Recession Worries Resurface After Latest Earnings

Barry Adams
21 Jul, 2022
New York City

Benchmark indexes on Wall Street lacked direction after trading near 6-week highs as investors digested the latest earnings from home builders and transportation companies. 

The S&P 500 index fell 0.7% to 3,931.47 and the Nasdaq Composite index fell 0.7% to 11,821.90 

Futures of crude oil declined $3.27 to $96.41 a barrel and natural gas rose 32 cents to $7.68 a unit.  

Heatwave in the U.S. and Europe lifted prices of natural gas and Russia resumed its natural gas supply to Europe through Nord Stream 1 pipe network. 

The yield on 10-year Treasury notes edged lower to 2.98% and the yield on German government 10-year Bund hovered near 1.246% after the European Central Bank lifted rates for the first time in eleven years. 

The yield on Japanese government bonds were nearly unchanged after the Bank of Japan left its key lending rate unrevised at 0.25%.  

D.R. Horton fell 3.3% to $70.74 after the home builder said June quarter sales increased 21% to $8.8 billion and net income surged 48% to $1.6 billion or $4.67 a share from a year ago. 

The home builder also lowered its full-year outlook on moderating demand to a range between $33.8 billion to $34.6 billion and complete between 83,000 and 85,000 homes. 

The company had previously guided annual revenues to fall between $35.3 billion to $36.1 billion and complete between 88,000 and 90,000 homes. 

American Airlines Group declined 7.8% to $14.02 after the company reported its first quarterly profit since the start of the pandemic. 

The airline reported record second quarter revenue of $13.4 billion, a 12.2% increase over the same period in 2019 on 8.5% less capacity.

Second quarter net income was $476 million or $0.68 per diluted share.

Carnival Corp dropped 12.3% to $9.70 after the cruise line operator planned a $1 billion common stock offering to finance general corporate expenses. 

Tesla Inc gained 6.2% to $788.23 after the electric vehicle maker reported quarterly sales jumped 42% and net income doubled from a year ago. 

 

First Rate Hike in Eurozone After 11 Years, Draghi Resigns

European markets traded mixed after the central bank lifted rates for the first time in eleven years and Italian political turmoil deepened. 

The DAX index eased 0.17% to 13,257.90, the CAC-40 index rose 0.6% to 6,220.59, and the FTSE 100 index decreased 0.4% to 7,234.52.  

The European Central Bank lifted its key lending rate by 50 basis points to cool rapidly advancing inflation in the currency zone of 19 nations. 

The governing council lifted the rates more than the 25 basis points of increase  expected by traders and economists. 

With the latest increase, the key lending rate is zero and the central bank had previously signaled rate hikes at the next meetings in July and September. 

The deposit rate is now set at zero, the main refinancing rate at 0.50%, and  the marginal lending facility is 0.75%. 

The euro strengthened after the rate decision to $1.0245.