 U.S. drugmaker, said on Friday it earned $ 1.73 billion, or 56 cents per share, compared with $ 1.69 billion, or 55 cents per share, a year earlier.

Excluding special items, Merck earned 95 cents per share. Analysts, on average, expected 92 cents.

The better-than-expected profit was largely due to the favorable impact of an overseas tax settlement as well as realization of foreign tax benefits, Merck said.

Jefferies & Co analyst Jeffrey Holford had predicted a tax rate of 26 percent, but it came in at 20.3 percent. He called the profit beat “low quality” because it was mostly due to the one-time tax gains.

“Gross margins were also weaker than expected,” Holford said, and noted that Singulair sales were about $ 75 million below what he had expected.

Merck spokesman Ron Rogers said the tax gains are not expected to carry over into the fourth quarter and that the drugmaker continues to expect a full-year tax rate of about 25 percent.

Global company revenue fell 4 percent to $ 11.49 billion in the quarter, below Wall Street expectations of $ 11.57 billion.

Merck tightened its full-year profit forecast to between $ 3.78 and $ 3.82 per share, from its earlier view of $ 3.75 to $ 3.85 per share.

Sales of Singulair tumbled 55 percent to $ 602 million. But a number of its newer products – including treatments for diabetes, hepatitis C and HIV – generated double-digit sales gains that helped cushion Singulair’s free fall.

And revenue from Gardasil, the company’s vaccine against cervical cancer, jumped 31 percent to $ 581 million.

But Merck will need to launch new drugs to withstand looming generic competition for other important medicines. Its Maxalt migraine drug, with $ 600 million in annual sales, goes generic in December, followed next year by its Temodar brain cancer medicine, which has near-blockbuster sales of $ 900 million.

Over the next 18 months, the company aims to seek six drug approvals, including marketing applications for new types of therapies for insomnia and osteoporosis.

(Reporting by Ransdell Pierson; Editing by Lisa Von Ahn, Jeffrey Benkoe and Steve Orlofsky)

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