DAILY MARKET REPORTS
- U.S. stock indexes edged lower on Thursday as investors awaited more developments around trade, while Netflix posted a surprise drop in U.S. subscribers, kicking off earnings for the FAANG group of stocks on a sour note.
- Shares of the streaming pioneer sank 11.3% and weighed on the S&P 500 and the Nasdaq as the company also missed targets for new subscribers overseas at a time when it has staked its future on global expansion.
- In trade-related news, U.S. Treasury Secretary Steven Mnuchin said U.S. and Chinese officials will hold a telephone call later on Thursday that could pave the way for further in-person trade talks.
- IBM reversed premarket losses to rise 3% as its quarterly profit beat on strong growth in its high-margin cloud business.
- UnitedHealth fell 1.5% following comments that the insurer would continue with its point-of-sale rebates, a week after the Trump administration pulled back an ambitious proposal to ban drug rebates.
- Railroad operator Union Pacific jumped 4.9% after it reported a profit beat, while tobacco company Philip Morris gained 6.8% on raising its full-year profit outlook.
US FINANCIAL MARKET
Netflix shares tumble as it misses global subscriber forecasts
- Netflix added fewer quarterly subscribers than Wall Street expected and its U.S. customer base shrank as its programming failed to draw new viewers, jarring investors ahead of looming competition.
- Total revenue rose to $4.92 billion from $3.91 billion. Analysts on average had expected revenue of $4.93 billion.
- The streaming giant said it had 130,000 fewer domestic subscribers at the end of the second quarter than at the end of the first, while analysts had forecast a gain of 352,000 in the United States.
- The world’s dominant subscription video service said it hooked 2.83 million new paid streaming subscribers outside the United States, below analyst expectations of 4.8 million.
- Netflix said Wednesday it expects to add seven million paid subscribers in the third quarter, including about 800,000 in the U.S. That is more bullish than the 6.6 million forecast from analysts polled by Refinitiv.
- Net income fell to $270.7 million in the second quarter, from $384.3 million a year earlier.
EBay beats estimates as more shoppers flock to site, shares rise
- EBay beat Wall Street estimates for quarterly revenue and profit on Wednesday, as a multi-year effort to make its platforms easier to use attracted more customers, sending its shares up 5%.
- The online marketplace said on Wednesday its second-quarter revenue rose 2% to $2.7 billion, slightly ahead of its own forecast and Wall Street estimates as it benefited from having 4% more buyers on the site.
- The total value of goods sold on its site has been falling, dropping another 4% in the quarter to $22.6 billion.
- EBay’s net income from continuing operations fell to $403 million for the second quarter, from $638 million a year earlier.
- The e-commerce company forecast third-quarter adjusted profit in the range of 62 cents to 65 cents per share and revenue of $2.61 billion to $2.66 billion.
- Analysts had expected a profit of 63 cents on revenue of $2.68 billion.
IBM Revenue Lags as Cloud Pivot Remains a Challenge
- International Business Machines reported another drop in quarterly revenue Wednesday, although the company’s rising profit exceeded Wall Street estimates and lifted its shares.
- Total revenue slipped 4.2% to $19.16 billion, in line with analysts’ estimates of $19.16 billion.
- Revenue from the cloud unit, the faster-growing service and a key metric for the company, grew 5% to $19.50 billion in the trailing 12 months.
- Revenue from the cloud and cognitive software segment, which includes analytics, cybersecurity and artificial intelligence, was up 3.2% at $5.65 billion and beat estimates of $5.49 billion.
- The company’s net income rose to $2.50 billion in the second quarter, from $2.40 billion a year earlier.
UnitedHealth Lifts Profit Targets on Stronger Sales
- UnitedHealth boosted its 2019 earnings targets after reporting a strong first half of the year, driven by broader sales growth in premiums, products and services.
- Total revenue rose 8% to $60.60 billion, above estimates of $60.55 billion.
- The company’s medical care ratio, or the percentage of premiums paid out for medical services, worsened to 83.1%, from 81.9% a year earlier. Analysts had expected 83%.
- Net income rose 12.7% to $3.29 billion.
- The full-year earnings outlook was bumped up to $13.95 to $14.15 a share, up from its previous range of $13.80 to $14.05 a share.
Union Pacific quarterly profit beats estimates on price gains
- Union Pacific on Thursday reported a quarterly profit that beat Wall Street estimates, as the U.S. railroad operator raised prices that helped offset volume declines due to a severe flood in the Midwest and the ongoing U.S.-China trade tensions.
- Total operating revenue fell 1% to $5.6 billion.
- Second-quarter operating ratio at Union Pacific, a measure of operating expenses as a percentage of revenue, declined 3.4 points to 59.6%. A lower ratio translates into higher profitability.
- Net income at Union Pacific, which serves the Western two-thirds of the country, rose 4% to $1.57 billion in the second quarter.
Morgan Stanley profit beats on wealth management gains, lower expenses
- Morgan Stanley reported a drop in quarterly profit but beat analysts’ expectations on gains in its wealth-management business and lower expenses.
- The bank reported a profit of $2.2 billion on $10.24 billion in revenue, both down from a year ago, when it earned $2.4 billion on $10.6 billion in revenue.
- Analysts had expected a profit of $1.9 billion on $10 billion in revenue.
- Overall, Morgan Stanley’s sales and trading revenue fell 12%, with both bond and equity trading seeing a dip.
- Morgan Stanley’s total deposits grew 2% to $177 billion while loans grew 4% to $258 billion, led by growth in mortgages to clients of its wealth-management division.
Honeywell beats quarterly profit estimates, raises 2019 forecast
- Honeywell International on Thursday reported a better-than-expected quarterly earnings and raised its full-year sales and profit forecasts, riding on higher demand for aircraft parts and spares, sending its shares up 1%.
- Revenue fell about 15% to $9.24 billion due to certain divestitures, and was below analysts’ expectation of $9.35 billion.
- Net income rose 21.6% to $1.54 billion in the quarter, beating analysts’ average estimate.
- Honeywell raised the low end of its full-year earnings per share forecast range by 5 cents to $7.95, while keeping the top end unchanged at $8.15.
- The company also raised the bottom end of its 2019 sales outlook by $200 million to $36.7 billion, while reaffirming the higher end at $37.2 billion.
Paint Maker PPG Posts Lower Sales on Weak Industrial Demand
- PPG Industries said weak demand from industrial clients is hurting sales, challenging the company’s decision to keep its paint and coatings businesses joined together.
- PPG’s revenue fell 2.6% in the second quarter to $4.02 billion. The company predicted weak demand would continue into the third quarter.
- Net income declined to $272 million, from $371 million in the same period a year ago.
- PPG now expects revenue this year to grow by a few percentage points at most when adjusted for currency changes, down from a forecast of growth between 3% and 5% previously.
iQOS boosts Philip Morris International’s quarterly profit, revenue
- Philip Morris International beat second-quarter earnings and revenue estimates while hiking its full-year forecast as its new tobacco products gain momentum.
- PMI posted revenue of $7.7 billion, down 0.3% from the year-ago quarter yet still better than the $7.37 billion analysts expected.
- In the quarter, PMI said cigarette volume fell 3.6%, while volume for its new heated tobacco products spiked 37% in the quarter.
- The company reported net income of $2.31 billion, up from the $2.19 billion the company reported in the year-ago quarter.
- PMI raised its full-year adjusted earnings forecast to $5.14 per share, up from the previously guided adjusted earnings per share of $5.09. Analysts were forecasting annual earnings of $5.16 per share.
Blackstone’s Earnings Decline
- Blackstone Group’s second-quarter earnings fell from a year earlier as the value of its private-equity portfolio appreciated less than the broader market, but the portion of profits it could return to shareholders ticked up.
- The firm posted a net gain of $305.8 million in the second quarter, compared with a profit of $742 million a year earlier.
- Blackstone’s distributable earnings, the share of profits that could be returned to shareholders, rose to $708.9 million, or 57 cents a share, from $700.1 million, or 56 cents a share, a year earlier.
- Blackstone said its assets under management were $545.48 billion, up 24% from a year earlier.
Qualcomm Hit by Second Antitrust Fine in Europe
- European Union competition authorities are imposing a €242 million ($272 million) fine on Qualcomm, the second penalty from the bloc in 18 months and its latest move targeting top U.S. tech companies for breaching antitrust rules.
- EU antitrust chief Margrethe Vestager said that Qualcomm had abused its dominant position to drive a competitor out of business, hindering competition in the market for baseband chips, which connect smartphones and tablets to cellular networks.
- In a statement Thursday, Qualcomm said it would appeal the decision to the EU’s courts and would provide a financial guarantee instead of paying the fine while its appeal is pending.
US ECONOMY & POLITICS
U.S. Jobless Claims Rise
- The number of Americans applying for first-time unemployment benefits increased last week, but remained near historically low levels, a sign of a firm labor market.
- Initial jobless claims, a measure of how many workers were laid off across the U.S., rose by 8,000 to a seasonally adjusted 216,000 in the week ended July 13, the Labor Department said Thursday.
- The figure matched expectations of economists surveyed by The Wall Street Journal.
- The report also showed continuing claims—those filed by workers unemployed for longer than a week—decreased by 42,000 to 1,686,000 in the week ended July 6. That figure is reported with a one-week lag.
Fed’s Beige Book Reports Modest Growth, Trade Worries
- American businesses see economic activity expanding modestly amid lingering fears over trade, according to a Federal Reserve report released Wednesday.
- “The outlook generally was positive for the coming months, with expectations of continued modest growth despite widespread concerns about the possible negative impact of trade-related uncertainty,” said the Fed’s beige book survey, a report of anecdotes drawn from business contacts around the country by the central bank’s 12 regional banks.
- The report should reassure Fed officials that the economy is in little danger of tipping into recession anytime soon.
Trump Administration, Congress Have Agreed on ‘Top-Line’ Spending Levels, Mnuchin Says
- Congress and the Trump administration have agreed on overall spending levels and raising the U.S. government’s borrowing limit for two years, though negotiators are still working on how to offset the cost of the spending agreement, Treasury Secretary Steven Mnuchin said Thursday.
- He has been speaking regularly with House Speaker Nancy Pelosi, who said that Congress and the administration will need an agreement by Friday to have enough time to pass it before lawmakers leave Washington for the August recess.
- Offsetting the cost of the agreement remains a major hurdle in the negotiations, as conservatives look to trim a federal budget deficit expected to balloon to more than $1 trillion during the Trump administration.
- Democrats will seek to protect spending on federal programs that help low- and middle-income Americans.
U.S.-China Talks Stuck in Rut Over Huawei
- Progress toward a U.S.-China trade deal has stalled while the Trump administration determines how to address Beijing’s demands that it ease restrictions on Huawei, people familiar with the talks said.
- No face-to-face meetings have taken place and none has been scheduled since President Trump and President Xi Jinping of China met last month in Japan and agreed to resume talks.
- At that time, Mr. Trump said the U.S. would allow some U.S. firms to sell products to Huawei, the Shenzhen-based telecommunications giant that Beijing sees as a strategic priority and Washington considers a national-security threat.
- Yet so far administration officials haven’t reached consensus on which semiconductor chips and other products can be provided to Huawei without triggering security concerns or giving the company a strategic edge.
U.S. solar sector launches lobbying push to preserve key subsidy
- The U.S. solar industry on Wednesday kicked off a lobbying push aimed at convincing Congress to extend a generous tax credit for solar energy systems that is set to begin phasing out next year.
- In a letter sent to congressional lawmakers and signed by more than 900 solar companies, the Solar Energy Industries Association argued that the 30% tax credit for solar energy systems should be preserved because it has helped generate $140 billion in investment.
- The subsidy has also created more than 200,000 jobs even though solar energy accounts for only a little more than 2% of U.S. electricity generation, the letter said.
EUROPE & WORLD
Novartis raises full-year targets, aims to settle U.S. lawsuit
- Novartis boss Vas Narasimhan raised full-year targets on Thursday and announced that $700 million has been set aside in the hope of settling a decade-old lawsuit alleging that the Swiss drugmaker bribed U.S. doctors.
- Novartis on Thursday reported a 20% jump in second-quarter core operating income to $3.6 billion with sales up 8% at $11.8 billion, beating an $11.5 billion forecast.
- Its Entresto heart failure medicine registered an 81% leap in second-quarter sales to $421 million.
- Inflammation drug Cosentyx, the company’ top seller, reached $858 million, up 25%.
- The company now expects 2019 core operating income to grow at low double-digit to mid-teen percentages, Narasimhan said, up from a previous target in the high single digits.
TSMC expects 5G to drive earnings, flags South Korea-Japan spat as risk
- Taiwan’s TSMC forecast that robust demand for 5G chips will drive a stronger second-half even as it anticipates a dispute between Japan and South Korea involving chip-making materials to be a big source of uncertainty.
- Revenue rose 3.3% to T$241 billion, but fell 1.4% to $7.75 billion in U.S. dollar terms – still topping the average analyst estimate.
- Earlier, TSMC reported a 7.6% decline in April-June net profit at T$66.77 billion ($2.15 billion), just ahead of analyst estimates.
- TSMC forecast third-quarter revenue to rise as much as 8.4% from a year earlier in U.S. dollar terms.
Japan-South Korea gloom spurs worries of ‘never seen before’ chip price spike
- Memory chip spot prices have risen for the first time this year, indicating grim warnings of “never seen before” spikes and a supply disruption could come to pass as a dispute between South Korea and Japan drags on.
- The 15% spike in DRAM chip prices over a week – in a sector dogged by oversupply and weak demand for more than a year – comes after Japan tightened curbs on exports of some chipmaking materials to South Korea – home to the world’s top two memory chipmakers, Samsung and SK Hynix.
- South Korea sourced 94% of fluorinated polyimides, 92% of photoresists and about 44% of hydrogen fluoride from Japan in the first five months of this year, Korean industry data showed.
Airbus closes in on Air France jetliner deal: sources
- Airbus is close to a deal worth billions of dollars to sell dozens of A320neo-family and smaller A220 aircraft to Air France as the French network carries out a keenly awaited renewal of its medium-haul fleet, industry sources said.
- The deal could include as many as 50-70 Canadian-designed A220 jets, formerly known as CSeries, to replace Air France’s aging fleet of roughly 50 A318 and A319 aircraft, they said.
- Air France is also expected to pick the A320neo family to replace approximately 40 earlier versions of the Airbus A320 that are up to 18 years old.
TODAY in HISTORY
- President Harry S. Truman signed the Presidential Succession Act. (1947)
- 14-year-old Romanian gymnast Nadia Comaneci earned the first perfect score, a ten, at the Olympics and went on to score six more tens and win three gold medals. (1976)
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