The Week in Review: Cisco Layoffs, Ukraine Concerns, Monster Gains

Index Snapshot

A week of continued recovery from the substantial losses of two weeks ago was tempered by Friday’s report of escalation in the Ukraine. The Dow Jones was hit particularly hard by the news, quickly plunging 100 points in response; the other major indexes also lost significant ground. However, an afternoon rally made up for much of the losses, ultimately making for a positive week. The Nasdaq led the way with a weekly gain of 2.15 percent, followed by the S&P 500 increasing 1.22 percent.  The Dow Jones closed up 0.66 percent and the Russell 2000 gained 0.91 percent for the week.

Cisco Posts Strong Earnings Report, Plans to Trim Its Workforce

Cisco Systems (CSCO) beat expectations on Wednesday with earnings of $0.43 per share, despite revenues that remained nearly flat – $12.36 billion following the previous quarter’s $12.4 billion. Nevertheless, investors drew back from the multinational systems equipment firm as CEO John Chambers announced that Cisco would lay off some 6,000 employees, representing approximately 8 percent of Cisco’s global workforce.

Mr. Chambers characterized the layoffs as a “restructuring” that would make space for employees in more vital, expanding operations. Investors nonetheless reacted negatively to the latest round of job trimming; the stock quickly fell approximately 1 percent in after hours trading on Wednesday and has continued to decline. Cisco announced a similar layoff of 4,000 employees one year ago, bringing the total number of jobs eliminated to 18,000 since Mr. Chambers took over as CEO.

Monster Beverage Corp Makes Monster Gains with Coca-Cola Backing

Monster Beverage Corp (MNST), the firm behind the popular line of energy drinks, has made massive gains on the news that Coca-Cola (KO) plans to purchase a 17 percent ownership stake in the company and transfer its global energy drink business to Monster. Coca-Cola will also make a cash payment of some $2.15 billion to Monster as a part of the deal. MNST gained 21 percent in after hours trading on Thursday and closed up 30.3 percent on Friday. KO gained 1.2 percent in after hours trading on Thursday and gained 1.74 on Friday.

Nordstrom Loses Ground on Poor Sales Numbers

Nordstrom Inc. (JWN) share prices fell on Friday amidst disappointing sales figures for the quarter ended on August 2. Sales at stores open for at least a year and through the firm’s website increased 2.7 percent for the quarter, missing Wall Street’s expectations. Sales at full-line department stores were expected to make gains but instead dropped 1.2 percent. Some analysts also speculate that the firm’s recent $350 million acquisition of Trunk Club has been unpopular among investors. JWN was down 5.21 percent today.

Department of Labor Reports Minimal Change in Employment for July

The Department of Labor’s Friday press release reported that July saw little change in the country’s overall unemployment picture. Total non-farm employment increased by 209,000 for the month, while the unemployment rate remained at 6.2 percent. Advance joblessness figures were disappointing for the week ended August 9 as initial jobless claims totaled 311,000, up 21,000 from the previous week’s revised figure.

Ukraine Flare-Up

Renewed escalation of the conflict in the Ukraine on Friday led to a plunge in share prices across markets and a rally in treasury bonds. Ukrainian President Petro Poroshenko stated that Russian armored vehicles had crossed the border into the Ukraine and that Ukrainian artillery had destroyed “the majority” of the vehicles. Though Russia denied any incursion had occurred, holding to its policy of publicly denying any link to the Donetsk uprising, NATO secretary-general Anders Rasmussen stated that NATO had observed the incursion and described it as a “continuation of what we have seen for some time.”

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