US FINANCIAL MARKET

Nasdaq 100 Up 1% as GDP Fuels ‘Soft Landing’ Calls: Markets Wrap – Bloomberg, 7/27/2023

• Stocks rose as data signaled the world’s largest economy remains strong despite the Federal Reserve’s aggressive tightening campaign, bolstering the case for a so-called soft landing.
• Major equity benchmarks gained as a report showed gross domestic product unexpectedly picked up steam in the second quarter, while US pending home sales unexpectedly rose in June.
• The S&P 500 rose 0.5%. The Nasdaq 100 rose 1.1%. The Dow Jones Industrial Average rose 0.2%.
• On Wednesday, Fed Chair Jerome Powell said his staff had ditched the recession forecast it put in place in March, when banking turmoil had raised fears about a potential credit crunch.
• The Nasdaq 100 climbed about 1% as a bullish forecast from Facebook parent Meta Platforms spurred an 7% rally in the shares.
• The S&P 500 was set for its highest since March 2022 while the Dow Jones Industrial Average advanced for a 14th straight session — on pace for a record winning run.
• A gauge of big banks rose even after US regulators unveiled plans for a 19% boost in capital requirements for the eight largest financial institutions.
• Two-year US yields, which are more sensitive to imminent Fed moves, rose six basis points to around 4.9%.
• The dollar halted a two-day decline.
• West Texas Intermediate oil hovered near $80 a barrel.
• European stocks held onto gains and the euro retreated after the region’s central bank raised rates and kept options open for the next meeting.
• Meantime, investors are still split about the outlook for the economy: 58% of respondents in JPMorgan Chase’s weekly survey expect a soft landing, while 42% are bracing for a recession.
• The Stoxx Europe 600 rose 1.3%.
• The Bloomberg Dollar Spot Index rose 0.5%.
• The yield on 10-year Treasuries advanced seven basis points to 3.94%.
• West Texas Intermediate crude rose 1.4% to $79.90 a barrel.
• Gold futures fell 1.3% to $1,983.30 an ounce.

Meta’s Improved Ad Sales Buy Time for Zuckerberg’s Metaverse – Bloomberg, 7/27/2023

• Meta Platforms said that a recovery in advertising will drive revenue growth at the fastest rate since 2021, helping Chief Executive Officer Mark Zuckerberg rekindle investor support for his longer-term ambitions.
• Meta reported revenue of $32 billion for the second quarter, beating analyst estimates of $31.1 billion.
• Zuckerberg and Li made sure to associate their plans to increase spending with improvements in the core business.
• That includes AI chatbots, “agents” and “coaches” that Zuckerberg teased on the call.
• AI “is going to both complement and touch and transform every single thing that we’re doing. And I’m really excited for it,” he said.
• Reels have been played more than 200 billion times on Instagram and Facebook, becoming more popular due to improvements in targeting each person’s feed with videos that will fit their interests, Meta said.
• Still, revenue from Reels is growing, reaching an annual sales rate of $10 billion, Zuckerberg said, up from $3 billion in the third quarter of 2022.
• In Wednesday’s report, Meta said Reality Labs, the division that makes metaverse tech, posted an operating loss of $3.7 billion.
• Even news that expenses will continue to climb over the next two years didn’t dampen the shares, which rose more than 7% in after-market trading following the earnings report.
• Meta’s revenue could grow as much as 20% in the current quarter, the company said Wednesday.

McDonald’s Grimace Shake Trend Pays Off for Burger Chain – Wall Street Journal, 7/27/2023

• The burger giant reported $6.5 billion in sales for the most recent quarter, exceeding analysts’ expectations of $6.3 billion.
• Quarterly revenue increased 14% from the prior-year period, the company said.
• A meal celebrating the “birthday” of the retro purple mascot last month helped drive McDonald’s U.S. same-store sales, up 10.3% in its second quarter from the same period last year.
• McDonald’s said menu price increases and more customer orders also helped boost its U.S. sales.
• The company reported digital sales in its six largest markets of around $8 billion for the quarter.
• The company reported a global same-store increase of 11.7% during the quarter compared with the same period last year.
• Earnings per share were $3.17 when adjusting for charges related to layoffs conducted by McDonald’s earlier this year and other one-time items.
• Analysts polled by FactSet expected $2.78 a share.

Mastercard earnings bring the latest signal of healthy spending – Market Watch, 7/27/2023

• Mastercard became the latest payments company to call out healthy spending levels as the financial-technology giant beat profit expectations for its latest quarter.
• Revenue rose to $6.3 billion from $5.5 billion, while analysts were anticipating $6.2 billion.
• Gross dollar volume rose 12% in the quarter on a local-currency basis, while cross-border volume was ahead 24%.
• Switched transactions increased by 17%.
• On an adjusted basis, Mastercard earned $2.89 a share, up from $2.56 a year earlier and ahead of the FactSet consensus, which was for $2.83.

Southwest Airlines to Revamp Flight Schedule as Consumer Travel Changes – Wall Street Journal, 7/27/2023

• Southwest Airlines plans to revamp its flight schedule next year to better reflect what it says are changing travel patterns as it reported the impact of rising labor costs on its second-quarter profit.
• The carrier reported record operating revenue of $7 billion during the second quarter.
• However, Chief Executive Bob Jordan said business travel’s recovery to prepandemic levels remains elusive, and the airline plans to revamp its flight schedule next year to adapt.
• Among the changes, Southwest will fly less on Tuesdays, pull back from some short-haul markets and trim early-morning and late-night flights, Jordan told CNBC.
• Business travel hasn’t fully bounced back.
• Southwest reported a profit of $683 million in the three months ended June 30, down about 10% from the same period a year earlier.
• The airline’s adjusted profit of $1.09 per diluted share was in line with analysts’ forecasts.
• Southwest said it expects the third quarter to bring another revenue record, but it said that revenue per seat flown a mile could be as much as 7% lower than in the same period in 2022.

Comcast Loses Broadband Customers, Benefits from ‘Super Mario’ Success – Wall Street Journal, 7/27/2023

• Comcast shed broadband customers in the second quarter and reported another steep loss tied to its Peacock streaming service, while its “The Super Mario Bros. Movie” boomed at the box office.
• The Philadelphia-based company said it lost 19,000 domestic broadband subscribers, making the June quarter only the second in its history in which Comcast’s base of core customers eroded.
• Those losses were less severe than some analysts had forecast.
• Revenue grew by 1.7% year-over-year to $30.5 billion in the second quarter, with most of that gain coming from its NBCUniversal media empire. Revenue for its cornerstone broadband business was flat.
• Net profit rose 25.1% year-over-year to nearly $4.25 billion, or $1.02 per share, helped by lower operating expenses in areas such as programming and marketing.
• The company reported $3.42 billion in free cash flow, up 8% from the second quarter of 2022.
• Comcast’s revenue growth was stronger than the $30.11 billion in revenue that analysts polled by FactSet expected, and its net profit was stronger than the $3.98 billion, or 90 cents per share, that Wall Street forecast.
• Revenue for Comcast’s connectivity and platforms segment—which includes the U.S.-based Xfinity business and its European Sky business—grew 0.1%, to $20.36 billion.
• Continued cord-cutting contributed to a loss of 543,000 domestic video customers.

Chipotle shares slide as sales fall short of Wall Street’s expectations – CNBC, 7/27/2023

• Chipotle Mexican Grill on Wednesday reported quarterly earnings that crushed expectations, but the burrito chain’s sales fell short.
• Earnings per share: $12.65 adjusted vs. $12.31 expected.
• Revenue: $2.51 billion vs. $2.53 billion expected.
• Restaurant-level operating margins expanded to 27.5% from 25.2% in the year-ago period.
• Avocado prices were lower than the second quarter of 2022, but higher prices for tortillas, dairy, beef and other ingredients put some pressure on profit.
• The company’s same-store sales grew 7.4%, falling shy of StreetAccount estimates of 7.5%.
• Digital sales accounted for 38% of the company’s food and beverage revenue this quarter.
• Chipotle opened 47 new locations, 40 of which included drive-thru lanes to pick up digital orders.
• Wall Street is anticipating same-store sales next quarter of 5.9%, according to StreetAccount.

ServiceNow Earnings Top Estimates. But the Stock is Lower. – Barron’s, 7/27/2023

• ServiceNow posted better-than-expected results for its latest quarter and lifted its full-year outlook.
• ServiceNow also unveiled two major additions to its suite of generative artificial intelligence tools, and announced an alliance with Nvidia and Accenture to help companies develop generative AI software.
• For the second quarter, ServiceNow posted revenue of $2.15 billion, up 23% from the year-ago quarter, and ahead of the Street consensus forecast as tracked by FactSet of $2.13 billion.
• Subscription revenue was $2.075 billion, up 25%, ahead of both the Street consensus forecast at $2.043 billion, and the company’s guidance range of $2.04 billion to $2.045 billion.
• Non-GAAP earnings were $2.37 a share, above the Street consensus forecast at $2.05 a share. Current remaining performance obligations at quarter-end were $7.2 billion, up 25%; Service Now’s guidance had called for the measure to increase 23%.
• For the September quarter, ServiceNow sees subscription revenue of $2.185 billion to $2.195 billion, above Street consensus at $2.144 billion.
• The company sees operating margin on an adjusted basis of 27%, edging consensus at 26.4%.
• The company also lifted its full-year subscription revenue forecast, projecting $8.58 billion to $8.6 billion, up from a previous estimate of $8.47 billion to $8.52 billion.
• ServiceNow inched up its full-year operating margin forecast to 26.5% from 26%.

Lam Research sales forecast beats estimates on AI boom – Reuters, 7/27/2023

• Chip-making tools supplier Lam Research forecast quarterly revenue above Wall Street estimates, as semiconductor makers scramble to meet a surge in demand fueled by rising adoption of artificial intelligence technology.
• “Advanced AI servers have significantly higher leading-edge logic, memory and storage content versus traditional servers, and every incremental 1% penetration of AI servers and data centers is expected to drive $1 billion to $1.5 billion of additional (chip equipment) investment,” Archer said on a conference call with analysts.
• Lam reported fourth-quarter revenue of $3.21 billion, lower than $4.64 billion a year ago but above market expectations of $3.13 billion.
• Excluding items, the company posted a profit of $5.97 per share, compared with estimates of $5.07.
• The company expects first-quarter revenue of $3.4 billion plus or minus $300 million, above expectations of $3.3 billion, according to IBES data from Refinitiv.

EBay’s higher investments weigh on profit forecast, shares fall – Reuters, 7/27/2023

• EBay forecast third-quarter profit below market expectations on Thursday as the e-commerce platform spent more to bolster categories such as auto parts, refurbished goods and collectibles, sending its shares down 4.5% after the bell.
• Revenue in the quarter ended June 30 was $2.54 billion, compared to expectations of $2.51 billion.
• Gross merchandise value, a key industry metric that denotes the total value of goods and services sold on the marketplace, fell 2%, to $18.2 billion in the second quarter.
• The company forecast third-quarter revenue in the range of $2.46 billion and $2.52 billion, compared to analysts’ average estimates of $2.47 billion.
• The company forecast third-quarter profit to be between 96 cents and $1.01 per share, compared to analysts’ estimates of $1.02, according to Refinitiv data.

AbbVie shares climb after quarterly results beat expectations – Market Watch, 7/27/2023

• AbbVie shares gained premarket on Thursday after the pharmaceutical giant reported stronger-than-expected revenue for the second quarter and raised its full-year guidance.
• Second quarter revenue came to $13.87 billion, versus $14.58 billion a year earlier, ahead of the FactSet consensus of $13.54 billion.
• Adjusted earnings per share came to $2.91, versus $3.37 a year earlier, beating the FactSet consensus of $2.83.
• Sales of blockbuster arthritis drug Humira totaled $4.01 billion in the quarter, topping the FactSet consensus of $3.95 billion.
• The company now expects full-year 2023 adjusted earnings per share in the range of $10.90 to $11.10, versus previous guidance of $10.57 to $10.97.

Honeywell stock dips after profit tops expectations but revenue comes up a bit shy – Market Watch, 7/27/2023

• Shares of Honeywell International slipped in premarket trading Thursday, after the aerospace and defense company reported second-quarter profit that topped expectations but revenue that came up a bit shy as continued strength in aerospace was offset by weakness in safety and productivity.
• Sales grew 2.2% to $9.15 billion, just below the FactSet consensus of $9.18 billion.
• Excluding nonrecurring items, adjusted earnings per share of $2.23 beat the FactSet consensus of $2.21.
• For 2023, the company nudged up its guidance ranges for adjusted EPS to $9.05 to $9.25 from $9.00 to $9.25 and for sales to $36.7 billion to $37.3 billion from $36.5 billion to $37.3 billion.

Bristol Myers stock takes a hit from earnings miss and lower outlook amid disappointing Revlimid sales – Market Watch, 7/27/2023

• Shares of Bristol Myers Squibb shed in premarket trading Thursday, after the drugmaker missed second-quarter earnings expectations and cut its full-year outlook, amid a more rapid than expected decline in sales of its cancer treatment Revlimid.
• Revenue fell 5.6% to $11.23 billion, below the FactSet consensus of $11.81 billion, as Revlimid sales dropped 41%.
• Excluding nonrecurring items, adjusted earnings per share of $1.75 missed the FactSet consensus of $1.98.
• For 2023, the company cut its guidance ranges for EPS to $7.35 to $7.65 from $7.95 to $8.25 and for revenue growth to a low single-digit percentage decline from an increase of about 2%.
• Revlimid sales are now expected to be about $5.5 billion, down from previous expectations of $6.5 billion.

Teradyne 2Q Revenue, Net Income Decline – Market Watch, 7/27/2023

• Teradyne posted a decline in revenue and net income in the latest quarter.
• Revenue declined 19% to $684.4 million from $840.8 million.
• Analysts polled by FactSet expected $656.9 million.
• Adjusted earnings were 79 cents a share, above analysts’ estimates of 66 cents.
• Teradyne guided for revenue between $650 million and $710 million and adjusted earnings between 61 cents a share and 81 cents a share, in line with analysts’ estimates.

Sunnova Misses Earnings and Sales Estimates – Barron’s, 7/27/2023

• Rooftop solar provider Sunnova Energy International released its second-quarter financial results after Wednesday’s close, missing Wall Street estimates sales and earnings estimates, sending shares lower.
• Sunnova reported a per-share loss of 76 cents and positive adjusted earnings before interest, taxes, depreciation, and amortization, or EBITDA, of $28.1 million from sales of $166.4 million.
• Wall Street was looking for a per-share loss of 42 cents and adjusted EBITDA of $44.5 billion from sales of about $196 million.
• The company says it added about 39,000 new customers in the second quarter, up from 30,100 added in the first quarter.
• The company expects to generate about $245 million in adjusted EBITDA in 2023, while Wall Street currently projects about $233 million.
• For the full year, Sunnova now expects to add between 135,000 and 145,000 customers—up from April’s estimate which predicted somewhere between 125,000 and 135,000.

L3Harris Technologies 2Q Revenue Up 13%; Costs Weigh on Profit – Market Watch, 7/27/2023

• L3Harris Technologies posted higher second-quarter revenue on increased demand in all of its segments, while profit fell due to higher costs.
• Revenue rose 13%, to $4.69 billion, topping analyst estimates for $4.37 billion.
• Revenue increased 8% for integrated mission systems, 9% for space and airborne systems and 30% for communications systems.
• Adjusted for certain items, per-share earnings came in at $2.97.
• Analysts recently polled by FactSet expected $2.94 a share.
• The company said the cost of product sales and services rose to $3.48 billion from $2.91 billion a year earlier.

Netflix Reworks Microsoft Pact, Lowers Ad Prices in Bid for Growth – Wall Street Journal, 7/27/2023

• Netflix is restructuring its advertising partnership with Microsoft a year into their deal and lowering ad prices in a bid to jump-start that fledgling corner of its business.
• The streaming company launched a $6.99 a month ad-supported option for consumers last year.
• Microsoft won a competition to provide technology for the service and sell ads on Netflix’s behalf, in part because it offered to pay a “revenue guarantee,” pledging to deliver a large amount of money to Netflix.
• With the new ad tier gaining traction slowly, Netflix has had preliminary discussions to sell ads through other partners, in addition to Microsoft, people familiar with the matter said.
• Netflix is reworking its pact with Microsoft to reduce the revenue guarantee.
• Those terms are still being settled.

Bud Light Brewer Lays Off Hundreds of U.S. Workers – Wall Street Journal, 7/27/2023

• Anheuser-Busch laid off hundreds of workers at its U.S. offices after months of slumping sales at Bud Light.
• The world’s largest brewer, which also sells Stella Artois and Budweiser, on Wednesday said the cuts would affect less than 2% of its roughly 18,000 U.S. workforce.
• The layoffs won’t impact front-line workers such as brewery and warehouse staff, the company said.