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WALL STREET DROPS AS TRADE TENSIONS WEIGH, FED MEETING LOOMS

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US FINANCIAL MARKET | US ECONOMY & POLITICS
 EUROPE & WORLD | TODAY IN HISTORY

DAILY MARKET REPORTS

  • U.S. stocks dropped on Tuesday as U.S.-China trade worries pressured technology shares, while the scale of consensus at the Federal Reserve in favor of deeper cuts in interest rates ate into optimism that drove markets to record highs last week.
  • Mr. Trump tweeted Tuesday that there were “no signs” of China making a new effort to buy U.S. agricultural products.
  • “That is the problem with China, they just don’t come through,” he added.
  • The S&P 500 technology sector fell 0.62%, with Apple’s 0.84% drop weighing the most on the index.
  • The iPhone maker’s report will provide a clear gauge on the impact of trade tensions with China, coming on the heels of renewed trade talks and as Trump warned Beijing against trying to wait out his first term in office to finalize a trade deal.
  • The drop came ahead of Wednesday’s planned announcement from the Federal Reserve, which is expected to cut interest rates.
  • With a quarter-percentage-point cut in rates fully priced-in, investors will watch for how Fed Chairman Jerome Powell manages debate about whether the stimulus is necessary and what that says about the attitude of the U.S. central bank to doing more in the months ahead.

US FINANCIAL MARKET

Mastercard’s Profit Climbs on Higher Revenue, Lower Expenses

  • Mastercard on Tuesday beat Wall Street estimates for quarterly profit, as a robust economy encouraged customers to spend more, boosting fee income for the world’s second-largest payment processor.
  • Net revenue rose 12.2% to $4.11 billion, edging past analysts’ estimates of $4.08 billion.
  • The company’s gross dollar volume, the dollar value of transactions processed, rose 8.3% to $1.60 trillion in the second quarter.
  • Around 26.80 billion transactions were processed, up nearly 21% from a year earlier. The gain was led by a 10% rise in the United States and a 31% jump in Europe.
  • The company’s net income rose to $2.05 billion in the second quarter, from $1.57 billion a year earlier.

Beyond Meat shares crumble on stock offering surprise, demand for meatless burgers soars

  • Beyond Meat’s shares tumbled on Monday on plans for another stock offering just three months after its IPO while demand for its plant-based burgers and sausages prompted an increase in its full-year sales forecast.
  • Net revenue rose nearly four-fold to $67.3 million in the quarter, above Wall Street’s estimate of $52.71 million.
  • The company reported a net loss of $9.4 million, compared with a loss of $7.4 million in the year-ago period.
  • The company said it expects net revenue to rise over 170% to $240 million in 2019, up from the prior $210 million it had forecast just last month.

Under Armour sales growth in North America trails Nike again; shares sink

  • Sportswear maker Under Armour on Tuesday cut its full-year revenue forecast for North America, its biggest market, as it suffered in the face of a strong performance by bigger rivals Nike and Adidas, sending its share down 11%.
  • Net revenue rose to $1.19 billion from $1.17 billion, roughly in line with analysts’ expectation.
  • While Nike posted a 7% rise in North America revenue in the quarter, sales for Under Armour fell 3% to $816 million, bigger than the 1.6% drop predicted.
  • The company’s net loss narrowed to $17.3 million in the quarter from $95.5 million a year earlier.

P&G Posts Strong Sales Even as It Raises Prices

  • Procter & Gamble’s quarterly revenue and profit beat Wall Street expectations on Tuesday, sending shares up even as the world’s No.1 personal goods company took an $8 billion writedown on its Gillette shaving business.
  • The company’s net sales rose 3.6% to $17.09 billion in the fourth quarter, beating analysts’ average estimate of $16.86 billion.
  • However, P&G reported a net loss of about $5.24 billion for the quarter, due to an $8 billion non-cash writedown of Gillette.
  • For the same period last year, P&G’s net income was $1.89 billion.
  • For fiscal 2020, the company guided net sales growth of 3% to 4% and organic sales growth of 3% to 4%.
  • Core earnings per share are expected to increase 4% to 9% for fiscal 2020, compared with $4.52 in fiscal 2019.

Eli Lilly tops profit estimates on boost from diabetes drugs

  • Eli Lilly beat analysts’ estimates for quarterly profit and raised its full-year earnings forecast on Tuesday, as higher sales of diabetes drugs Trulicity and Basaglar offset competition for its erectile dysfunction treatment, Cialis.
  • Total revenue rose to $5.64 billion from $5.59 billion, above estimates of $5.59 billion.
  • However, revenue from the United States was nearly flat at $3.25 billion, mainly due to lower prices even as volumes rose.
  • The drugmaker posted net income of $1.33 billion in the latest quarter.
  • The company raised its 2019 adjusted earnings forecast to a range of $5.67 to $5.77 per share from its prior range of $5.60 to $5.70 per share. Analysts were expecting a profit of $5.66 per share.

Merck quarterly profit beats on strong demand for Keytruda, vaccines

  • Merck posted a higher-than-expected quarterly profit and raised its full-year earnings forecast on Tuesday, powered by strong demand for its vaccines and cancer immunotherapy Keytruda.
  • Sales rose 12.4% to $11.76 billion and beat expectations of $10.96 billion.
  • Sales of Keytruda surged 58% to $2.63 billion in the second quarter, also benefiting from its use to treat renal cancer and melanoma. Cowen had expected sales of $2.57 billion.
  • Net income rose to $2.67 billion, from $1.71 billion a year earlier.
  • The U.S. drugmaker raised its forecast for 2019 adjusted earnings per share to between $4.84 and $4.94 from its prior forecast of between $4.67 and $4.79.

Ralph Lauren earnings beat estimates on North America demand

  • Ralph Lauren reported better-than-expected quarterly revenue and profit on Tuesday, as its North America business benefited from a social media marketing blitz and the launch of new editions of its trademark Polo shirts.
  • Net revenue rose to $1.43 billion. Analysts were expecting revenue of $1.42 billion.
  • Sales in North America rose 3.1% to $719.4. In Europe and Asia, where Ralph Lauren is seen as a more premium brand, sales rose 1.5% and 4.3% respectively.
  • Net income rose to $117.1 million in the first quarter, from $109 million a year earlier.

GrubHub reports slump in quarterly profit as costs rise

  • GrubHub reported a slump in quarterly profit on Tuesday, hurt by soaring costs as the online food delivery company faces off against rivals Uber Eats and DoorDash, sending its stock down 6% in trading before the bell.
  • Revenue, however, rose 36% to $325.1 million. Total costs and expenses rose 55.3% to $318.9 million in the quarter.
  • Net income fell to $1.3 million in the second quarter, from $30.1 million a year earlier.

D.R. Horton profit beats as lower home prices boost demand

  • No.1 U.S. homebuilder D.R. Horton topped Wall Street estimates for quarterly profit and revenue on Tuesday, as lower home prices and declining mortgage rates whetted buyer appetite.
  • Revenue jumped 10.6% to $4.91 billion. Analysts, on average, expected revenue of $4.52 billion.
  • Orders rose 6.4% to 15,588 homes, but fell short of analyst estimates of 15,663 homes, according to IBES data from Refinitiv.
  • Horton lowered its average home price by 2% to $296,450 in the quarter, pushing sales up 13.2% to 15,971 homes.
  • Net income rose to $474.8 million in the third-quarter, from $453.8 million a year earlier.

ConocoPhillips profit misses on lower crude prices, higher spending

  • ConocoPhillips missed Wall Street estimates for quarterly profit on Tuesday as it spent more than expected and took a hit from lower crude prices due to fears of a slowing global economy.
  • ConocoPhillips, the world’s largest independent oil and gas producer, said production, excluding Libya, rose to 1.29 million barrels of oil equivalent per day (boepd), an increase of 79,000 boepd from a year earlier.
  • Adjusted earnings fell to $1.14 billion in the second quarter, from $1.29 billion a year earlier.
  • For the full-year, Conoco tightened its production outlook to a range of between 1.31 million boepd and 1.34 million boepd compared with a previous forecast of between 1.30 million boepd and 1.35 million boepd.

Capital One Reports Data Breach Affecting 100 Million Customers, Applicants

  • Capital One Financial, the fifth-largest U.S. credit-card issuer, said Monday that a hacker accessed the personal information of approximately 106 million card customers and applicants, one of the largest-ever data breaches of a big bank.
  • The bulk of the exposed data involves information submitted by customers and small businesses that applied for Capital One credit cards between 2005 and early 2019, the bank said, including addresses, dates of birth and self-reported income.
  • Paige A. Thompson, 33 years old, was arrested in connection with the hack Monday by federal agents in Seattle, officials said.
  • Ms. Thompson is accused of breaking through a Capital One firewall to access customer data that the bank had stored on Amazon.com’s cloud service, according to a federal criminal complaint and people familiar with the matter.

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US ECONOMY & POLITICS

U.S. Consumer Spending Slowed Slightly in June

  • Personal-consumption expenditures, a measure of household spending on everything from airline tickets to furniture, increased a seasonally adjusted 0.3% in June from the prior month, the Commerce Department said Tuesday.
  • Personal income, reflecting Americans’ pretax earnings from salaries and other sources including investments, rose 0.4% for the fourth month in a row. Economists had forecast a 0.4% rise in incomes and a 0.3% increase in spending.
  • May’s spending was revised higher to a 0.5% increase from an earlier estimate of a 0.4% gain.
  • Spending was up 0.6% in April and 1% in March.

U.S. Inflation Remained Soft in June

  • The Federal Reserve’s preferred inflation gauge, the personal-consumption-expenditures price index, rose a seasonally adjusted 0.12% in June from May, the Commerce Department said Tuesday.
  • A less volatile measure of inflation that excludes food and energy prices was up 0.25% from May.
  • Economists had expected a 0.2% rise in the so-called core PCE price index.
  • The broad PCE price index was up 1.4% in June from a year earlier, while the core index was up 1.6%.
  • Both gauges of inflation remain below the Fed’s target of 2% on an annual basis.

Home-Price Gains Continued to Slow in May

  • The growth of U.S. home prices slowed again in May, as the housing market continues to moderate during what has been a relatively weak year for sales.
  • Sales prices grew 3.4% for the year ending in May 2019, down from the 3.5% increase during the year ending in April, according to the S&P CoreLogic Case-Shiller National Home Price Index.
  • In the nation’s 20 largest cities, price gains were at their most modest, growing 2.4% for the year ending in May.

U.S.-China Trade Talks Resume With No Breakthroughs in Sight

  • Chinese and U.S. negotiators resumed trade talks, taking tentative steps to overcome mutual mistrust and limited political appetite for a breakthrough agreement after weeks of recriminations.
  • Both sides are looking to the other to demonstrate goodwill, said people briefed on the discussions, with the U.S. expecting a pickup in Chinese orders for American farm goods and Beijing waiting for Washington to relax restrictions on Chinese telecommunications gear maker Huawei’s access to U.S. technology.
  • Apart from small steps, however, expectations are low for significant progress in resolving a trade dispute that has rattled global markets and seen both sides slap punitive tariffs on about half the more than $600 billion in goods they trade.

Senate Fails to Block Arms Sales to Saudi Arabia, U.A.E.

  • A congressional effort to block certain arms sales to Saudi Arabia and the United Arab Emirates fell short on Monday after the Senate failed to override President Trump’s veto of the measures.
  • The trio of arms resolutions, which passed both the Democratic-led House and GOP-controlled Senate, were aimed at stopping arms sales that the Trump administration had approved under rarely-used emergency powers.
  • Bypassing the typical congressional review process for the sales further frustrated lawmakers on Capitol Hill, some of whom have for months criticized the administration’s continued strong support for the two countries.

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EUROPE & WORLD

Huawei Shows Resilience in the Face of U.S. Blacklisting

  • Huawei Technologies said revenue rose sharply in the first half of the year despite a U.S. export blacklisting, but the Chinese telecommunications giant signaled tougher times ahead as it copes with uncertainty around its access to U.S. technology.
  • The Shenzhen-based company said revenue rose 23% to 401.3 billion yuan (about $58.3 billion) from a year earlier.
  • Shipments of its smartphones jumped 24% to 118 million units, as robust sales in China more than offset a global sales drop.
  • Huawei Chairman Liang Hua said on Tuesday Huawei remained confident in its ability to cope with the blacklisting and its 5G product roll-out had not been affected.
  • The company has won 11 5G contracts since the blacklist was put in place out of a total of 50 bagged so far, he said.

Sony surprises with record profit as image sensor demand offsets weak gaming

  • Japan’s Sony surprised the market by reporting on Tuesday a record first-quarter operating profit despite the slowing gaming business, as strong demand for multiple-lens camera systems for smartphones boosted sales of image sensors.
  • The electronics firm posted an operating profit of 230.93 billion yen ($2.1 billion) for the April-June quarter, up 18.4% from a year earlier and overshooting a consensus estimate of 173.61 billion yen.
  • The imaging and sensing business, which includes image sensors, posted a profit of 49.5 billion yen, up from 29.1 billion yen a year earlier, comfortably offsetting a 9.6 billion drop in profit at the gaming business, its biggest profit earner.
  • The company, which has had two straight years of record profits, maintained its profit forecast for the year at 810 billion yen.

Nintendo quarterly profit drops 10% ahead of Switch Lite launch

  • Japanese gaming company Nintendo on Tuesday reported a 10% decline in quarterly profit, far wide of market expectations, as a rise in costs dulled stronger sales of its hybrid home-portable Switch console.
  • The Kyoto-based gaming company said it sold 2.1 million Switch consoles in the quarter, bringing the total installed base to 36.9 million units. It maintained its full-year sales forecast of 18 million units for the year ending March.
  • Operating profit for the quarter was 27.4 billion yen ($252.26 million), versus the 40 billion yen average estimate.

BP profit again outstrips forecasts, lifted by higher oil output

  • A strong rise in oil and gas production helped BP offset weaker crude prices to again beat profit expectations on Tuesday.
  • Second-quarter production rose to 3.8 million barrels of oil equivalent per day, 4% higher than a year earlier.
  • Benchmark Brent crude oil prices in the second quarter averaged around $69 a barrel, up from $63 the previous quarter but down from $74 a barrel a year earlier, BP said.
  • Net income reached $2.8 billion in the second quarter, exceeding a company-provided forecast of $2.46 billion.
  • The second-quarter profit was up from $2.4 billion in the previous quarter, while BP’s operating cash flow recovered to $6.8 billion in the quarter from $5.3 billion in the previous quarter as a result of a one-off working capital release.

Bayer Warns on Crop Weakness as Roundup Plaintiffs Rise

  • Bayer warned that severe weather impacting its crop-science division could strain its ability to hit full-year sales targets, further highlighting troubles following the acquisition of Monsanto last year.
  • Overall sales grew 21% to €11.5 billion ($12.81 billion), boosted from its acquisition of Monsanto last June.
  • Profit fell by nearly half to €404 million, as a wet planting season delayed farmers from getting their corn crop in the ground while dry weather across Europe and Canada has been hitting demand for herbicides and fungicides.
  • Bayer said the number of plaintiffs suing over its Roundup herbicide rose by another 5,000, highlighting the difficulty in putting to rest what so far has been a damaging legal battle over the world’s most widely used weedkiller.
  • The number of plaintiffs rose to 18,400 in the latest quarter, up from 13,400 in April, Bayer said.

Boris Johnson Ramps Up No-Deal Brexit Rhetoric, Causing Pound to Fall

  • Prime Minister Boris Johnson refuses to hold face-to-face meetings with EU leaders unless they agree to change key aspects to Britain’s divorce deal with the bloc, something the other 27 member states have rejected, a stance that jolted the British currency.
  • The prime minister’s position—and the possibility it could spark a chaotic split with the EU along with a fresh U.K. election—sent the pound down 1.3% to its lowest level against the euro since September 2017.
  • His stance that “no dealwas Britain’s default position fed fears over the economic hit the country faces if it leaves the EU without a pact to smooth the split.
  • “The withdrawal agreement is dead it has got to go, but there is scope to do a new deal,” Mr. Johnson said Monday.

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TODAY in HISTORY

  • 620 million people were without power in India, the worst power outage in world history. (2012)

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