DAILY MARKET REPORTS
- U.S. stocks opened lower as investors were spooked by the latest signals from the bond market that pointed to heightened risk of a recession.
- Policy makers in India, New Zealand and Thailand moved aggressively to support growth and inflation, all cutting interest rates by more than investors had expected.
- Those moves raised concerns about the extent of the potential spillover from the trade conflicts.
- The yield on 10-year Treasurys dipped below 1.6% on Wednesday, down from 1.740% on Tuesday, when it hit its second-lowest level in 2019.
- China’s central bank on Wednesday set its official yuan rate at the weakest since 2008, but still kept it below the symbolic seven-yuan-a-dollar level, at 6.9996.
- Asked about the recent volatility in markets, President Trump said: “I think the market reaction is to be expected. I might have expected it even more. At some point, as I said, we have to take on China. They’ve been taking us to the cleaners for 25 years.”
- Meanwhile, he doubled down on hammering the Federal Reserve, tweeting Wednesday morning that the central bank had made a mistake by increasing interest rates too much.
- Shares in Walt Disney fell about 5.9%, after the company reported weaker-than-expected second-quarter earnings late Tuesday.
US FINANCIAL MARKET
Disney’s Quarterly Revenue Surges but Profit Drops
- Walt Disney’s acquisition of several key 21st Century Fox properties along with streaming service Hulu drove revenue past $20 billion in the latest period but also cut into profit.
- Revenue rose 33% to $20.25 billion. Analysts expected $21.45 billion in revenue.
- Expenses rose 55% to $17.49 billion.
- Revenue at Disney’s studio entertainment division surged 33% while operating income rose 13%.
- The direct-to-consumer and international division—which includes the ESPN+, Disney+ and Hulu streaming services—saw revenue more than double to $3.86 billion.
- The operating loss in the segment was $553 million, compared with $168 million a year earlier, which Disney attributed to the Hulu consolidation and spending ramp-up in ESPN+ and Disney+.
- Meanwhile, media networks revenue rose 21%.
- Operating income in that segment rose 7%, driven by the Fox properties, primarily FX and National Geographic networks.
- Third-quarter profit in the June quarter fell 40% to $1.76 billion the company said Tuesday.
CVS Boosts Profit Outlook as Revenue Outperforms
- CVS Health raised its full-year profit forecast and posted better-than-expected quarterly results on Wednesday, as higher U.S. prescription drug prices fueled rebates to its core pharmacy benefits business.
- The company reported revenue of $63.43 billion in the quarter, compared with $46.92 billion a year earlier, a gain due in large part to its acquisition of insurer Aetna last November. Analysts predicted $62.63 billion in revenue.
- Same-store sales at the company’s front-end stores that sell over-the-counter drugs rose 2.9%, beating estimates of a 1.2% rise.
- The company on Wednesday said profit in the quarter increased to $1.93 billion, compared with a net loss of $2.56 billion a year earlier when it recorded an impairment charge related to its long-term care business.
- CVS now expects full-year adjusted earnings per share of $6.89 to $7.00, compared with its previous forecast of $6.75 to $6.90.
Tinder love fuels Match Group’s revenue beat, upbeat forecast; shares rise
- Online dating services provider Match Group forecast third-quarter sales above estimates and reported better-than-expected second-quarter revenue on Tuesday, as its popular app Tinder attracted more users.
- Revenue for the three months ended June 30 rose about 18% to $498 million, above expectations of $489 million.
- Average subscribers at June-end rose 18% to 9.1 million.
- Tinder grew its average subscriber base 40.5% to 5.2 million in the quarter with new launches.
- Net earnings fell to $128 million, from $132.5 million a year ago.
Capri cuts sales forecast as Michael Kors demand slows
- Capri Holdings missed quarterly revenue estimates and cut its full-year sales forecast on Wednesday, as the high-end fashion house struggled with slowing demand for its Michael Kors brand at department stores and at its own retail outlets.
- Total revenue rose nearly 12% to $1.35 billion, missing analysts’ average estimate of $1.37 billion.
- Michael Kors revenue decreased 4.8% to $981 million and sales at Jimmy Choo, Capri’s stiletto brand which is also foraying into handbags, fell 8.7% to $158 million in the reported quarter.
- Net income fell to $45 million from $186 million, due to a $97 million impairment charge.
- For the full year, Capri expects revenue of $5.8 billion, down from its earlier forecast of $6 billion.
Wendy’s quarterly revenue falls short of estimates
- Burger chain Wendy’s reported quarterly revenue on Wednesday that fell short of analysts’ estimates, hit by tough competition in a crowded U.S. restaurant market.
- Total revenue rose 5.9% to $435.3 million, but came in below estimates of $439.9 million.
- Wendy’s posted same-stores sales growth 1.4%, roughly in line with analysts’ average estimate of 1.36%, but revenue missed.
- Net income rose 8.4% to $32.4 million from a year earlier.
New York Times posts profit beat, adds more digital subscribers
- The New York Times posted a better-than-expected quarterly profit on Wednesday, as it signed up more digital subscribers amid a drop in revenue from print advertising.
- Total revenue rose to $436.3 million from $414.6 million a year earlier, missing analysts’ average estimate of $438.7 million.
- The Times said it added 197,000 digital-only subscribers in the quarter, pushing total subscriptions to 3.78 million.
- Net income rose to $25.2 million in the quarter, from $23.6 million a year earlier.
Tesla considers raising prices in China from September: sources
- U.S. electric vehicle maker Tesla is considering lifting its prices in China from September amid yuan-related uncertainty, two people familiar with the matter said.
- Tesla currently imports all the cars it sells in China, but it is in the process of building a factory in Shanghai that will manufacture Model 3 cars in the initial phase and help it minimize the impact of the trade war and tariffs.
- If enacted, this would be the first case of a planned price adjustment by an importer since the yuan fell this week and points to the growing pressure that importers are facing.
FedEx to End Ground Deliveries for Amazon
- FedEx said it was ending its contract to deliver Amazon.com packages through its ground network, essentially severing ties with one of the world’s biggest shippers.
- The delivery giant said Wednesday it decided not to renew the contract when it expires at the end of August.
- In June, FedEx said it was ending its air-shipping contract with Amazon in the U.S. but would continue to handle ground deliveries. It would still handle international shipments.
- FedEx’s decision will require Amazon to find a new way to handle millions of packages ahead of the critical holiday shopping season at the same time Amazon is looking to speed home deliveries.
US ECONOMY & POLITICS
U.S. Collected $63 Billion in Tariffs Through June
- The tariff hikes approved by President Trump have infuriated Beijing and escalated the U.S.-China trade war, but there has been at least one beneficiary: the U.S. Treasury.
- As of June 30, the U.S. government has collected $63 billion in tariffs over the preceding 12 months, according to the latest Treasury data. What’s more, the tariff bounty is on the rise.
- The U.S. collected $6 billion in tariffs in June, up from $5.3 billion in May and $4.8 billion in April, after Mr. Trump’s decision to raise levies on $200 billion in Chinese goods from 10% to 25%
- The U.S. is now on a pace to generate $72 billion in tariffs annually, and could well hit the $100 billion mark Mr. Trump has touted if new 10% tariffs on $300 billion in untaxed imports take effect on Sept. 1, as threatened.
- There is one caveat, however. For every dollar brought in by the new tariffs, a dollar has been authorized to fund rescue programs for farmers who have been harmed by retaliation from China and other countries.
After Rate Cut, Trade Headwinds Complicate Outlook for Fed Officials
- Two Federal Reserve officials said lower interest rates might be warranted later this year amid a more uncertain trade outlook, but that it was premature to say when or how aggressively the central bank should act.
- St. Louis Fed President James Bullard and San Francisco Fed President Mary Daly added escalating trade tensions also make the economic outlook unusually complicated.
- Trade policy is challenging the Fed because while economic models can quantify the effects of higher prices from tariffs, they can’t divine tariffs’ broader disruptions to the economy due to declining business confidence and deferred investments as firms reorient their supply chains.
In Large Democratic Field, Two Candidates Lead Pack
- A new national poll on the Democratic presidential primary race suggests it could soon start to feel like a two-way contest between former Vice President Joe Biden and Massachusetts Sen. Elizabeth Warren.
- Mr. Biden and Ms. Warren lead the latest Quinnipiac University poll of Democrats and Democratic-leaning voters, with 32% and 21%, respectively.
- That marks a high for Ms. Warren in the poll, which put Sen. Bernie Sanders (I., Vt.) at 14% and Sen. Kamala Harris (D., Calif.) at 7%—a major drop from the 20% Ms. Harris boasted after the first debates in June.
- Ms. Warren has consistently led on who has the best policy ideas, notching 32% in the latest poll, well above Mr. Sanders’s 16%. And Mr. Biden is without peer on the question of electability: 49% say he has the best chance of beating Mr. Trump.
- The division between electability and compelling policy is not just an imaginary one. The Quinnipiac survey found that 46% of voters value a candidate who shares their policy views, while 50% want someone who is the “most electable.”
EUROPE & WORLD
Trio of Central Banks Surprises Markets with Rate Cuts
- Policy makers in India, New Zealand and Thailand moved aggressively to shore up growth and stoke inflation, all cutting interest rates by more than investors had expected.
- The three central banks across the Asia Pacific region are joining a shift toward even looser policy monetary policy.
- The Reserve Bank of New Zealand slashed its official rate by 0.5 percentage point to 1.0%, a steeper cut than forecast.
- In response, traders ratcheted up bets on the neighboring Reserve Bank of Australia cutting its own rates in September, with swaps shifting to price in a 70% chance of a cut, from 45%.
- In Mumbai, the Reserve Bank of India also surprised markets by lowering its key lending rate by more than expected – 0.35 percentage point, to 5.40%. It was the RBI’s fourth rate reduction this year, putting the key lending rate at a nine-year low.
Israel’s Teva Pharm profit falls less than expected
- Teva Pharmaceutical Industries reported a smaller-than-expected drop in second-quarter profit on Wednesday and said its chief financial officer was leaving the company.
- Revenue fell 8% to $4.34 billion mainly due to generic competition to its multiple sclerosis drug Copaxone and lower revenues from cholesterol treatment Treanda. Analysts had forecast revenue of $4.25 billion.
- Teva had legal settlements and loss contingencies of $646 million in the quarter.
- The company posted a loss of $689 million, compared to a loss of $176 million a year ago.
Toshiba quarterly profit jumps on cost cuts, but misses estimates
- Japan’s Toshiba reported on Wednesday a 10-fold jump in first-quarter operating profit as it stepped up cost cuts across divisions, but the profit missed analyst estimates.
- The company has been consolidating factories, and cutting jobs to compensate for the loss of the prized chip business, sold last year to plug a multi-billion-dollar balance sheet hole left by the collapse of its U.S. nuclear power unit.
- The company reported an operating profit of 7.8 billion yen ($73.49 million) for the April-June quarter, up from 730 million yen a year earlier. The result compared with the 11.63 billion yen average estimate.
- Toshiba maintained its annual profit forecast at 140 billion yen, in line with the target the company set in its five-year plan.
Auto Supplier Continental Slams Brakes on Engine Parts Amid Shift to Electric
- One of the world’s biggest car-parts makers is saying goodbye to the internal combustion engine—the machine that has been at the heart of the auto industry for well over a century.
- In a major strategy shift, Continental said Wednesday that it would cut investment in conventional engine parts because of a faster-than-expected fall in demand as major auto makers accelerate their shift to electric vehicles.
- Continental made the announcement as it released earnings for the three months to the end of June, reporting a 41% drop in net profit to €485 million ($543 million) and a 1% decline in sales to €11.3 billion.
- It attributed the weakness in the second quarter to a global slowdown in automotive production.
China Warns Hong Kong It Will Intervene if Situation Deteriorates
- A senior Chinese official in charge of Hong Kong affairs warned that Beijing would intervene if the local government proved unable to contain the violent protests, the most explicit threat of intervention to date from the central government.
- At a meeting with Hong Kong representatives in the nearby city of Shenzhen on Wednesday, the official, Zhang Xiaoming, issued a dire assessment of the situation in the territory after more than two months of protests.
- He called the situation the most severe since China resumed sovereignty over Hong Kong in 1997.
- Mr. Zhang’s warning was more direct than in recent days when officials signaled that Beijing’s patience was wearing thin.
- A day earlier in Shenzhen, where Wednesday’s meeting was held, more than 10,000 mainland police officers ran through anti-riot drills, a video of which was circulated widely online as a show of force.
China warns India of ‘reverse sanctions’ if Huawei is blocked – sources
- China has told India not to block its Huawei from doing business in the country, warning there could be consequences for Indian firms operating in China, sources with knowledge of the matter said.
- India is due to hold trials for installing a next-generation 5G cellular network in the next few months, but has not yet taken a call on whether it would invite the Chinese telecoms equipment maker to take part.
- Two sources said India’s ambassador in Beijing, Vikram Misri, was called to the Chinese foreign ministry on July 10 to hear China’s concerns about the U.S. campaign to keep Huawei out of 5G mobile infrastructure worldwide.
- Chinese officials said there could be “reverse sanctions” on Indian firms engaged in business in China should India block Huawei because of pressure from Washington, one of the sources said, citing a readout of the ambassador’s meeting.
TODAY in HISTORY
- The United States launched Explorer 6, which sent back a picture of Earth. (1959)
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