DAILY MARKET REPORTS
- U.S. stock indexes treaded water on Tuesday as Wall Street’s big banks swung between gains and losses after their quarterly results drew mixed reactions from investors.
- JPMorgan, the largest U.S. bank by assets, beat profit estimates but interest margin slipped, triggering concerns of lower interest rates hurting bank profits, a day after Citigroup reported a similar drop.
- Goldman Sachs rose 2.4% and Wells Fargo gained 0.5% after the banks reported quarterly profit that topped estimates.
- As earnings season gathers steam this week, investors will be closely watching for indications of how a protracted U.S.-China trade war has hurt the quarterly profits and forecasts of companies.
- Economic data was a bright spot. A Commerce Department report showed retail sales increased more than expected in June, while a Federal Reserve report showed U.S. manufacturing output accelerated in June, climbing for the second straight month.
US FINANCIAL MARKET
JPMorgan profit beats estimates on lending strength; net interest margin dips
- JPMorgan Chase reported a better-than-expected quarterly profit on Tuesday as higher interest income and buoyant consumer lending offset lower activity at its trading desks.
- Revenue rose to $28.83 billion from $27.75 billion a year ago, in line with analysts’ expectations for $28.84 billion.
- JPMorgan’s net interest margin declined to 2.49% from 2.57% a year ago as deposit rates rose and the rate the bank paid on other borrowings rose.
- Average loans at the largest U.S. bank, however, increased 2% on the back of an 8% rise in credit-card loans.
- Net income climbed 16% to $9.65 billion. A year earlier, the bank reported a profit of $8.32 billion.
Goldman Sachs profit beats estimates, boosted by strong equities trading
- Goldman Sachs reported a higher-than-expected quarterly profit on Tuesday as the Wall Street investment bank benefited from higher equities trading revenues.
- The Wall Street bank reported quarterly profits of $2.42 billion, on revenue of $9.46 billion.
- Both were lower than a year ago, but topped expected earnings of $1.9 billion on revenue of $8.8 billion.
- The bank said equities trading revenue increased by 6% from a year ago to $2 billion, the second highest in four years.
- However, Goldman’s fixed income business suffered another disappointing quarter with net revenue falling by 13%.
Wells Fargo posts higher profit on cost controls, rise in loans
- Wells Fargo reported higher quarterly profit on Tuesday despite flat revenue as the bank benefited from aggressive cost-cutting.
- Second-quarter revenue was $21.6 billion, roughly the same level as a year ago. Analysts had expected $20.93 billion.
- Total loans rose 0.6% in the quarter from a year earlier.
- Deposits were up 2% from a year earlier.
- Net interest margin, which measures lending profitability, fell to 2.82% from 2.91% in the prior quarter due in large part to higher interest costs.
- Quarterly profit at the bank, the fourth largest in the U.S. by assets, was $6.21 billion, compared with $5.19 billion a year ago.
Johnson & Johnson Bumps Up Sales Target
- Johnson & Johnson raised its full-year sales forecast as demand for its cancer drugs Darzalex and Imbruvica helped it exceed estimates for second-quarter profit on Tuesday.
- Sales fell 1.3% to $20.56 billion as growth in international market helped counter falling sales in the United States.
- Analysts were expecting sales of $20.29 billion.
- In the quarter, pharmaceutical sales rose 1.7% to $10.53 billion, above analysts’ estimates of $10.27 billion.
- The diversified healthcare company said net earnings rose to $5.61 billion, from $3.95 billion a year earlier.
- The company raised its 2019 forecast for operational sales, which excludes the impact of currency fluctuations, to a range of $82.4 billion to $83.2 billion, from a prior range of $82 billion to $82.8 billion.
Domino’s Pizza U.S. same-store sales miss estimates, shares fall 6%
- Domino’s Pizza reported second-quarter same-store sales at its U.S. outlets that grew slower than expected as it faced fierce competition from rival pizza chains and third-party delivery companies, sending its shares down about 6% before the bell.
- Total revenue rose 4.1% to $811.6 million in the quarter but missed expectations of $836.6 million.
- Same-store sales at company-owned U.S. outlets grew 2.1%, while those at U.S. franchise stores rose 3.1%.
- Analysts on average had expected it to rise 3.15% at company-owned U.S. stores and 4.69% at franchise stores.
- Net income rose to $92.4 million, from $77.4 million a year earlier.
Senate to grill Facebook over plans for Libra cryptocurrency
- U.S. lawmakers from both sides of the aisle are set to grill Facebook on its cryptocurrency plans on Tuesday, as the project continues to draw intense scrutiny from financial regulators and politicians across the globe.
- Facebook is fighting a rearguard action to get Washington onside after it shocked regulators and lawmakers with an announcement on June 18 that it was hoping to launch a new digital coin called Libra in 2020.
- Critics have expressed anger that the company would have got so far in its plans for such a potentially groundbreaking project without extensive input from policymakers, especially when it is already in the spotlight over privacy issues.
- The Senate Banking Committee will question David Marcus, the company’s top executive overseeing the project, on issues ranging from how Libra could affect global monetary policy to how customer data will be handled.
Tesla drops cheapest Model X, S variants, cuts prices to simplify lineup
- Tesla has dropped the standard-range variants of its Model X and Model S from its product lineup and adjusted prices across its range, in a sales push that comes days after the U.S. electric vehicle maker reported record deliveries.
- To simplify its offerings, the automaker on Tuesday limited variants of its Model X sport-utility vehicle and Model S sedan to “Long Range” and the more expensive “Performance”.
- The discontinuation of the standard-range variants, however, means a rise in starting prices – to $84,990 for the Model X and $79,990 for the Model S, excluding potential buying incentives.
- Tesla also lowered the starting price of its mass-market Model 3 to $38,990.
Trump Signals Scrutiny of Google’s Ties with China After Thiel Comments
- President Trump said the U.S. government would look into national-security concerns raised by billionaire investor and Facebook board member Peter Thiel about Google’s ties to the Chinese government.
- The statement, tweeted by Mr. Trump, came after Mr. Thiel, in a keynote speech Sunday called for the FBI and CIA to investigate Google unit, which he has claimed is working with China’s government instead of the U.S. military.
- In an interview Monday with Fox News Channel’s Tucker Carlson, Mr. Thiel suggested Chinese intelligence agents are likely to have infiltrated Google as it works on an artificial-intelligence project in the country.
- However, Mr. Thiel, in the interview, didn’t offer evidence that backed his claims.
U.S. judge slashes Roundup jury award to $25.3 million; Bayer still plans to appeal
- A federal judge on Monday slashed a damages award Bayer owed a California man who blamed Roundup weed killer for his cancer, to $25.27 million from $80.27 million, while rejecting the company’s bid for a new trial.
- U.S. District Judge Vince Chhabria in San Francisco said evidence against the former Monsanto, which Bayer bought last year, supported the $5.27 million in compensatory damages that a jury awarded Edwin Hardeman.
- Chhabria nonetheless reduced punitive damages to $20 million from $75 million, saying that while Monsanto “deserves to be punished” the award was “constitutionally impermissible” because it was nearly 15 times the compensatory damages award.
- U.S. Supreme Court precedents limit the ratio of punitive to compensatory damages to 9 to 1.
UAW Talks Open with Labor Costs Rising, Slowdown Looming
- After years of prosperity, car companies in Detroit are entering contract talks this week with the United Auto Workers union with one main goal: cap fast-rising labor costs ahead of a downturn in the U.S. auto industry.
- Within the past eight years, factory worker costs for Ford, GM and Fiat Chrysler have crept toward prerecession levels, as the union won pay increases and other benefits sacrificed during the last downturn while car companies posted big profits.
- This time around, negotiators for the three American car makers plan to press for concessions on health care and want greater flexibility using temporary workers, according to people familiar with their bargaining strategy.
- GM and Ford also want to address underused factories with the union as both companies continue to slash costs and shift more resources into developing electric and self-driving cars.
- Ford, GM and Fiat Chrysler together employ nearly 150,000 UAW-represented workers. All three labor contracts expire Sept. 14.
US ECONOMY & POLITICS
U.S. Retail Sales Rose Solidly in June
- Retail sales, a measure of purchases at stores, at restaurants and online, rose a seasonally adjusted 0.4% in June from a month earlier, the Commerce Department said Tuesday.
- The June rise exceeded economists’ forecast for retail sales to edge up 0.1% last month.
- From a year earlier, retail sales were up 3.4% in June, and sales in April and May both logged in at 0.4%.
- Americans ramped up their spending online, where outlays were up 13.4% from June 2018 and 1.7% from May.
- Consumers also spent solidly at clothing stores, restaurants and building-material supply stores.
U.S. Industrial Production Unchanged in June
- U.S. industrial output was flat in June, as increases for the manufacturing and mining sectors were offset by a decline in utilities output.
- Economists had expected a 0.2% increase last month. May industrial production was unrevised at a 0.4% increase.
- From a year earlier, industrial production rose 1.3% in June.
- Capacity utilization, which reflects how much industries are producing compared with what they could potentially produce, slipped by 0.2 percentage point to 77.9% in June. Economists had expected 78.1%.
Lighter Loads Weigh on Railroads
- Freight trains are carrying a shrinking amount of cargo as railroads feel the effects of trade tensions, a cooling global economy and changes to their own systems that are driving customers elsewhere.
- The number of U.S. railroad carloads shipped fell 2.9% in the first half of the year, according to the Association of American Railroads.
- The slowdown was widespread among industries, with 16 of 20 categories of shipments including food, lumber, auto parts and metals, posting declines.
EUROPE & WORLD
Canadian Pacific quarterly profit rises on higher commodity shipments
- Canadian Pacific Railway reported a 33% rise in adjusted quarterly profit on Tuesday, as the country’s second-largest railroad operator earned more from moving energy, chemicals, plastics as well as grains.
- Total revenue rose 13% to C$1.98 billion.
- Revenue from energy, chemicals and plastics segment rose 22% on a currency adjusted basis to C$346 million, while that from grain shipments rose 11% to C$422 million in the second quarter.
- Adjusted income rose to C$602 million in the quarter, from C$453 million a year earlier.
737 MAX Woes Hobble Budget Carrier Ryanair
- Ryanair said delays in deliveries of Boeing’s 737 MAX passenger jet will lower growth next summer, forcing Europe’s largest budget airline to close some of its bases and make cuts at others this winter.
- The carrier said Tuesday it now expects passenger growth of 3% in the summer of 2020, down from an earlier forecast of 7%. Ryanair blamed the lower guidance on expected delays in receiving a fleet of 737 MAXs.
- It expects to add 30 jets to its network by next summer, instead of the planned 58. This also means that passenger numbers in the year to March 2021 are now expected to be around 157 million, down from 162 million it previously forecast.
Arrest of French Academic in Iran Complicates Efforts to Save Nuclear Deal
- Iran said it has detained a French-Iranian scholar on unspecified charges, complicating French President Emmanuel Macron’s efforts to salvage the 2015 nuclear deal and defuse tensions in the Middle East.
- Iran’s judiciary confirmed Tuesday the arrest of Fariba Adelkhah, one of France’s leading experts on Iran and the author of several related books, a day after Mr. Macron raised the issue with Tehran and demanded access to the prisoner.
- A foreign ministry spokeswoman said Monday that French authorities had demanded information from Tehran about the conditions of Ms. Adelkhah’s arrest and consular access, but had yet to receive a “satisfactory answer.”
British Leadership Rivals Take Brexit Position That Sets Up Clash With EU
- The two contenders to succeed Theresa May as U.K. prime minister said they want to ditch controversial proposals for managing the Irish border after Brexit, setting up a likely clash with the European Union that raises the risk of an abrupt and messy split with the bloc.
- During a debate Monday hosted by the Sun newspaper, front-runner Boris Johnson and rival Jeremy Hunt said they weren’t willing to accept the so-called backstop provisions of a Brexit withdrawal package negotiated between Mrs. May and the EU.
- The backstop plan was developed as a way to prevent the need for border infrastructure between Northern Ireland, part of the U.K., and the Republic of Ireland, an EU member state, once the U.K. leaves.
- But it proved deeply unpopular with May’s Northern Irish parliamentary allies and some sections of the ruling Conservative Party, who objected that the proposal risked weakening the bonds between Northern Ireland and the rest of the U.K.
- The EU has said the Irish backstop is an essential component of any exit deal.
China’s Xiaomi continues chip strategy revamp with investment in semiconductor designer
- China’s Xiaomi has taken a stake of roughly 6% in compatriot chip designer VeriSilicon, as the smartphone maker revamps its years-long pursuit of success in semiconductors which it sees as central to driving innovation.
- The investment comes as the government identifies chips as one of several sectors in which it wants the country to become more self-reliant under its “Made in China 2025” initiative.
- In a filing to the China Securities Regulatory Commission (CSRC) published online on Thursday, VeriSilicon revealed a fund run by Xiaomi became its second-largest external shareholder in June.
EU goods trade gaps with U.S. and China widen
- The European Union’s trade surplus in goods with the United States and its deficit with China both increased in the first five months of 2019, figures that could add extra strain to global tensions.
- The European Union’s surplus with the United States grew to 62.1 billion euros ($69.8 billion) in Jan-May 2019 from 55.4 billion euros in the same period of 2018, EU statistics office Eurostat reported on Tuesday.
- With China, the EU’s trade deficit expanded to 76.7 billion from 69.2 billion euros.
- Overall, the goods trade deficit of the 28-nation bloc widened to 14.2 billion euros in Jan-May 2019 from 9.9 billion a year earlier.
TODAY in HISTORY
- The first atomic bomb was tested in Alamogordo, N.M. (1945)
- D. Salinger’s novel Catcher in the Rye was published. (1951)
- Saddam Hussein became president of Iraq. (1979)
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