DAILY MARKET REPORTS
- U.S. stocks drifted between small gains and losses Monday as investors weighed second-quarter earnings from Citigroup and looked ahead to results from other large banks.
- Analysts currently expect S&P 500 companies to post a roughly 3% drop in profits from a year earlier, the biggest decline since 2016.
- Citi shares fell 1.7% Monday after the bank exceeded analysts’ estimates for both profits and revenue, but delivered mixed results for its trading unit.
- Analysts will get a look at earnings results from JPMorgan and Wells Fargo on Tuesday and other big banks later this week.
- Meanwhile, Boeing ’s stock fell 1.5%, weighing on the Dow industrials, after some FAA officials and pilot-union leaders suggested the company’s 737 MAX planes are unlikely to be ready to carry passengers again until 2020.
- Stock indexes in Asia ended the day mixed after data showed Chinese economic activity slowed to its weakest pace since 1992, raising expectations that Beijing would introduce stimulus measures to support the economy.
- Growth in the world’s second-largest economy decelerated to 6.2% in the second quarter.
US FINANCIAL MARKET
Citigroup Reports Profit, Revenue Boost
- Citigroup beat analysts’ estimates for quarterly profit on Monday, as a tight lid on costs and strength in consumer lending helped the third-largest U.S. bank counter weakness in its trading business.
- Revenue at the bank was $18.76 billion, up 2% from $18.47 billion a year ago. Analysts had expected $18.5 billion.
- Trading revenue at Citigroup was up 4% to $4.1 billion, but that included a one-time gain on the bank’s stake in a trading platform. Without that gain, Citigroup’s core trading revenue declined 5% from a year ago.
- Total loans at the third-largest U.S. bank by assets rose 3% to $689 billion, while deposits increased 5% to $1.05 trillion, excluding foreign exchange fluctuations.
- Citi’s interest margin declined slightly to 2.67% from 2.70% a year earlier and 2.72% in the first quarter of 2019.
- Citigroup said Monday its second-quarter net income rose 7% to $4.8 billion, up from $4.5 billion a year ago.
Boeing 737 MAX Grounding Could Stretch Into 2020
- Boeing’s 737 MAX planes are unlikely to be ready to carry passengers again until 2020 because of the time it will take to fix flight-control software and complete other steps, even as the company strives to get its jet back into service this year.
- The situation remains fluid, no firm timeline has been established and Boeing still has to satisfy U.S. regulators that it has answered all outstanding safety questions.
- But under the latest scenario, the global MAX fleet is now anticipated to return to the air in January 2020, a full 12 months after the plane maker proposed its initial replacement of software eventually implicated in a pair of fatal crashes according to some Federal Aviation Administration officials and pilot-union leaders.
Retailers cash in on Amazon’s ‘free marketing’ on Prime Day
- Amazon.com’s Prime Day is now a major marketing opportunity and shopping event in the annual calendar for other U.S. retail companies, rivaling the Thanksgiving holiday’s Black Friday as a driver of sales.
- The mid-summer shopping event is estimated to bring in $5.8 billion in sales this year for Amazon globally, compared to $3.9 billion last year, according to Coresight Research.
- Last year, when Prime Day lasted 36 hours and faced technical glitches, online shoppers bought more than 100 million products worldwide, at the time recording the largest daily sales for Amazon’s own-brand Echo range of smart speakers, while the Fire TV Stick with Alexa Voice Remote and Echo Dot were the best-selling devices.
Symantec, Broadcom cease deal negotiations: CNBC
- Cybersecurity company Symantec and chipmaker Broadcom have ceased deal negotiations, CNBC reported, citing sources.
- Symantec’s shares fell 18% to $21.01 in trading before the opening bell, while those of Broadcom were up nearly 3%.
- Symantec would not accept less than $28 per share, according to the report.
J&J Says No Developments in Justice Probe Over Baby Powder
- Johnson & Johnson said there were no new developments regarding a Justice Department probe into the company’s handling of talcum powder.
- The company’s statement followed a Bloomberg report that said the U.S. was pursuing a criminal investigation into whether the company lied about alleged cancer risks tied to talcum powder.
- A grand jury is examining documents covering what executives at the pharmaceutical and health-products company knew about carcinogens in its products, the Bloomberg report said.
- J&J said in February that it had received a subpoena from the Justice Department related to the baby powder. “The implication that there has been a new development in this matter is flatly wrong,” a J&J spokesman said in a statement Friday.
Oklahoma, J&J to wrap up first trial over opioid crisis
- Oklahoma’s attorney general is expected to urge a judge to find Johnson & Johnson responsible for flooding the market with painkillers and fueling the U.S. opioid epidemic, as the first trial in nationwide litigation over the drug crisis comes to an end.
- Lawyers for Attorney General Mike Hunter and J&J are set to deliver closing arguments in state court in Norman, Oklahoma following six weeks of testimony from current and former J&J executives and victims of the epidemic.
- The Oklahoma case is being closely watched by plaintiffs in other opioid lawsuits, particularly in 1,900 cases pending in Ohio brought largely by cities and counties against J&J and other companies.
Gilead to Boost Stake in Belgian Biotech Galapagos as Part of $5.1 Billion Deal
- Gilead Sciences will pay $5.1 billion to boost its stake in Galapagos and gain rights outside Europe to the Belgian biotechnology company’s treatments in development, in a broad research collaboration aimed at increasing growth at the drugmakers.
- Under the terms of the deal, announced Sunday, Gilead will make a $3.95 billion payment to Galapagos. It also will invest $1.1 billion, or €140.59 ($158.49) a share, to increase its stake in the drugmaker to 22% from 12.3%.
- Assuming Galapagos shareholders sign off, Gilead could eventually boost its ownership stake to as much as 29.9%.
- Gilead will get two seats on Galapagos’s board of directors as part of the deal.
Huawei Plans Extensive Layoffs in the U.S.
- Huawei Technologies is planning extensive layoffs at its U.S. operations, according to people familiar with the matter, as the Chinese technology giant continues to struggle with its American blacklisting.
- The layoffs are expected to affect workers at Huawei’s U.S.-based research and development subsidiary, Futurewei Technologies, according to these people.
- The unit employs about 850 people in research labs across the U.S., including in Texas, California and Washington state.
U.S. firms may get nod to restart Huawei sales in two-four weeks – official
- The U.S. may approve licenses for companies to re-start new sales to Huawei in as little as two weeks, according to a senior U.S. official, in a sign President Trump’s recent effort to ease restrictions on the Chinese company could move forward quickly.
- Still, it is unclear which products will be granted licenses. Some U.S. suppliers sought clarity at a conference the Commerce Department held in Washington this week.
- Out of $70 billion that Huawei spent buying components in 2018, some $11 billion went to U.S. firms including Qualcomm, Intel and Micron Technology.
Disney Looks to Extend Box-Office Reign With ‘Lion King’
- Analysts and box-office tracking services expect the new “Lion King” to open with a domestic debut north of $170 million, among the best this year. But industry executives are also expecting the movie to keep selling tickets for longer than usual, sensing a blockbuster with broad appeal that is likely to pull in audiences in the weeks to come.
- Disney currently commands a 35% share of the domestic box office so far this year, despite only releasing six new movies.
- Its closest competitor, AT&T’s Warner Bros., has nearly 15%, while the remaining major studios— Comcast’s Universal Pictures, Sony’s Sony Pictures Entertainment and Viacom’s Paramount Pictures—approximately account for a combined 29%.
Callon Petroleum to Buy Carrizo Oil for $1.2 Billion in Stock
- Callon Petroleum has said it would buy Carrizo Oil & Gas for $1.2 billion in stock as the oil company seeks to build scale in key production areas in Texas.
- Houston-based Callon will also assume the $1.7 billion in long-term debt Carrizo listed on its balance sheet at the end of the first quarter. The company also has $250 million in preferred shares.
US ECONOMY & POLITICS
Trump sees slowing Chinese growth pressuring Beijing on trade
- U.S. President Donald Trump on Monday pointed to slowing economic growth in China amid restarted trade talks, saying U.S. tariffs were having “a major effect” and warning that “possibly much more” were to come.
- “This is why China wants to make a deal with the U.S., and wishes it had not broken the original deal in the first place,” Trump tweeted.
- U.S. and Chinese negotiators spoke by phone last week, and in-person talks are expected soon in Beijing, U.S. officials have said.
Pelosi sets spending demands for two-year budget deal
- U.S. House Speaker Nancy Pelosi said on Saturday that a two-year budget agreement with the Trump administration must include equal increases in defense and nondefense spending, plus additional money for a program intended to improve healthcare for military veterans.
- Pelosi’s office said it released the letter after she and Mnuchin spoke by phone on Saturday evening for 12 minutes.
- “The two-year budget agreement we are working to achieve should provide equal increases in the defense base and the non-defense base over the next two fiscal years,” the speaker said in the letter.
EUROPE & WORLD
China Growth at Its Slowest Since 1992 as Beijing Struggles to Juice Economy
- China’s economic growth decelerated to its slowest pace in decades, weakened by trade tensions with the U.S. and businesses that held back from making big investments despite encouragement from Beijing.
- The economy grew by 6.2% in the second quarter, down from 6.4% in the period before, official statistics showed Monday. Growth was slower than the 6.3% year-over-year rate forecast by economists.
- China has already slashed RRR six times since early 2018 to free up more funds for lending, and analysts polled by Reuters forecast two more cuts by the end of this year.
- Investment in bridges, roads and other infrastructure rose 5.8% in the first half of the year compared with 5.6% during the first five months. Factory output was up 6.3% in June from a year earlier, compared with 5.3% in May.
- Retail sales jumped 9.8% – the fastest since March 2018 – and confounding expectations for a slight pullback to 8.3%. Gains were led by a 17.2% surge in car sales.
Mexico’s Economy Falters as U.S. Chugs Along
- Mexico is slipping toward a recession even as the U.S. economy continues to grow, the first time in 25 years that the neighbors’ economic cycles have fallen sharply out of sync.
- Mexico’s National Statistics Institute reported Friday that industrial output fell 2.1% between April and May of this year, its sharpest monthly decline in over a decade.
- That and other recent data suggest that Mexico’s economy may have contracted during the second quarter of the year, in addition to falling by 0.2% in the first three months of the year.
TODAY in HISTORY
- The Russian Soyuz and the U.S. Apollo The Apollo-Soyuz mission was the first international manned spaceflight. (1975)
- After 86 days of gushing oil into the Gulf of Mexico and several previous attempts to contain the flow, BP caps its leaking oil (2010)
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