US FINANCIAL MARKET
U.S. Stocks Wobble Ahead of Fed Update – Wall Street Journal, 7/28/2021
- Major U.S. stock indexes wobbled Wednesday as investors awaited fresh guidance from the Federal Reserve and another batch of earning reports from the nation’s biggest companies.
- The broad S&P 500 index was roughly flat in morning trading, while the Dow Jones Industrial Average slipped 0.3%. The technology-heavy Nasdaq Composite climbed 0.7%.
- Fed officials are set to conclude their two-day policy meeting on Wednesday, with a statement due to be released at 2 p.m. ET. The focus will be on any signals from Chairman Jerome Powell about whether policy makers are accelerating deliberations over how and when to pare back on their easy-money policies, and any shift in the Fed’s view on inflation.
- The yield on the benchmark 10-year Treasury note rose to 1.259% from 1.235% on Tuesday. Bond yields and prices move in opposite directions.
- Overseas, the Stoxx Europe 600 was up 0.4% in recent trading. Shares of Barclays gained 2.9% in London after the U.K. bank reported a rise in quarterly profit that surpassed analysts’ expectations.
- In Hong Kong, markets clawed back part of the steep losses accumulated over the last three sessions in a selloff sparked by China’s widening crackdowns on online platforms and other businesses.
- The city’s benchmark Hang Seng Index added 1.5%, while its sister tech index advanced 2.8%. Some previously hard-hit technology stocks, such as Meituan and Kuaishou Technology, regained some of the ground they had lost in recent days.
- Elsewhere in Asia, the Shanghai Composite Index shed 0.6%, while Japan’s Nikkei 225 fell 1.4%.
CDC Urges Vaccinated People to Resume Wearing Masks Indoors in Some Areas – Wall Street Journal, 7/28/2021
- The Centers for Disease Control and Prevention, citing the highly transmissible Delta variant, recommended Tuesday that vaccinated people resume masking indoors in certain parts of the country and that K-12 schools adopt universal masking for teachers, staff, students and visitors regardless of vaccination status.
- New guidance issued by the nation’s top health protection agency said fully vaccinated people who live in places with high or substantial transmission of the virus should once again wear masks in public indoor spaces, while emphasizing that Covid-19 vaccines remain effective at preventing severe illness, hospitalization and death.
- CDC Director Rochelle Walensky said the guidelines were revised because new data on the Delta variant show that so-called breakthrough infections for fully vaccinated people, though rare, carry a similar level of viral load as infections among the unvaccinated.
- President Biden also said that requiring federal employees to get vaccinated against Covid-19 is under consideration as the Delta variant spreads nationwide.
Apple says chip shortage reaches iPhone, growth forecast slows – Reuters, 7/28/2021
- Apple said on Tuesday that a global chip shortage that has bit into its ability to sell Macs and iPads will start to affect iPhone production and forecasted slowing revenue growth, sending its shares lower.
- Driven by the better-than-expected iPhone sales, total revenue hit $81.43 billion, above analyst expectations of $73.30 billion, according to IBES data from Refinitiv.
- Apple said iPhone sales were $39.57 billion, up nearly 50% from a year earlier and above analyst expectations of $34 billion.
- Services revenue reached a record high of $17.49 billion, up by a third from a year earlier and above analyst expectations of $16.33 billion. Cook told Reuters that Apple now has 700 million subscribers on its various platforms, up from 660 million a quarter earlier.
- Sales of iPads and Macs were $7.37 billion and $8.24 billion, compared with analyst expectations of $7.15 billion and $8.07 billion, according to Refinitiv data.
- Apple’s profits were $21.74 billion, or $1.30 per share, above estimates of $1.01 per share, according to Refinitiv.
- Apple executives said revenue for the current fiscal fourth quarter will grow by double-digits but be below the 36.4% growth rate in the just-ended third quarter. Growth will also slow in Apple’s closely watched services business, they said.
- Apple had told investors last quarter that the chip shortage could hold back sales by $3 billion to $4 billion.
- In an interview on Tuesday, Cook told Reuters that the hit to overall revenue in the third quarter was “lower than the low end” of its previously forecasted range.
Microsoft Posts Another Quarter of Record Sales Driven by Cloud Growth – Wall Street Journal, 7/28/2021
- Microsoft’s success during the pandemic shows few signs of fading as its cloud-computing business delivered bumper sales growth to help the software giant post record revenue.
- The Redmond, Wash.-based company reported fiscal fourth-quarter sales of $46.2 billion after the bell Tuesday, up around 21% from the year-earlier period.
- Azure, Microsoft’s collection of cloud data centers and software tools that has been the backbone of its growth in recent years, saw year-over-year sales growth of 51%, topping the 50% seen in the two prior quarters.
- Overall gaming sales advanced 11%, slowing from 50% growth in the previous quarter. Xbox hardware revenue was up 172%, the company said.
- The improving job market in the wider economy, Microsoft said, also helped LinkedIn enjoy a 46% growth in year-over-year quarterly sales.
- It generated a $16.5 billion profit for the period ended June 30, an increase of 47% year-over-year, exceeding Wall Street expectations.
Google Revenue Surges as Online Advertising Market Thrives – Wall Street Journal, 7/28/2021
- Google’s parent company flexed its digital dominance, reporting its highest quarter ever for sales and profit behind a gusher of online advertising from businesses vying for customers across reopened economies.
- Alphabet reported second-quarter revenue of $61.88 billion, an increase of 62% from a year earlier, when its unassailable ad business tumbled as the coronavirus crippled the economy.
- The company posted $50.44 billion in sales from advertising, a 69% increase helped by a red-hot U.S. market where ad spending is on track to be the fastest in the postwar era.
- YouTube’s ad business collected $7 billion in revenue, increasing 84% from a year earlier.
- It reported cloud sales rose 54% to $4.63 billion in the quarter.
- Profit more than doubled to $18.53 billion, with per-share earnings surpassing analysts’ expectations.
Visa gets vaccine boost as domestic spending back near pre-COVID levels – Reuters, 7/28/2021
- Visa beat estimates for quarterly profit on Tuesday, with domestic spending almost back to pre-pandemic levels and international travel on the road to recovery as rising vaccinations and reopening economies take effect.
- Total revenue climbed 27% to $6.13 billion. Assuming July trends continue, Visa’s fourth-quarter net revenue growth is expected to be in line with the third quarter, Chief Financial Officer Vasant Prabhu said.
- Cross-border volumes jumped 47% on a constant currency basis in the quarter.
- Travel spending volumes at Visa were approaching 2019 levels in July, while entertainment surpassed those levels in May, Prabhu told analysts on a call.
- Net income rose to $2.58 billion in the quarter ended June 30 from $2.37 billion a year earlier.
Boeing Swings to Profit on Defense and Jet Sales – Wall Street Journal, 7/28/2021
- Boeing reported its first quarterly profit in nearly two years and said it needs an order from China by mid-2022 to participate fully in a stronger-than-expected recovery in air travel.
- Sales rose 44% to $17 billion as jetliner deliveries quadrupled from a year ago, including 47 of its MAX jets.
- The company’s commercial airplanes unit reported an operating loss of $472 million in the quarter, but its defense business rebounded to earn $958 million and services generated $531 million.
- Boeing on Wednesday reported a profit of $567 million for the June quarter compared with a $2.4 billion loss in the same period a year ago.
- The company burned through $705 million in cash during the quarter, far less than analysts expected as delivery payments combined with deposits from a slew of new jetliner sales.
Starbucks, Facing Higher Costs, Pushes Upscale Coffee – Wall Street Journal, 7/28/2021
- Starbucks said higher labor and supply costs are likely to linger for months, adding that it is promoting higher-end beverages such as cold coffee and could lift prices in areas to help compensate.
- For its fiscal third quarter ended in June, Starbucks reported $7.5 billion in sales, above analysts’ expectations.
- U.S. same-store sales were 83% higher than the same period last year, when Covid-19 forced the chain to shut many of its dining rooms as the health crisis worsened.
- The chain now expects same-store sales growth of 18% to 20% in China for its full fiscal year, down from 27% to 32% previously. It also reduced its same-store guidance in other international markets.
General Dynamics profit beats on higher sales, raises guidance – Reuters, 7/28/2021
- General Dynamics beat Wall Street estimates for quarterly profit on Wednesday as the defense contractor benefited from higher sales in its combat systems and technologies divisions.
- Company revenue fell marginally to $9.22 billion, below analyst estimates of $9.30 billion as revenue in the aerospace unit was down 17.8% from the same period a year ago.
- Gulfstream delivered 21 jets versus 32 a year ago, but the company said it saw “very strong” customer demand as the pandemic continues and plans to deliver 71 more jets by year end.
- Sales in the company’s combat systems unit, which makes battle tanks, rose 8.3% to $1.90 billion, while the technologies unit, which provides IT and mission-support services, saw an increase of 3.2% in sales to $3.16 billion.
- Net earnings rose to $737 million, or $2.61 per share, in the quarter ended July 4, from $625 million, or $2.18 per share, a year earlier.
- The company raised its full-year earnings per share guidance by $0.45 to $0.50 cents to about $11.50.
McDonald’s Sales Surpass Pre-Pandemic Levels – Wall Street Journal, 7/28/2021
- McDonald’s said its sales are surpassing pre-pandemic levels across the world as more of its dining rooms reopen and U.S. customers try new chicken offerings.
- The burger giant reported sales of $5.9 billion for its quarter ending in June, up 57% from a year earlier when it was hit by Covid-19-related lockdowns. Analysts expected sales of $5.6 billion.
- The company said that menu price increases of roughly 6% over the past year, larger to-go orders and sales of its new crispy chicken sandwiches helped boost U.S. sales.
- Global same-store sales in the second-quarter were 7% higher than in the same period of 2019, with the U.S. business leading the growth, McDonald’s said Wednesday.
- It had net income of $2.2 billion, more than four times the amount in last year’s period.
Pfizer Forecasts $33.5 Billion in Covid-19 Vaccine Sales – Wall Street Journal, 7/28/2021
- Pfizer expects sales for its Covid-19 vaccine this year to reach about $33.5 billion, a nearly 30% increase from its forecast three months ago, as the shot plays a growing role in the global campaign to reduce the spread of the coronavirus.
- In the latest quarter, the two-dose shot contributed $7.8 billion to Pfizer’s total sales of nearly $19 billion. That boost fueled the company’s 92% year-over-year revenue gain, as did stronger sales of other Pfizer drugs and vaccines amid greater healthcare demand this year.
- Sales for its oncology business grew 19% to $3.2 billion while internal-medicine sales were 5% higher at $2.4 billion. Revenue from top-selling pneumonia vaccine Prevnar rose more than one third over a year ago due to additional children’s wellness visits to doctors.
- Pfizer posted an adjusted profit of $1.07 a share for the three months through June. Wall Street analysts expected an adjusted profit of 97 cents a share.
- Pfizer raised its full-year financial guidance to between $78 billion to $80 billion, and an adjusted profit of $3.95 a share to $4.05 a share after stripping out one-time items.
- Previously, the company projected sales of $70.5 billion to $72.5 billion and adjusted earnings of $3.55 a share to $3.65 a share.
Mattel expects strong holiday season as Barbie demand swells – Reuters, 7/28/2021
- Mattel raised its full-year sales forecast on Tuesday, expecting sustained robust demand for its Barbie and Hot Wheels brands into the holiday season despite upcoming price hikes.
- Mattel reported second-quarter total net sales of $1.03 billion, beating analysts’ average estimate of $878.8 million, according to IBES data from Refinitiv.
- Overall gross billings for Barbie, Mattel’s biggest brand, jumped 46% in the second quarter, while Hot Wheels’ billings surged 67%.
- Excluding items, Mattel reported a profit of 3 cents per share, compared with estimates of a loss of 5 cents per share.
- The company said it expects full-year constant currency net sales to increase by 12% to 14%, compared with prior forecast of a 6% to 8% rise, driven by demand for dolls, cars and action figures.
Bristol Myers sees return to growth for Opdivo, tops estimates – Reuters, 7/28/2021
- Bristol Myers Squibb reported second quarter earnings that topped Wall Street estimates, as sales of flagship cancer treatment Opdivo returned to growth after missing estimates in the previous quarter.
- Bristol Myers reported second quarter revenues of $11.7 billion, 16% higher than in the same period last year, driven in part by sales of Opdivo that exceeded $1.9 billion for the quarter, 16% higher than in the quarter ended June 30, 2020.
- Excluding one-time items, Bristol Myers reported earnings of $4.3 billion, or $1.93 per share, beating analyst estimates of around $4.2 billion and $1.89 per share, according to IBES data from Refinitiv.
- Bristol Myers still expects full-year earnings in the range of $7.35 to $7.55 a share
AMD forecasts revenue above estimates on strong chip demand – Reuters, 7/28/2021
- Advanced Micro Devices forecast current-quarter revenue above Wall Street expectations on Tuesday, as it sees strong demand for its chips used in data centers and gaming consoles.
- The company’s revenue for the second quarter almost doubled to $3.85 billion. Analysts on average had expected $3.62 billion.
- Sales in AMD’s computing and graphics segment, which includes graphic chip sales to data centers, rose 65% to $2.25 billion, beating analysts’ estimate of $2.17 billion, according to market research firm FactSet.
- Its enterprise, embedded and semi-custom segment, the unit that houses data center chips, jumped nearly three-fold in sales to $1.60 billion.
- Excluding items, the company earned 63 cents per share in the quarter, above estimates of 54 cents, according to Refinitiv IBES data.
- AMD projected third-quarter revenue of about $4.1 billion, plus or minus $100 million, compared with analysts’ estimates of $3.82 billion, according to Refinitiv IBES data.
Shopify beats revenue expectations on resilient online shopping trend – Reuters, 7/28/2021
- Canada’s e-commerce giant Shopify Inc beat second-quarter revenue expectations on Wednesday, on the back of a resilient online shopping trend precipitated by the COVID-19 pandemic.
- The company’s revenue rose 57% to $1.12 billion for the quarter ended June 30, compared with analysts’ average estimate of $1.05 billion, according to IBES data from Refinitiv.
- Gross merchandise volume, a widely watched figure for the e-commerce industry’s performance, rose 40% to $42.2 billion in the quarter. Analysts on average had expected $40.49 billion, according to IBES data from Refinitiv.
- Net income rose to $879.1 million, or $6.90 per share, from about $36 million, or 29 cents per share, a year earlier. The jump in net income was due to the inclusion of $778 million of unrealized gains on its equity investments, Shopify said.
U.S. auto sales pace to weaken further in July – J.D. Power, LMC Automotive – Reuters, 7/28/2021
- Growth in U.S. new vehicle retail sales is expected to slow down further in July because of a limited supply of automobiles caused by a global semiconductor shortage, consultants J.D. Power and LMC Automotive said on Wednesday.
- Retail sales are expected to reach 1.2 million units in the month, a 3.7% increase from the same period last year when adjusted for selling days, but a slump in expectations when compared to the preceding months.
- The consultants had forecast sales growth of 110% for April, while the outlook fell to 34% and 12.4% for May and June, respectively.
- Average transaction prices are expected to rise 17% to $41,044, the highest on record, while the average incentive spending per unit is expected to fall to $2,065 from $4,235 last year.
- The average number of days a new vehicle sits on a dealer lot before being sold is on pace to fall to a record low of 31 days, down from 75 days a year ago, said the statement.
US ECONOMY & POLITICS
U.S. Goods-Trade Gap Widened to Second-Biggest on Record in June – Bloomberg, 7/28/2021
- The U.S. merchandise-trade deficit widened to the second-biggest on record in June, reflecting a larger increase in imports that include costlier petroleum.
- The deficit grew to $91.2 billion from $88.2 billion in May, according to Commerce Department data released Wednesday. The median estimate in a Bloomberg survey of economists had called for a $88 billion shortfall last month.
- Imports climbed 1.5% to a record-high $236.7 billion, as the value of inward-bound shipments of industrial supplies such as petroleum surged.
- Exports rose 0.3% to $145.5 billion.
- The value of vehicle imports fell for a third month, dropping 2.5% to $28.5 billion. Exports climbed 1.7% to $11.6 billion, edging up from the lowest level since mid-2020.
- Overall, the value of U.S. exports plus imports climbed to $382.1 billion in June, a fresh record.
Fed Meeting Will Focus on Tapering Timeline – Wall Street Journal, 7/28/2021
- Federal Reserve officials are set to resume deliberations Wednesday about how and when to begin paring their asset purchases amid an economic rebound clouded by supply-chain bottlenecks and rising Covid-19 cases.
- The central bank at the end of last year said it would continue to purchase $120 billion in Treasurys and mortgage-backed securities monthly until officials deemed they had achieved “substantial further progress” toward their goals of low unemployment and inflation reaching their 2% goal.
- The Fed will release its policy statement at 2 p.m. EDT. Most of the focus is likely to center on Chairman Jerome Powell’s news conference at 2:30 p.m.
- Officials are likely to receive a formal staff briefing around when to start paring their monthly purchases of $80 billion in Treasury securities and $40 billion in mortgage securities, and how quickly to reduce, or taper, them.
Lawmakers Say Infrastructure Deal Within Reach – Wall Street Journal, 7/28/2021
- Lawmakers expressed renewed optimism Tuesday that they were close to reaching a deal on a roughly $1 trillion infrastructure package as they worked through a series of 11th-hour holdups.
- After a day of partisan sniping over last-minute disputes, lawmakers said Tuesday they were approaching resolution to some of the issues that had bogged down the final stretch of negotiations.
- But they still hadn’t finished their talks, weeks after the group announced that they had agreed to a loose framework for a deal.
- “We’re enthusiastic about getting the bipartisan infrastructure plan across the finish line—confident we’ll be there soon,” said White House press secretary Jen Psaki.
Treasury Market Meltdown in 2020 Shows Need for Overhaul, Report Finds – Wall Street Journal, 7/28/2021
- A global dash for cash sparked by the coronavirus pandemic in March 2020 forced the Federal Reserve to buy hundreds of billions of dollars of U.S. Treasury securities in a matter of days to prevent a broader meltdown in financial markets.
- A new report from a group that includes former central bankers warns that failing to address key market fragilities revealed by that episode could weaken the confidence in the market for U.S. Treasurys, which is widely assumed to be the global risk-free asset.
- Sales of Treasurys by an array of investors seeking to raise cash in March 2020 were so extreme that the Fed would likely have had to intervene in the market no matter what, the report said.
- Weaknesses in the Treasury market “accelerated the avalanche in a way that was damaging and scary—and unnecessarily so,” said Mr. Geithner.
EUROPE & WORLD
Spotify Adds Fewer Total Users Than Expected – Wall Street Journal, 7/28/2021
- Spotify Technology’s advertising revenue more than doubled in the most recent quarter, helped by growth in its podcast business, but the company added fewer total users than expected.
- Overall for the second quarter, revenue climbed 23% to €2.33 billion, in line with the company’s expectations.
- Overall revenue from subscriptions rose 17% to €2.06 billion. Advertising revenue rocketed 110% to €275 million, growing for a fourth consecutive quarter after sliding in the first half of last year amid pandemic headwinds.
- As of the quarter ended June 30, Spotify had 365 million monthly active users, up 22% from a year earlier and just shy of the company’s forecast.
- Average revenue per user for the subscription business in the quarter slipped 3% to €4.29, the equivalent of $5.07, as the company continued to attract new subscribers through discounted plans and charged lower prices in newer markets such as India and Russia.
- Spotify posted a loss of €20 million or 19 European cents a share, compared with a loss of €356 million, or €1.91 a share, in the year-earlier period.
- For the third quarter, Spotify guided for monthly active users to grow to between 377 million and 382 million and that premium subscribers would rise to between 170 million and 174 million. It said it expects to generate revenue of €2.31 billion to €2.51 billion.
- King Henry VIII of England’s chief minister, Thomas Cromwell, was executed and Henry married his fifth wife, Catherine Howard. (1540)
- Robespierre, one of the leading figures of the French Revolution, was sent to the guillotine. (1794)
- The 14th Amendment to the Constitution, which established the citizenship of African Americans and guaranteed due process of law, was ratified. (1868)
- Nine Pennsylvania coal miners were rescued after 77 hours of being trapped in a mine shaft. (2002)