DAILY MARKET REPORTS
- U.S. stocks fell on Friday, retreating from record closing highs, after a strong rebound in U.S. job growth in June dashed hopes of an aggressive interest rate cut by the Federal Reserve this month.
- Nonfarm payrolls rose by 224,000 jobs last month, the most in five months, the Labor Department data showed.
- Economists had forecast payrolls rising 165,000 in June.
- The closely watched employment report led investors to scale back bets of a 50-basis point rate cut by the central bank at its policy meeting on July 30-31.
- However, moderating wage growth and mounting evidence that the economy was slowing sharply could still encourage the Fed to cut interest rates by a quarter point.
- The Philadelphia chip index slipped 1% after Samsung forecast a steep plunge in its second-quarter operating profit, as a supply glut and rising tariffs hit global demand for electronics.
US FINANCIAL MARKET
Samsung Electronics Expects Quarterly Operating Profit to Fall More Than 50%
- Samsung Electronics forecast a steep plunge in its second-quarter operating profit as the U.S.-China trade war wreaks havoc in global chip and smartphone markets, although one-off gains helped it beat analyst expectations.
- April-June operating profit likely fell 56% to 6.5 trillion won ($5.6 billion), Samsung in a regulatory filing ahead of the release of its detailed earnings figures in late July.
- The company’s preliminary results exceeded market expectations of an operating profit of 6.01 trillion won and revenue of 54.6 trillion won for the quarter.
- Revenue likely fell 4.2% from a year earlier to 56 trillion won.
- Samsung received reimbursement worth about 800 billion won for display panels sold to Apple as the U.S. smartphone maker missed a sales target the parties had agreed on, analysts said.
U.S. second-quarter earnings seen declining slightly vs. year ago: Refinitiv
- Second-quarter earnings for S&P 500 companies are expected to have declined fractionally from the year-ago quarter, according to IBES data, with estimates for the just-finished period turning negative after gradually declining for weeks.
- Analysts expect earnings for the quarter to have slipped 0.005%. If that forecast holds true, it would mark the first quarterly decline in earnings for companies in Wall Street’s benchmark S&P 500 index since 2016, based on Refinitiv’s data.
- Strategists note that guidance from companies for the second quarter has been more negative than recent quarters.
- So far, 87 have guided downward compared with an average of 74 per quarter going back to 2006, with technology companies responsible for most of the increase in warnings.
GM, Ford quarterly China sales slide again amid economy woes
- General Motors and Ford announced their quarterly sales in China fell, albeit at a slower pace sequentially, as the U.S. automakers were hit by a slowing economy amid the Sino-U.S. trade war.
- GM’s vehicle sales in China for the quarter ended June 30 dropped 12.2%, while Ford’s sales slumped by 21.7%.
- For the first quarter of this year, Ford’s sales in China tumbled 35.8 percent while GM’s skid 17.5 percent.
- GM delivered 1.57 million vehicles in China in the January-June period this year, while Ford delivered 290,321 vehicles.
Boeing makes $100 million pledge for 737 MAX crash-related support
- Boeing said it would give $100 million over multiple years to local governments and non-profit organizations to help families and communities affected by the deadly crashes of its 737 MAX planes in Indonesia and Ethiopia.
- The move appears to be a step toward repairing the image of the world’s largest planemaker, which has been severely dented by the crash of an Ethiopian Airlines plane in March just five months after a similar crash of a Lion Air flight in Indonesia.
- The $100 million, which is less than the list price of a 737 MAX 8, is meant to help with education and living expenses and to spur economic development in affected communities, Boeing said.
- It did not specify which authorities or organizations would receive the money.
Deutsche Bank’s Investment-Banking Chief to Leave
- Deutsche Bank’s investment-banking chief, Garth Ritchie, has agreed to leave the embattled German lender, the bank confirmed.
- Mr. Ritchie and the bank have reached an agreement that will see him leave Deutsche Bank’s management board at the end of July. He’s expected to stay at the bank through a transition period ending in November.
- Before the announcement of his planned departure, Mr. Ritchie, a former equities trader who also is co-president of the bank, was just over half a year into a new five-year contract ending in 2023.
Huawei Disputes U.S. Cyber Firm’s Findings of Flaws in Gear
- China’s Huawei disputed findings from a U.S. cybersecurity firm that its gear is far more likely to contain flaws than equipment from rival companies, characterizing the analysis as incomplete and inaccurate.
- A report released last week by Finite State found that over half of the nearly 10,000 firmware images encoded into more than 500 variations of Huawei enterprise network-equipment devices tested contained at least one such exploitable vulnerability.
- In a lengthy rebuttal, Huawei criticized Finite State for using an “unconventional approach” that didn’t include outreach to Huawei during the review or an advance copy of the analysis before it was published.
- Huawei also accused Finite State of selectively presenting results that betrayed a lack of neutrality by testing older gear likely to contain more defects and comparing results to smaller rivals Arista Networks and Juniper Networks but not other market leaders, such as Cisco Systems.
- “We stand by our report,” said Matt Wyckhouse, Finite State’s chief executive. “Our position is still that Huawei’s vulnerabilities are extensive, they are real, and they are pervasive across their product line.”
EU opens road to 5G connected cars in boost to BMW, Qualcomm
- European Union states opened the way to competing technologies for internet connected cars on Thursday, rejecting a European Commission push for a WIFI-based standard backed by Volkswagen.
- The result represents a win for BMW and Qualcomm which support a rival 5G telecoms system.
- Germany, France and Italy, with powerful car industries, were among 21 countries to vote against the EC proposal at a Brussels meeting of EU representatives, an EU official said.
US ECONOMY & POLITICS
U.S. Job Creation Bounced Back in June
- Nonfarm payrolls rose by 224,000 in June, the Labor Department said Friday. The jobless rate last month ticked up to 3.7% in part because more Americans entered the labor force to look for a job.
- Wages advanced 3.1% from a year earlier, consistent with the prior month’s pace.
- Economists had forecast a gain of 165,000 new jobs in June, a 3.6% unemployment rate and 3.2% annual wage growth.
- Updated figures showed payrolls rose by 72,000 in May and 216,000 in April, a net downward revision of 11,000.
- June hiring was led by a strong gain in the health-care sector, which added 50,500 jobs, and in transportation and warehousing. Manufacturing employment, which had been soft much of the year, gained 17,000 jobs last month.
- Construction firms added 21,000 employees. Retailers cut jobs.
- A bright spot in Friday’s report was labor-force participation ticking up in June after trending down in prior months.
- The share of adults working or seeking work rose to 62.9% from 62.8% in May.
- A broader measure of unemployment and underemployment (U6)—which includes those too discouraged to look for work, plus Americans stuck in part-time jobs but who want to work full-time—rose to 7.2% in June from 7.1% in May.
Kudlow: Jobs report shows country is in a ‘very strong prosperity cycle,’ but Fed should still cut
- Larry Kudlow, director of the National Economic Council, is “very optimistic” about the health of the U.S. economy but believes the Federal Reserve should “take back the interest rate hike” it made in December because of low inflation.
- “We are still in a very strong prosperity cycle…We have very good pro-growth policies, low taxes, deregulation, opening energy, trade reform. I think the incentives of our supply side policies are working,” Kudlow said after the release of the June jobs report.
- While seeing a strong economy, Kudlow still thinks the Fed should ease monetary policy, and the reason for that is the “rock-bottom” inflation rate.
EUROPE & WORLD
India Hopes to Snap Out of Slump with More Spending
- India plans to increase spending and allow more foreign investment as it attempts to jump-start a stalled economy that has emerged as Prime Minister Narendra Modi’s biggest challenge.
- In the annual budget—the first since Mr. Modi was re-elected in a landslide victory in May—the South Asian nation said it is looking to ease restrictions on foreign firms in the retail, insurance, media and aviation industries.
- It also lowered taxes on housing and smaller companies, while boosting taxes on the rich and increasing import tariffs.
- India expects growth of around 7% this year, but it needs a sustained 8% pace or more a year to create more jobs for its 1.3 billion citizens.
Airbus deliveries climb in H1, sources say, leaving production challenge
- Airbus deliveries rose about 28% in the first half to just under 390 aircraft, putting the planemaker on course to beat crisis-hit Boeing in 2019 but handing it a record production task in the second half, industry sources said.
- The working tally of as many as 389 deliveries – including 227 in the second quarter – leaves the European planemaker with around 500 planes to hand over in the second half of the year in order to meet an annual delivery goal of 880-890 airplanes.
- This year’s mid-way Airbus delivery numbers are boosted partly by the Canadian A220, recently acquired from Bombardier.
- First-half deliveries in 2018 had dipped 1% to 303 aircraft due mainly to delays in receiving A320neo engines.
South Korea says may retaliate against Japan high-tech export curbs
- South Korea said on Thursday it may retaliate against Japan’s latest export limits on high-tech materials, as a row over forced wartime labor threatened to disrupt global supplies of memory chips and smartphones.
- The curbs on exports of three materials used in South Korean chips and smartphone displays, which Japan had announced on Monday, will disrupt the global supply chain, South Korea’s trade minister said.
- Japan accounts for 70%-90% of the production of the three materials, Japanese media have said, making it difficult for South Korean chipmakers to find alternative sources of supply.
- Samsung and SK Hynix – the world’s top memory chipmakers, and suppliers to Apple and China’s Huawei – could face delays if the measures that took effect on Thursday drag on.
TODAY in HISTORY
- William Booth formed the Salvation Army in London, England. (1865)
- Dolly, the first sheep cloned from adult cells, was born. (1996)
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