Market Update
Movers: DoorDash, Etsy, PayPal, Qualcomm, Shopify, Southwest Airlines
Scott Peters
03 Aug, 2023
New York City
DoorDash Inc increased 0.6% to $86.50 after the delivery company reported better-than-expected revenue in its latest quarter.
Revenue in the second quarter increased 33% to $2.2 billion from $1.6 billion and net loss in the quarter shrank to $172 million from $263 million and diluted loss per share eased to 44 cents to 72 cents a year ago.
Gross market volume increased 26% to $16.5 billion from $13.1 billion and total orders increased 25% to 532,000 from 426,000 a year ago.
Qualcomm Inc plunged 9.6% to $116.80 after the semiconductor chipmaker reported weaker-than-expected revenue in the fiscal third quarter and forecasted lighter-than-expected revenue in the current quarter.
Revenue in the fiscal third quarter ending on June 25 declined 23% to $8.5 billion from $10.9 billion and net income declined to $1.8 billion from $3.7 billion and diluted earnings per share dropped to $1.60 from $3.29 a year ago.
Revenue for smartphone chipsets declined 25% to $5.2 billion and automotive applications rose 13% to $434 million and for connected devices dropped 25% to $1.5 billion from $1.95 billion a year ago.
Demand for smartphones in China has not rebounded to the projected levels and the China region accounts for about 61% of Qualcomm sales.
Qualcomm Inc said overall smartphone shipments are expected to decline in high single-digit percentage rate in 2023.
PayPal Holdings Inc declined 8.8% to $66.70 despite the company meeting earnings expectations set by some investors.
The payment processing company said second quarter revenue increased 7% to $7.29 billion and the company swung to net income of $1 billion from a loss of $341 million and diluted earnings per share was 92 cents compared to a loss of 29 cents a year ago.
Total payment volume increased 11% to $376 million from $339.8 million a year ago.
PayPal forecasted third quarter revenue to increase 8% to $7.4 billion and diluted earnings per share between 85 cents and 87 cents.
The company anticipated stock repurchase in the current year to reach $5 billion.
PayPal and KKR announced an exclusive multi-year relationship for European buy now, pay later and under the terms of the agreement, private credit funds and accounts managed by KKR will purchase up to €40 billion of current and future BNPL loans originated in the UK and other European countries.
The deal is expected to close in the second half and upon closing PayPal expects to receive proceeds of $1.8 billion.
Etsy Inc declined 9.6% to $86.88 after the company reported second quarter earnings that met analysts' estimates but forecasted revenue in the third quarter below expectations.
Consolidated revenue in the second quarter increased 7% to $629 million from $585.1 million and net income declined 15.3% to $61.9 million from $73.1 million and diluted earnings per share fell to 45 cents from 51 cents a year ago.
The company operates three online platforms, Etsy, Reverb and Depop and reports consolidated results.
Gross merchandise sales inched lower 0.6% to $3.01 billion from $3.02 billion and number of active sellers increased 12.3% to 8.3 million and active buyers rose 2.5% to 96.2 million.
The company guided third quarter gross market sales between $2.95 billion and $3.1 billion and revenue between $610 million and $645 million.
Southwest Airlines Company declined 2.3% to $32.60 and extended a 4-day loss after the regional airline reported mixed quarterly results.
Revenue in the second quarter increased 4.6% to $7.6 billion from $6.7 billion and net income fell 10.1% to $683 million from $760 million and diluted earnings per share dropped to $1.08 from $1.20 a year ago.
The company guided revenue per available set miles in the third quarter declined between 3% and 7% because of tough comparison with the previous year's demand driven by pent-up demand for travel after the ending of Covid restrictions.
Shopify Inc decreased 4.7% to $59.28 after the online shopping platform for sellers reported higher sales and gross merchandise volume but quarterly loss expanded.
Revenue in the second quarter increased 31% to $1.7 billion from $1.3 billion and net loss rose to $1.3 billion from $1.2 billion and diluted loss per share expanded to $1.02 from 95 cents a year ago.
Gross merchandise volume rose 17% to $55 billion from a year ago and gross payment volume rose to $31.7 billion, which increased to 58% of GMV from 53% in the second quarter a year ago.
U.S. Stocks Face More Headwinds, Treasury Yields Soar to 9-month Highs
Barry Adams
03 Aug, 2023
New York City
Market indexes drifted lower for the second day following the U.S. long-term debt rating downgrade and investors focused on another batch of earnings.
Southwest, DoorDash, PayPal, Etsy and Qualcomm were among the leading companies reporting earnings and about 600 companies are expected to release earnings before the end of the week.
Stocks have been under pressure after Fitch Ratings cut the U.S. long term debt rating by one notch citing expected "fiscal deterioration" over the next three years as the U.S. government ramps up borrowing.
Treasury yields spiked to the levels last seen in November as bond traders worry that the Fed will struggle to bring down inflation below 3%.
In addition, the U.S. Treasury plans to borrow at elevated pace for the next five months and to finance its growing budget deficit.
In overseas news, investors also reviewed the Bank of England lifting its key policy rates by 25 basis points and held out for more rate hikes if inflation stays elevated.
The Bank of England also lowered its inflation outlook by the end of 2023 to 5% and forecasted inflation to drop to 2% level by the second quarter of 2025.
The Euro Area inflation turned negative for the second month in June and dropped to the lowest level in the last three years.
U.S. Indexes & Yields
The S&P 500 index traded down 0.5% to 4,491.40 and the Nasdaq Composite declined 0.3% to 13,933.52.
The yield on 2-year Treasury notes increased to 4.91%, 10-year Treasury notes inched higher to 4.14% and 30-year Treasury bonds edged down to 4.29%.
Crude oil increased $0.40 to $79.88 a barrel and natural gas prices increased 4 cents to $2.51 a thermal unit.
U.S. Stock Movers
DoorDash Inc increased 0.6% to $86.50 after the delivery company reported better-than-expected revenue in its latest quarter.
Qualcomm Inc plunged 9.6% to $116.80 after the semiconductor chipmaker reported weaker-than-expected revenue in the fiscal third quarter and forecasted lighter-than-expected revenue in the current quarter.
Demand for smartphones in China has not rebounded to the projected levels and the China region accounts for about 61% of Qualcomm sales.
Qualcomm said overall smartphone shipments are expected to decline in high single-digit percentage rate in 2023.
PayPal Holdings declined 8.8% to $66.70 despite the company meeting earnings expectations set by some investors.
The payment processing company posted adjusted earnings in the second quarter of $1.16 a share and revenue of $7.29 billion.
Etsy Inc declined 9.6% to $86.88 after the company reported second quarter earnings that met analysts' estimates but forecasted revenue in the third quarter below expectations.
Europe Movers: Adidas, AXA, BMW, Infineon, Lufthansa, Rolls-Royce, Societe Generale
Inga Muller
03 Aug, 2023
Frankfurt
European markets trimmed losses after the Bank of England lifted its key lending rates by 25 basis points and the Euro Area wholesale inflation turned negative for the second month in a row.
The DAX index decreased 0.8% to 15,894.94, the CAC-40 index fell 0.8% to 7,251.72 and the FTSE 100 index dropped 0.7% to 7,508.68.
The yield on 10-year German bonds increased to 2.53%, 8rench bonds traded higher to 3.10%, the UK gilts edged up to 4.42% and Italian bonds increased to 4.25%.
BMW declined 1.7% to €103.44 after the German luxury vehicle maker warned of simmering supply chain issues and higher inflation for the remainder of the year.
Infineon Technologies AG dropped 7.8% to €35.09 after the company reported a decline of 10% in its adjusted quarter earnings.
Lufthansa AG declined 5.4% to €8.35 despite the state controlled German airline reported record second quarter pre-tax earnings over €1 billion.
Net profile in the second quarter rose to €881 million from €414 million in the first quarter, and from €259 million a year ago..
In the second quarter, Lufthansa flew 33.2 million passengers, 14% higher than 29.2 million a year ago but at 84% level in the corresponding quarter in 2019.
Adidas AG increased 2.2% after the German sportswear maker revised higher its 2023 sales outlook.
AXA SA declined 0.6% to €27.23 after the French insurance company reported first-half net income declined to €3.83 billion compared to €3.85 billion a year ago.
Rolls-Royce Holdings Plc increased 3% to 189.55 pence after the aviation and defense company reported higher first-half net profit after margins improved in its civil aviation business.
Societe Generale SA increased 2.9% to €24.69 after the company returned to profitability in the second quarter and resumed its stock repurchase plan of €440 million.
Volatile mining companies traded lower following the weak sentiment in the commodities markets.
Glencore, Anglo American and Antofagasta declined between 1% and 3%.
European Markets Drop 1%, BoE Hiked Rates, German Trade Surplus Widened
Bridgette Randall
03 Aug, 2023
Frankfurt
Market indexes retained negative bias for the third day in a row after investors reviewed economic data in the region and the Bank of England's rate decision.
Market averages in Frankfurt, Paris and London declined and tech sector stocks led decliners after investors focused on the latest earnings results.
Infineon, Lufthansa, Societe Generale, Rolls Royce, AXA, Adecco and BMW were in focus after the release of earnings.
Bank of England Lifted Rates by 25 Basis Points to 5.25%
The Bank of England lifted its key lending rates for the fourteenth time in a row by 25 basis points to 5.25%.
Interest rates in the U.K. are at the highest levels since 2008 and the central bank is expected to continue its rate hike campaign as inflation remains significantly above the target rate of 2%.
The Bank of England revised its inflation forecast to 5% by the end of 2023 and estimated inflation is likely to reach its 2% target by the second quarter of 2025.
German Trade Balance Expanded In June
German trade surplus expanded to €18.7 billion in June from an upwardly revised €14.6 billion in May, the Federal Statistics Office or DeStatis reported Wednesday.
Seasonally adjusted imports fell 3.4% from the previous month to €112.6 billion while exports edged 0.1% higher to €131.3 billion.
Exports to EU countries advanced 1.3%, and to the Euro Area increased 1.8% and imports from EU countries fell 3.1% and from the Euro Area declined 4.1%.
From a year ago, exports declined 1.9% and imports plunged 11.6%.
Wholesale Prices Dropped for 2nd Month
Producer prices in the Euro Area declined 3.4% in June following an upwardly revised fall of 1.6% in May, Eurostat reported Wednesday.
The ongoing decline in energy prices dragged down the measure of wholesale inflation for the second month in a row and the index fell to the lowest level since June 2020.
On a monthly basis, the index declined 0.4% in June and fell for the sixth consecutive month in a row.
In the month, energy prices fell 16.5% compared to a decline of 13.5% in May, intermediate goods prices fell 2.7% compared to 1.5%, but capital goods prices rose at a slower pace of5.2% from 5.6%, durable consumer goods prices slowed to 5.9% from 6.7% and non-durable consumer goods prices eased to 8.9% from 9.6% a year ago.
Europe Indexes & Yields
The DAX index decreased 0.8% to 15,894.94, the CAC-40 index fell 0.8% to 7,251.72 and the FTSE 100 index dropped 0.7% to 7,508.68.
The yield on 10-year German bonds increased to 2.53%, 8rench bonds traded higher to 3.10%, the UK gilts edged up to 4.42% and Italian bonds increased to 4.25%.
The euro edged lower to $1.091, the British pound to $1.266 and the U.S. dollar fetched 87.63 Swiss cents.
Brent crude increased $0.40 to $82.80 a barrel and the Dutch TTF natural gas increased €1.0 to €29.74 per MWh.
Europe Stock Movers
BMW declined 1.7% to €103.44 after the German luxury vehicle maker warned of simmering supply chain issues and higher inflation for the remainder of the year.
Infineon Technologies AG dropped 7.8% to €35.09 after the company reported a decline of 10% in its adjusted quarter earnings.
Adidas AG increased 2.2% after the German sportswear maker revised higher its 2023 sales outlook.
AXA SA declined 0.6% to €27.23 after the French insurance company reported first-half net income declined to €3.83 billion compared to €3.85 billion a year ago.
Rolls-Royce Holdings Plc increased 3% to 189.55 pence after the aviation and defense company reported higher first-half net profit after margins improved in its civil aviation business.
Societe Generale SA increased 2.9% to €24.69 after the company returned to profitability in the second quarter and resumed its stock repurchase plan of €440 million.
Volatile mining companies traded lower following the weak sentiment in the commodities markets.
Glencore, Anglo American and Antofagasta declined between 1% and 3%.
Global Markets Dropped 2% After U.S. Debt Downgrade
Barry Adams
02 Aug, 2023
New York City
Market indexes on Wall Street fell more than 2% after Fitch Ratings lowered its long-term credit rating for the U.S. by one notch.
The S&P 500 and the Nasdaq Composite dropped after tech stocks led the decliners and the rating downgrade was the more reason for the market to consolidate after a rally of nine months.
Profit-taking sentiment drove tech stocks lower and several leading tech companies fell sharply.
Meta Platforms, Alphabet, Apple, Amazon.com, Tesla and Microsoft declined between 2% and 3%.
Market indexes opened lower and selling intensified in the early hours of trading with the Nasdaq index falling as much as 2.6% by midday.
Market averages attempted a rebound for the next two hours but turned lower in the final hour of trading after sellers overwhelmed buyers.
Fitch's rating downgrade met some resistance on Wall Street and among leading economists for its reasoning and timing.
But the rating action came just days ahead of the U.S. Treasury ramping up its borrowing to as much as $103 billion starting next week.
Moreover, the U.S. government is also expected to post a larger than expected budget deficit of as much as 6%, driven in part by sky-high military spending.
Fitch had placed the U.S. debt on its watch list with negative implications in late May but most economists panned the downgrade and added that beyond the shock value of the rating action, financial markets will continue on its path.
Former U.S. Treasury Secretary Larry Summers labeled Fitch's decision "bizarre and inept" but failed to clarify how long the U.S. can keep adding to its gigantic pile of federal government debt without long term consequences.
Allianz Chief Economic Advisor Mohamed El-Erian added the reasoning and timing of the rating agency's decision was "perplexing."
"It doesn't really matter that much" said JPMorgan chief executive Jamie Dimon in an interview with CNBC.
Dimon went on to add that it is the market that determines interest rates or the borrowing costs.
But markets are influenced by what rating agencies have to say and how debts are rated and compared to other issuers in the market, so the ratings do have significant influence on the level and direction of interest rates.
Market indexes are expected to recover from the decline but other longer term factors could also impact market direction.
Core inflation is still running significantly ahead of the Fed's target rate of 2%, despite the recent cooling of overall inflation.
The wider acceptance of the soft landing scenario among investors has bolted market indexes to double digit gains and extended nine-month rally but corporate profits have been mixed and barely meeting lowered expectations.
In other economic news, the private sector added 324,000 net new jobs in July, the latest survey from ADP said Wednesday.
Job gains declined from a downwardly revised whopping 455,000 increase in June, but were still significantly ahead of the 189,000 estimated by economists in a survey conducted by Dow Jones.
Bulk of job additions were in the service sector totaling 303,000, driven by 201,000 leisure and hospitality and 30,000 in information management.
Investors also reacted to the fresh batch of earnings as the busy of week of releases rolled on.
AMD, CVS health, Humana, Ferrari, Match.com, Starbucks and Freshworks were in focus.
U.S. Indexes & Yields
The S&P 500 index traded down 1.4% to 4,513.42 and the Nasdaq Composite declined 2.2% to 13,975.57.
The yield on 2-year Treasury notes increased to 4.91%, 10-year Treasury notes inched higher to 4.08% and 30-year Treasury bonds edged down to 4.18%.
Crude oil decreased $1.49 to $79.87 a barrel and natural gas prices decreased 7 cents to $2.48 a thermal unit.
U.S. Stock Movers
Ferrari NV increased 1.3% to $321.69 after the maker of luxury sports cars lifted its annual outlook and reported better-than-expected quarterly earnings.
Advanced Micro Devices, Inc decreased 1.1% to $116.30 after the semiconductor chipmaker reported stronger-than-expected sales and earnings in the second quarter but forecasted weaker-than-expected third quarter sales.
Match Group Inc jumped 1.7% to $47.95 after the online dating site reported strong increase in sales and earnings in the second quarter and forecasted sales are likely to be ahead of market expectations.
Starbucks Corp increased 0.8% to $102.03 after the coffee chain operator reported higher-than-expected sales in the fiscal third quarter on a sales rebound in China.
Sales at stores open at least 13 months in China soared 46% from a year ago, after Covid-restrictions ended.
Revenue in the quarter ending on July 2 rose 12% to $9.2 billion and the company opened 588 net new stores in the quarter, increasing the worldwide total to 37,000.
Net earnings attributable to shareholders increased to $1.1 billion from $913 million and diluted earnings per share rose to 99 cents from 79 cents a year ago.
European Markets Rebounded from 2% Loss, Crude Oil In Focus
European markets dropped mirroring losses in Asian markets after worries about U.S. fiscal management and growing debt resurfaced.
Fitch Ratings lowered its credit rating to AA+ from AAA citing persistent governance issues.
Rating agencies have been slow in downgrading the U.S. debt, despite more than a decade of weakening governance, rising debt levels and outsized military spending.
Fitch also noted that the U.S. government deficit is expected to rise to 6.3% in 2023 from 3.7% in 2022.
In stock trading, market indexes in Frankfurt, Paris and London declined more than 1% but the U.S. dollar held up.
Closer to home, the number of people registering in Spain as unemployed declined by 10,968 to 2.68 million in July, the ministry of Labor and Social Security reported Wednesday.
Unemployment declined for the fifth month in a row, reaching the level since 2008 when it was 2.62 million.
A separate report from the ministry showed that 16,285 net formal jobs were added in July, increasing the total number of jobs to 20.71 million.
Crude oil advanced to a 3-month high after an industry report suggested a 4-decade higher weekly drawdown of inventories last week.
Crude Oil Advanced to 3-month High
Crude oil prices rose to a three-month high after U.S. crude oil inventories declined by 15.4 million barrels last week, a report from American Petroleum Institute noted Tuesday.
The decline in inventories significantly higher than expected 1.37 million barrels withdrawal in the week.
If the industry association's withdrawal estimate is confirmed by the official data on Wednesday, it will be the largest drawdown in four decades in a week.
Moreover, Saudi Arabia is also expected to announce an extension of its one million barrels per day production cut through September at the OPEC meeting on Friday.
To arrest the rising energy prices, the Biden administration withdrew its offer to buy 6 million barrels of oil for the U.S. Strategic Petroleum Reserve.
Europe Indexes & Yields
The DAX index decreased 0.8% to 16,020.02, the CAC-40 index fell 1.3% to 7,312.84 and the FTSE 100 index dropped 1.4% to 7,561.53.
The yield on 10-year German bonds increased to 2.46%, 8rench bonds traded higher to 3.05%, the UK gilts edged up to 4.39% and Italian bonds increased to 4.15%.
The euro edged lower to $1.097, the British pound to $1.271 and the U.S. dollar fetched 87.81 Swiss cents
Brent crude increased $1.21 to $83.59 a barrel and the Dutch TTF natural gas increased €1.83 to €28.95 per MWh.
Europe Stock Movers
Mining companies traded down on the ongoing worries that demand growth from China is likely to remain weak for several quarters as policy makers struggle to devise new stimulus measures and revive moribund property market.
Glencore, Antofagasta and Anglo American gained between 1% and 2%.
Ferrexpo Plc declined 1.4% to 91.32 pence after the iron mining company reported a decline in pallet production in the first-half of 2023.
BAE Systems Plc gained 4.6% to 976.60 pence after the defense contractor and military hardware maker reported strong financial results in the first-half and lifted its guidance for 2023.
Siemens Healthineers AG declined 7.1% to €48.57 after the medical devices maker reported an unexpected decline in quarterly operating earnings but the company reiterated its full-year 2023 outlook.
Schaeffler AG decreased 0.4% to €5.75 despite the German industrial and automotive products maker lifted its margin outlook for 2023 and supported sales growth estimates for the year.
Hugo Boss AG decreased 1.1% to €72.16 despite the men's apparel company reporting higher sales and earnings in the second quarter and lifting its forecast for 2023.
Taylor Wimpey Plc gained 3.2% to 117.80 pence after the company reported better-than-expected first-half results.
Roche Holding AG declined 1.0% to CHF 296.0 pence and Novartis AG dropped 1.0% to CHF 90.15 after two companies were engaged in a patent dispute.
Roche's subsidiary Genentech accused Novartis unit Sandoz of infringing one of its patents.
Movers: AMD, Ferrari, Match Group, Starbucks
Scott Peters
02 Aug, 2023
New York City
Ferrari NV increased 1.3% to $321.69 after the maker of luxury sports cars lifted its annual outlook and reported better-than-expected quarterly earnings.
Net revenue in the second quarter increased 14% to Є1.4 billion and vehicle shipments declined 2% to 3,392 compared to 3,455 a year ago.
Adjusted net profit increased 33% to Є334 million from Є251 million and adjusted diluted earnings per share increased 35% to Є1.83 from Є1.36 a year ago.
Vehicle shipments in the Europe, Middle East and Africa region jumped 17% to 1,638, in North America declined 17% to 869, in the Greater China region dropped 5% to 339 and the rest of Asia fell 16% to 546.
Ferrari revised 2023 revenue forecast to Є5.8 billion from the previous estimate of Є5.7 billion and higher than Є5.6 billion in 2022.
The vehicle maker also revised higher diluted adjusted earnings per share range between Є6.25 and Є6.40 from the previous range between Є6.0 and Є6.20 compared to Є5.09 in 2022.
Advanced Micro Devices, Inc decreased 1.1% to $116.30 after the semiconductor chipmaker reported stronger-than-expected sales and earnings in the second quarter but forecasted weaker-than-expected third quarter sales.
Revenue declined 18% to $5.4 billion from $6.6 billion and net income plunged 94% to $27 million from $447 million and diluted earnings per share dropped to 2 cents from 27 cents a year ago.
Data center revenue driven by enterprise sales dropped 11% to $1.3 billion, client segment revenue which includes PC related sales plunged 54% to $998 million and gaming segment revenue declined 4% to $1.6 billion.
Match Group Inc jumped 1.7% to $47.95 after the online dating site reported strong increase in sales and earnings in the second quarter and forecasted sales are likely to be ahead of market expectations.
Total revenue in the second quarter rose 4% to $830 million and the company swung to a net income of $137.3 million from a loss of 32.3 million and diluted earnings per share was 48 cents from (11 cents) a year ago.
Total paying subscribers declined 5% to 15.6 million from 16.4 million and average revenue per subscriber rose to $17.41 from $15.86 a year ago.
Starbucks Corp increased 0.8% to $102.03 after the coffee chain operator reported higher-than-expected sales in the fiscal third quarter on a sales rebound in China.
Sales at stores open at least 13 months in China soared 46% from a year ago, after Covid-restrictions ended.
Global comparable store sales increased 10% and the U.S. and North American comparable store sales increased 7% from a year ago.
Revenue in the quarter ending on July 2 rose 12% to $9.2 billion and the company opened 588 net new stores in the quarter, increasing the worldwide total to 37,000.
Net earnings attributable to shareholders increased to $1.1 billion from $913 million and diluted earnings per share rose to 99 cents from 79 cents a year ago.
China is expected to drive future sales growth as the company pushes to open more stores in smaller cities of the nation with 1.4 billion people with a preferred hot beverage tea over coffee.
At the end of the third quarter, stores in the U.S. and China comprised 61% of the company’s global portfolio, with 16,144 and 6,480 stores in the U.S. and China, respectively.
Economists Pan U.S. Debt Rating Downgrade, Robust Private Sector Job Gains Cool
Barry Adams
02 Aug, 2023
New York City
Global markets fell more than 2% after Fitch Ratings lowered its long-term credit rating for the U.S. by one notch.
Fitch had placed the U.S. debt on its watch list with negative implications but most economists panned the downgrade and added that beyond the shock value of the rating action, financial markets will continue on its path.
Former U.S. Treasury Secretary Larry Summers labeled Fitch's decision "bizarre and inept" but failed to clarify how long the U.S. can keep adding to its gigantic pile of federal government debt without long term consequences.
Allianz Chief Economic Advisor Mohamed El-Erian added the reasoning and timing of the rating agency's decision was "perplexing."
Market indexes are expected to recover from the decline but other longer term factors could also impact market direction.
Core inflation is still running significantly ahead of the Fed's target rate of 2%, despite the recent cooling of overall inflation.
The wider acceptance of the soft landing scenario among investors has bolted market indexes to double digit gains and extended nine-month rally but corporate profits have been mixed and barely meeting lowered expectations.
In other economic news, the private sector added 324,000 net new jobs in July, the latest survey from ADP said Wednesday.
Job gains declined from a downwardly revised whopping 455,000 increase in June, but were still significantly ahead of the 189,000 estimated by economists in a survey conducted by Dow Jones.
Bulk of job additions were in the service sector totaling 303,000, driven by 201,000 leisure and hospitality and 30,000 in information management.
Investors also reacted to the fresh batch of earnings as the busy of week of releases rolled on.
AMD, CVS health, Humana, Ferrari, Match. Starbucks and Freshworks were in focus.
U.S. Indexes & Yields
The S&P 500 index traded down 0.7% to 4,541.52 and the Nasdaq Composite declined 1.4% to 14,088.09.
The yield on 2-year Treasury notes increased to 4.91%, 10-year Treasury notes inched higher to 4.08% and 30-year Treasury bonds edged down to 4.18%.
Crude oil decreased $0.69 to $80.67 a barrel and natural gas prices decreased 6 cents to $2.49 a thermal unit.
U.S. Stock Movers
Ferrari NV increased 1.3% to $321.69 after the maker of luxury sports cars lifted its annual outlook and reported better-than-expected quarterly earnings.
Advanced Micro Devices, Inc decreased 1.1% to $116.30 after the semiconductor chipmaker reported stronger-than-expected sales and earnings in the second quarter but forecasted weaker-than-expected third quarter sales.
Match Group Inc jumped 1.7% to $47.95 after the online dating site reported strong increase in sales and earnings in the second quarter and forecasted sales are likely to be ahead of market expectations.
Starbucks Corp increased 0.8% to $102.03 after the coffee chain operator reported higher-than-expected sales in the fiscal third quarter on a sales rebound in China.
Sales at stores open at least 13 months in China soared 46% from a year ago, after Covid-restrictions ended.
Revenue in the quarter ending on July 2 rose 12% to $9.2 billion and the company opened 588 net new stores in the quarter, increasing the worldwide total to 37,000.
Net earnings attributable to shareholders increased to $1.1 billion from $913 million and diluted earnings per share rose to 99 cents from 79 cents a year ago.
Moves: BAE Systems, Ferrexpo, Hugo Boss, Novartis, Roche, Schaeffler, Siemens Healthineers
Inga Muller
02 Aug, 2023
New York City
European market indexes dropped as much as 2%, the U.S. dollar held stable and bond yields edged slightly higher after Fitch Ratings trimmed U.S. credit rating down one notch from its top investment grade.
The DAX index decreased 1.4% to 16,016.88, the CAC-40 index fell 1.2% to 7,317.36 and the FTSE 100 index dropped 1.5% to 7,553.02.
The yield on 10-year German bonds increased to 2.46%, 8rench bonds traded higher to 3.05%, the UK gilts edged up to 4.39% and Italian bonds increased to 4.15%.
Mining companies traded down on the ongoing worries that demand growth from China is likely to remain weak for several quarters as policy makers struggle to devise new stimulus measures and revive moribund property market.
Glencore, Antofagasta and Anglo American gained between 1% and 2%.
Ferrexpo Plc declined 1.4% to 91.32 pence after the iron mining company reported a decline in pallet production in the first-half of 2023.
BAE Systems Plc gained 4.6% to 976.60 pence after the defense contractor and military hardware maker reported strong financial results in the first-half and lifted its guidance for 2023.
Siemens Healthineers AG declined 7.1% to €48.57 after the medical devices maker reported an unexpected decline in quarterly operating earnings but the company reiterated its full-year 2023 outlook.
Schaeffler AG decreased 0.4% to €5.75 despite the German industrial and automotive products maker lifting its margin outlook for 2023 and supporting sales growth estimates for the year.
Hugo Boss AG decreased 1.1% to €72.16 despite the men's apparel company reporting higher sales and earnings in the second quarter and lifting its forecast for 2023.
Taylor Wimpey Plc gained 3.2% to 117.80 pence after the company reported better-than-expected first-half results.
Roche Holding AG declined 1.0% to CHF 296.0 pence and Novartis AG dropped 1.0% to CHF 90.15 after two companies were engaged in a patent dispute.
Roche's subsidiary Genentech accused Novartis unit Sandoz of infringing one of its patents.
European Markets Trimmed 2% Fall On U.S. Fiscal Worries
Bridgette Randall
02 Aug, 2023
Frankfurt
European markets dropped mirroring losses in Asian markets after worries about U.S. fiscal management and growing debt resurfaced.
Fitch Ratings lowered its credit rating to AA+ from AAA citing persistent governance issues.
Rating agencies have been slow in downgrading the U.S. debt, despite more than a decade of weakening governance, rising debt levels and outsized military spending.
Fitch also noted that the U.S. government deficit is expected to rise to 6.3% in 2023 from 3.7% in 2022.
In stock trading, market indexes in Frankfurt, Paris and London declined more than 1% but the U.S. dollar held up.
Closer to home, the number of people registering in Spain as unemployed declined by 10,968 to 2.68 million in July, the ministry of Labor and Social Security reported Wednesday.
Unemployment declined for the fifth month in a row, reaching the level since 2008 when it was 2.62 million.
A separate report from the ministry showed that 16,285 net formal jobs were added in July, increasing the total number of jobs to 20.71 million.
Crude oil advanced to a 3-month high after an industry report suggested a 4-decade higher weekly drawdown of inventories last week.
Crude Oil Advanced to 3-month High
Crude oil prices rose to a three-month high after U.S. crude oil inventories declined by 15.4 million barrels last week, a report from American Petroleum Institute noted Tuesday.
The decline in inventories significantly higher than expected 1.37 million barrels withdrawal in the week.
If the industry association's withdrawal estimate is confirmed by the official data on Wednesday, it will be the largest drawdown in four decades in a week.
Moreover, Saudi Arabia is also expected to announce an extension of its one million barrels per day production cut through September at the OPEC meeting on Friday.
To arrest the rising energy prices, the Biden administration withdrew its offer to buy 6 million barrels of oil for the U.S. Strategic Petroleum Reserve.
Europe Indexes & Yields
The DAX index decreased 1.4% to 16,016.88, the CAC-40 index fell 1.2% to 7,317.36 and the FTSE 100 index dropped 1.5% to 7,553.02.
The yield on 10-year German bonds increased to 2.46%, 8rench bonds traded higher to 3.05%, the UK gilts edged up to 4.39% and Italian bonds increased to 4.15%.
The euro edged lower to $1.097, the British pound to $1.271 and the U.S. dollar fetched 87.81 Swiss cents
Brent crude increased $0.30 to $85.21 a barrel and the Dutch TTF natural gas increased €1.22 to €28.35 per MWh.
Europe Stock Movers
Mining companies traded down on the ongoing worries that demand growth from China is likely to remain weak for several quarters as policy makers struggle to devise new stimulus measures and revive moribund property market.
Glencore, Antofagasta and Anglo American gained between 1% and 2%.
Ferrexpo Plc declined 1.4% to 91.32 pence after the iron mining company reported a decline in pallet production in the first-half of 2023.
BAE Systems Plc gained 4.6% to 976.60 pence after the defense contractor and military hardware maker reported strong financial results in the first-half and lifted its guidance for 2023.
Siemens Healthineers AG declined 7.1% to €48.57 after the medical devices maker reported an unexpected decline in quarterly operating earnings but the company reiterated its full-year 2023 outlook.
Schaeffler AG decreased 0.4% to €5.75 despite the German industrial and automotive products maker lifted its margin outlook for 2023 and supported sales growth estimates for the year.
Hugo Boss AG decreased 1.1% to €72.16 despite the men's apparel company reporting higher sales and earnings in the second quarter and lifting its forecast for 2023.
Taylor Wimpey Plc gained 3.2% to 117.80 pence after the company reported better-than-expected first-half results.
Roche Holding AG declined 1.0% to CHF 296.0 pence and Novartis AG dropped 1.0% to CHF 90.15 after two companies were engaged in a patent dispute.
Roche's subsidiary Genentech accused Novartis unit Sandoz of infringing one of its patents.
Fitch Downgrades U.S. Debt Rating Citing Deteriorating Governance
Brian Turner
02 Aug, 2023
New York City
Fitch Ratings lowered its credit rating for the U.S. long-tern credit to AA+ from AAA citing persistent governance issues.
Rating agencies have been slow in downgrading the U.S. debt, despite more than a decade of weakening governance, rising debt levels and outsized military spending.
Fitch also noted that the U.S. government deficit is expected to rise to 6.3% in 2023 from 3.7% in 2022
Fitch said the combination of tightening credit conditions, a slowdown in consumption because of elevated prices and weakening business investment could lead the economy into a "mild recession" in the final quarter of this year and first quarter of the next year.
Fitch placed the U.S. long run foreign currency issuer default rating AAA on negative watch in May at the height of the politically fractious debt ceiling negotiations.
The ratings agency highlighted “the repeated debt-limit political standoffs and last-minute resolutions” that have eroded market confidence in the country’s fiscal management.
Two other credit rating agencies, Moody's and the Standard & Poor's, have not placed the U.S. debt default rating on a watch list.
U.S. based credit rating agencies have a long history of downgrading debt ratings of emerging nations with the slightest hint of fiscal deterioration but have ignored the worsening fiscal and political environment in the U.S. over the last two decades.
Fitch's downgrade drew quick comments from several officials from President Joe Biden's administration including Treasury Secretary Janet Yellen.
“The change by Fitch Ratings announced today is arbitrary and based on outdated data,” Yellen said.
Fitch is the second credit rating agency to lower U.S. debt rating after Standard & Poor's lowered its rating to AA- from AAA in 2011.
At that time lawmakers narrowly avoided a debt default after a last minute deal in Washington but left the nation vulnerable to future debt defaults.
Fitch had warned in May while placing the U.S. debt rating on its watch list, that a future downgrade is likely despite a last minute agreement between President Biden and House Speaker Kevin McCarthy in the final week of May.
Lower U.S. debt rating is not expected to have an immediate negative impact to the stock market but could have longer term impact and cost more in interest rates.
After the announcement, investors in Asia and Europe sought safety in other government bonds and currencies.
The Japanese yen edged up 0.4% to 142.70 against the U.S. dollar and the Swiss franc inched up 0.2% to 87.70 U.S. cents.
With Focus On Earnings, Investors Turn Cautious, Gradual Cooling In Job Market
Barry Adams
01 Aug, 2023
New York City
Market indexes on Wall Street traded down and investors reviewed a flood of earnings releases and critical updates on the labor market.
The S&P 500 index and the Nasdaq Composite index declined and Treasury yields advanced after crude oil prices advanced to a 3-month high.
The S&P 500 index advanced more than 3%, the Nasdaq Composite index jumped 4% and the Russell 2000 index soared 6.1% after small cap companies rebounded in July.
Earnings dominated news flow and Caterpillar, Pfizer, Uber, HSBC, BP, Gap, CNA, Loews Corporation, ZoomInfo and SoFi were in focus.
On the economic front, manufacturing activities declined for the ninth month in a row in July but at a slower pace than in the previous month.
The ISM Manufacturing Purchasing Managers' Index edged up to 46.4 from a nearly a three-year low of 46.0 in June.
New orders, production, inventories and backlog shrank indicating ongoing weakening demand.
The number of job openings declined 34,000 from the previous month to 9.582 million in June, the JOLT report released by the U.S. Bureau of Labor Statistics showed Tuesday.
Job market has been cooling off gradually after peaking near 12 million in early 2022.
Job openings fell in transportation, warehousing, and utilities by 78,000, state and local government education by 29,000, and federal government by 21,000.
However, job openings increased in health care and social assistance by 136,000 and in state and local government, excluding education by 62,000.
Over the month, the number of hires and total separations fell to 5.9 million and 5.6 million, respectively.
U.S. Indexes & Yields
The S&P 500 index traded down 0.2% to 4,577.69 and the Nasdaq Composite declined 0.6% to 14,263.99.
The yield on 2-year Treasury notes increased to 4.90%, 10-year Treasury notes inched higher to 4.90% and 30-year Treasury bonds edged down to 4.07%.
Crude oil increased $0.35 to $81.35 a barrel and natural gas prices decreased 8 cents to $2.55 a thermal unit.
U.S. Stock Movers
Caterpillar Inc soared 7.2% to $283.09 after the heavy equipment maker reported higher sales on rising demand in the second quarter.
Uber Technologies declined 4.6% to $47.11 after the company said gross bookings rose 16% to $33.5 billion and reported quarterly profit of 18 cents a share.
Pfizer Inc increased 0.9% to $36.27 after the pharmaceutical company reported mixed quarterly results in the second quarter and revenue of $12.7 billion and adjusted earnings per share of 67 cents.
Lower Covid related vaccine sales negatively impacted overall sales.
European Markets Hovered Near Recent Highs
European markets traded down after investors reviewed latest unemployment data in the region and corporate earnings releases.
Market indexes in London, Paris and Frankfurt turned lower on the first day of a new month after the DAX gained about 1.5% in July and CAC-40 added 0.8% and the FTSE 100 index jumped 2.2%.
Looming recession worries coupled with the expected rise in interest rates have kept investors on the sidelines following the market rally of the last seven months.
Market indexes are hovering near record highs and investors are debating the future path of indexes in the face of rising rates and restrained consumer spending because of elevated prices.
Euro Area Jobless Rate Held Stable In June
In the region's economic news, the seasonally adjusted unemployment rate in the Euro Area held stable at 6.4% in June matching the rate in the previous month, Eurostat reported Tuesday.
The number of unemployed declined by 62,000 from the previous month to 10.814 million and the jobless rate among people younger than 25 years old fell to a record low of 13.8% from 14.0% in the previous month.
Among the economies of the Euro Area, the jobless rate was highest in Spain with 11.7%, followed by Italy with 7.4% and France with 7.1%.
Germany recorded the lowest unemployment rate of 3%.
Separately, the German bureau of labor statistics said the jobless rate fell to 5.6% in July from 5.7% in the previous month.
The agency reported demand for labor remained cautious because of weak economic conditions and summer break.
The unemployment declined by 4,000 to 2.604 million, but excluding Ukrainian nationals, the total unemployed would have been higher, the government report said.
From a year ago, the total unemployed rose by 147,000.
Weak Manufacturing Activities In Euro Area and UK
In other economic news in the region, the HCOB Eurozone Manufacturing PMI declined to 42.7 in July from 43.4 in the previous month, the lowest in three years.
Manufacturing activities were also under pressure in the Euro Area. and declined for twelve consecutive months in a row because higher interest rates and higher prices negatively impacted demand for manufactured goods.
The HCOB Eurozone Manufacturing PMI declined to 42.7 in July from 43.4 in the previous month, the lowest in three years.
UK factory output fell at the fastest pace in July after higher interest rates and inflation kept demand weak.
The S&P Global/CIPS UK Manufacturing PMI was revised higher to 45.3 in July from the preliminary estimate of 45.0.
The latest reading was the lowest in the year and the weakest since May 2020.
Europe Indexes & Yields
The DAX index decreased 0.9% to 16,307.64, the CAC-40 index fell 0.9% to 7,433.94 and the FTSE 100 index declined 0.3% to 7,666.25.
The yield on 10-year German bonds increased to 2.46%, French bonds traded lower to 3.02%, the UK gilts edged down to 4.32% and Italian bonds decreased to 4.10%.
The euro edged lower to $1.09, the British pound to $1.281 and the U.S. dollar fetched 87.58 Swiss cents
Brent crude decreased $0.48 to $84.94 a barrel and the Dutch TTF natural gas increased €1.24 to €27.12 per MWh.
Europe Stock Movers
JD Sports Fashion Plc declined 2.5% to 153.60 pence after the U.K.'s Competition and Markets Authority said the retailer and Leicester City Football Club broke competition law
HSBC Holdings Plc increased 1.1% to 654 pence and the UK and Kong-based bank said second quarter profit increased 12% to $6.64 billion from $5.49 billion a year ago, ahead of market expectations on higher interest rates.
Revenue rose 37% to $16.7 billion in the second quarter and net interest income advanced 35% to $9.31 billion.
The bank announced its plan to pay a quarterly dividend of 10 U.S. cents and announced stock buyback of $2 billion.
The bank resumed paying quarterly dividends in the first quarter, following the suspension of dividend payment in 2020.
“We have delivered a strong first half performance and are confident of achieving our revised mid-teens return on tangible equity target in 2023 and 2024,” CEO Noel Quinn said in a stock exchange filing.
Fresnillo Plc declined 3.5% 596.50 pence after the silver mining company forecasted weaker-than-expected 2023 outlook.
BP Plc rose 1.7% to 491.38 pence after the energy company hiked its quarterly dividend.
TeamViewer SE soared 7.4% to €16.59 after the software company reported higher earnings in the second quarter supported by higher sales and lower financing costs.
Movers: Arista Networks, Caterpillar, Pfizer, Uber Technologies
Scott Peters
01 Aug, 2023
New York City
Caterpillar Inc soared 7.2% to $283.09 after the heavy equipment maker reported higher sales on rising demand in the second quarter.
Revenue in the second quarter increased 22% to $17.3 billion from $14.2 billion and net income rose to$2.9 billion from $1.7 billion and diluted earnings per share advanced to $5.67 from $3.13 a year ago.
The company reported sales increase in all regions of the world and sales in North America rose 31% to $1.3 billion and jumped in Asia Pacific increased 18% to $1.1 billion.
Sales in the oil and gas industry jumped 43% to $1.7 billion and power generation soared 39% to $1.6 billion.
Uber Technologies declined 4.6% to $47.11 after the company said gross bookings rose 16% to $33.5 billion and reported quarterly profit of 18 cents a share.
Revenue in the second quarter rose 14% to $9.2 billion from $8.1 billion a year ago.
The company swung to operating profit of $326 million from a loss of $726 million, first ever operating income on GAAP basis.
Net income attributable to shareholders was $324 million compared to a loss of $2.6 billion and diluted earnings per share was 18 cents compared to ($1.33) a year ago.
Pfizer Inc increased 0.9% to $36.27 after the pharmaceutical company reported mixed quarterly results in the second quarter.
Revenue in the second quarter declined 54% to $12.7 billion from $27.7 billion and net income plunged 77% to $2.3 billion from $9.9 billion and diluted earnings per share dropped to 41 cents from $1.43 a year ago.
Expected decline in Paxlovid and Comirnaty (Covid vaccine) revenues drove a 53% decline in operating revenues.
Arista Networks, Inc soared 22% to $186.86 after the company reported higher-than-expected sales and earnings in the second quarter and also estimated higher-than-expected third quarter sales.
Second quarter sales increased to $1.5 billion from $1.1 billion and net income jumped to $491.9 million from $299 million and diluted earnings per share advanced to $1.55 from 94 cents a year ago.
The company forecasted third quarter revenue between $1.45 billion and $1.50 billion and non-GAAP margin of 62%.
ZoomInfo Technologies Inc dropped 25.6% to $19.0 after the company forecasted a decline in revenue in the third quarter.
Revenue in the second quarter increased 16% to $308.6 million from $267.1 million and net income rose to $38.1 million from $15.9 million and diluted earnings per share advanced to 9 cents from 4 cents a year ago.
The company guided third quarter revenue between $309 million and $312 million.
The company revised lower fiscal year 2023 revenue range between $1.275 billion and $1.285 billion from the previous range of $1.225 billion and $1.235 billion.
Market Indexes On Wall Street Turn Lower and Investors Review Another Batch of Earnings
Barry Adams
01 Aug, 2023
New York City
Market indexes on Wall Street traded down and investors reviewed a flood of earnings releases today.
The S&P 500 index and the Nasdaq Composite index declined and Treasury yields advanced after crude oil prices advanced to a 3-month high.
The S&P 500 index advanced more than 3% and the Nasdaq Composite index jumped 4% and the Russell 2000 index soared 6.1% in July after small cap companies rebounded.
Earnings dominated news flow and Caterpillar, Pfizer, Uber, HSBC, BP, Gap, CNA, Loews Corporation, ZoomInfo and SoFi were in focus.
U.S. Indexes & Yields
The S&P 500 index traded down 0.2% to 4,577.69 and the Nasdaq Composite declined 0.6% to 14,263.99.
The yield on 2-year Treasury notes increased to 4.90%, 10-year Treasury notes inched higher to 4.90% and 30-year Treasury bonds edged down to 4.07%.
Crude oil increased $0.35 to $81.35 a barrel and natural gas prices decreased 8 cents to $2.55 a thermal unit.
U.S. Stock Movers
Caterpillar Inc soared 7.2% to $283.09 after the heavy equipment maker reported higher sales on rising demand in the second quarter.
Uber Technologies declined 4.6% to $47.11 after the company said gross bookings rose 16% to $33.5 billion and reported quarterly profit of 18 cents a share.
Pfizer Inc increased 0.9% to $36.27 after the pharmaceutical company reported mixed quarterly results in the second quarter and revenue of $12.7 billion and adjusted earnings per share of 67 cents.
Lower Covid related vaccine sales negatively impacted overall sales.