US FINANCIAL MARKET
Stocks Creep Up After GDP Data – Wall Street Journal, 7/29/2021
- U.S. stocks rose Thursday, pushing some major indexes toward fresh records, despite new data suggesting the economic recovery has started to slow.
- The Dow Jones Industrial Average added more than 150 points in recent trading, hitting an intraday record and setting the benchmark up for its highest close ever.
- The S&P 500 added 0.6%, also putting the broad index on course for a new high. The Nasdaq Composite also rose, gaining 0.4%.
- The gains followed data showing gross domestic product grew by 6.5% on an annualized basis in the second quarter, up slightly from earlier in the year but well below analyst’s forecasts of 8.4% growth.
- Meanwhile, jobless claims, a proxy for layoffs, came in at 400,000, resuming their downward trajectory but also coming in above projections.
- Also helping the market was the Federal Reserve’s decision a day earlier to maintain the central bank’s easy-money policies to continue to support the economic recovery.
- Although Chairman Jerome Powell did hint that the Fed may taper bond-buying programs this year.
- Shares of Ford jumped nearly 4% after the car maker posted a surprise profit and raised its outlook for the year. Qualcomm also topped analysts’ projections, sending shares of the tech firm up 5.7%.
- Facebook shares fell 3.5% after the social media platform said it expected revenue growth to slow in the second half of the year. PayPal slid 4.7% after reporting a drop in profit in the second quarter.
- In Asia, most major benchmarks rose. The Shanghai Composite Index climbed 1.5% and Hong Kong’s Hang Seng Index added 3.3%, led by advances in technology stocks.
- The Chinese government sought to reassure global banks and investors about the recent volatility in markets, saying that Beijing would consider the market impact of future policies.
- That helped some U.S.-listed Chinese tech stocks recover from recent losses.
- E-commerce platforms Pinduoduo climbed 0.5% and JD.com added 1.2%. Ride-hailing giant Didi Global soared 11%, as executives weigh going private, according to people familiar with the matter.
Biden Plans to Require Covid-19 Vaccine or Regular Tests for Federal Workers – Wall Street Journal, 7/29/2021
- President Biden is expected to announce Thursday that his administration will require federal employees to get vaccinated or be regularly tested for Covid-19, according to a person familiar with the discussions.
- The person familiar with the situation said no decision has been finalized, and the policy is still under review. The person said the administration is also strongly considering more stringent masking protocols for unvaccinated federal workers.
- The Centers for Disease Control and Prevention revised its mask guidance to recommend vaccinated people in some parts of the country resume wearing them indoors. It also said K-12 schools should adopt universal masking, regardless of vaccination status.
- Officials in California and New York City announced similar requirements for public workers on Monday. California’s order, which also applies to those who work in healthcare settings, goes into effect in August. The New York City mandate begins after Labor Day.
Facebook’s slowdown warning hangs over strong ad sales, while Zuckerberg talks ‘metaverse’ – Reuters, 7/29/2021
- Facebook said on Wednesday it expects revenue growth to “decelerate significantly,” sending the social media giant’s shares down 3.5% in extended trading even as it reported strong ad sales.
- Facebook’s total revenue, which primarily consists of ad sales, rose about 56% to $29.08 billion in the second quarter from $18.69 billion a year earlier, beating analysts’ estimates, according to IBES data from Refinitiv.
- Its revenue from advertising rose 56% to $28.58 billion in the second quarter ended June 30, Facebook said. It pointed to a 47% increase in price per ad.
- Monthly active users came in at 2.90 billion, up 7% from the same period last year but missing analyst expectations of 2.92 billion and marking the slowest growth rate in at least three years, according to IBES data from Refinitiv.
- Net income in the second quarter more than doubled to $10.4 billion, or $3.61 per share. Analysts had expected a profit of $3.03 per share.
Ford Posts Surprise Profit Amid Strong New-Car Market – Wall Street Journal, 7/29/2021
- Ford Motor posted a surprise second-quarter profit and raised its earnings outlook for the year, saying it sees an easing to the computer-chip shortage that has hampered vehicle output for months.
- The U.S.’s second-largest auto maker by sales reported revenue of $26.8 billion.
- A surge in used-car prices also delivered a record $1.6 billion pretax profit in the quarter for the company’s lending arm, Ford Motor Credit, which keeps a large portfolio of leased vehicles on its books.
- Ford’s second-quarter pretax profit, adjusted for one-time items, was $1.1 billion, or 13 cents a share—better than the 3-cent loss forecast of analysts surveyed by FactSet.
- Ford said it expects to boost deliveries to dealerships globally by 30% during the second half of the year, which should bolster the bottom line despite the sting of rising commodity costs.
- The chip shortage prompted Ford to slash in half its second-quarter production plans, to about 700,000 vehicles.
- Ford said in April that it expects the semiconductor shortage to cause production losses of about 1.1 million vehicles this year, for a bottom-line hit of about $2.5 billion.
Gloomy outlook dulls PayPal’s quarterly profit beat – Reuters, 7/29/2021
- Shares of PayPal fell 8% on the payment company’s downbeat current-quarter profit outlook that outweighed a better-than-expected profit in the second quarter from a pandemic-driven shift to digital spending.
- Total revenue in the second quarter rose 19% to $6.24 billion, but missed estimates of $6.27 billion, according to Refinitiv data, further hurting shares.
- The company processed a total of $311 billion in payments in the second quarter ended June 30, up 40% from a year earlier, and added 11.4 million net new active accounts.
- Venmo, PayPal’s app that allows individuals in the United States to send and receive money, processed $58 billion in payments, up 58% from a year earlier.
- On an adjusted basis, PayPal earned a profit of $1.15 per share in the second quarter, compared with analysts’ expectations of $1.12 per share, according to Refinitiv data.
- PayPal said it expects third-quarter net revenue to be in the range of about $6.15 billion to $6.25 billion, representing growth of about 13%-14% at current spot rates, but missing analysts’ average estimate of $6.45 billion.
- San Jose, California-based PayPal also said it expects adjusted profit of $1.07 per share, in-line with a year earlier, but lower than estimates of $1.14.
- It expects annual total payment volumes to rise between 33% and 35% on a spot and forex neutral basis.
Mastercard profit beats estimates on overall spending boost – Reuters, 7/29/2021
- Mastercard reported a 36% rise in second-quarter profit on Thursday that comfortably beat estimates, underpinned by a recovery in global spending as businesses start to reopen and travel shows signs of a rebound.
- Mastercard’s cross-border volumes, which track spending on its cards beyond the country of issue, rose 58% on a local currency basis, driven by a pickup in international travel.
- Consumer spending saw a spike during the quarter due to massive government stimulus packages, sending Mastercard’s gross dollar volumes, or the dollar value of the transactions processed, up 33% on a local currency basis to $1.9 trillion.
- Net income, excluding exceptional items, rose to $1.9 billion, or $1.95 per share, from $1.4 billion, or $1.36 per share a year earlier.
Qualcomm optimistic on 5G, connected device sales as supply bottlenecks ease – Reuters, 7/29/2021
- Qualcomm on Wednesday predicted a rise in sales of chips for 5G phones, including Apple’s iPhone, as the company said it had mitigated supply shortfalls that have contributed to a global chip shortage.
- Qualcomm total revenues rose 63% to nearly $8 billion, boosted by soaring sales of chips for connected devices that hit $1.4 billion.
- Mobile handset chips remain Qualcomm’s biggest seller, increasing 57% to hit $3.86 billion in the quarter.
- Sales of other chips have also been expanding, with radio frequency chips and IoT chips reaching sales of $957 million and $1.4 billion, up 114% and 83% from a year earlier, respectively.
- For the fiscal third quarter ended June 27, Qualcomm said overall adjusted profits were $1.92 per share, higher than estimates of $1.68 per share, according to Refinitiv data.
- The company predicted revenue with a midpoint of $1.55 billion from its patent licensing business, compared with analyst expectations of $1.56 billion, according to Refinitiv data.
- On Wednesday, Qualcomm said that global sales of 5G handsets for 2021 was likely to come in at the higher end of its forecast of 450 to 550 million handsets.
- Qualcomm said on Wednesday it expects sales of 5G chips to hit $10 billion this fiscal year, up from $6 billion the previous year. The company also said it expects adjusted profits of $8.24 per share for its fiscal 2021, nearly double the year before.
Comcast’s quarterly revenue tops estimates, lifted by cable growth – Reuters, 7/29/2021
- Comcast’s second-quarter revenue beat Wall Street estimates on Thursday, benefiting from record broadband subscriber and total cable customer additions.
- Total revenue rose 20.4% to $28.55 billion in the quarter, beating analysts’ estimates of $27.18 billion, according to IBES data from Refinitiv.
- The company, which is the largest cable operator in the United States, gained 354,000 broadband customers as people continued to work and learn from home, the strongest second quarter on record, compared with Factset estimates of 272,000.
- Comcast said its NBCUniversal’s Peacock streaming service had 54 million sign-ups as of this week, including over 20 million active monthly accounts.
- Theme park revenue amounted to $1.1 billion during the quarter versus just $136 million a year ago, when stay-at-home orders crippled the business.
- Comcast posted a nearly 33% rise in ad sales at NBCUniversal Media. The studio’s business posted revenue up 8.4% to $2.22 billion.
- The company reported adjusted earnings per share of 84 cents in the second quarter, beating estimates of 67 cents.
Northrop lifts outlook as countries ramp up space exploration – Reuters, 7/29/2021
- Defense contractor Northrop Grumman raised its full-year forecast on Thursday and beat quarterly estimates, propped up by high demand at its fast-growing space unit.
- Total sales of $9.15 billion also toppled estimates, according to IBES data from Refinitiv.
- The company’s space systems unit reported a 34% jump in quarterly sales, as countries ramp up investment in space exploration and satellite based sensors.
- Adjusted net earnings of $6.42 per share beat analysts’ estimate of $5.84 in the second quarter ended June 30.
- The Virginia-based company expects full-year sales to be between $35.8 billion and $36.2 billion, above its previous forecast of $35.3 billion and $35.7 billion.
- Northrop now expects full-year adjusted earnings per share between $24.40 and $24.80, up from its prior range of $24 and $24.50.
Textron lifts 2021 profit forecast again on business jet strength – Reuters, 7/29/2021
- Textron on Thursday beat Wall Street estimates for quarterly profit and raised its full-year adjusted profit forecast for the second time this year, on higher demand for private aircraft.
- Revenue rose 29% to $3.19 billion, above analysts’ average estimate of $2.97 billion, according to Refinitv data.
- Textron’s aviation unit delivered 44 jets, higher than the 23 a year earlier, and 33 commercial turboprops, up from 15 in 2020.
- Sales in its aviation unit rose 55.4% to $1.16 billion in the second quarter.
- Excluding items, the company earned 81 cents per share, above analyst estimates of 65 cents, according to Refinitiv data.
- The company said it expects 2021 adjusted earnings of $3.00 to $3.20 per share, compared to its previous forecast of $2.80 to $3.
Merck sees recovery in non-COVID vaccine demand as quarterly sales beat estimates – Reuters, 7/29/2021
- Merck & Co reported quarterly revenue on Thursday that topped Wall Street estimates, as sales of its Gardasil vaccine bounced back and demand for blockbuster cancer drug Keytruda remained strong.
- The company’s second-quarter sales rose 22% to $11.40 billion, beating estimates of $11.10 billion.
- Gardasil sales jumped 88% to $1.23 billion, beating analysts’ estimates of $991.38 million.
- Sales of cancer immunotherapy Keytruda rose 23% to $4.18 billion in the quarter, in line with estimates.
- Merck reported adjusted earnings of $1.31 per share for the quarter, in-line with analyst estimates. Its share were down 1% in early trading.
Yum Brands beats estimates as KFC, Pizza Hut sales soar – Reuters, 7/29/2021
- Yum Brands beat market expectations for second-quarter results on Thursday as new menu items and steady online demand boosted sales at KFC and Pizza Hut in the United States.
- Comparable sales rose 23%, beating estimates of a 20.5% increase, according to IBES data from Refinitiv.
- In the second quarter ended June 30, digital sales rose 35% to over $5 billion, with Chief Executive Officer David Gibbs telling analysts all of Yum’s chains “are very rapidly becoming digital brands”.
- Same-store sales at KFC and Pizza Hut were also above pre-pandemic levels in the United States, cushioning the blow from declines in their international segments due to renewed coronavirus curbs in certain countries.
- Overall net income rose 90% from a year earlier to $391 million. Excluding items, Yum earned $1.16 per share, surpassing estimates of 96 cents.
Hilton forecasts firm recovery after swinging to profit on travel demand – Reuters, 7/29/2021
- U.S. hotel operator Hilton Worldwide swung to a quarterly profit on Thursday and forecast sustained growth in the second half of the year as leisure travel recovers on easing pandemic-related curbs.
- Revenue rose 135.6% to $1.33 billion, but missed estimates of $1.41 billion.
- The company reported a 233.8% jump in comparable RevPAR – a key performance measure for the hotel industry – for the quarter. System-wide occupancy came in at 58.5% in the second-quarter, compared with 22.3% a year ago.
- Occupancy rate for the company’s U.S. region rose to 63.7% in the quarter as domestic leisure travel continues to steer the demand recovery.
- The company reported net income attributable to Hilton stockholders of $130 million, or 46 cents per share, in the second quarter ended June 30, compared to a net loss of $430 million, or $1.55 per share, a year earlier.
US ECONOMY & POLITICS
U.S. Economy Grows Beyond Pre-Pandemic Level – Wall Street Journal, 7/29/2021
- U.S. gross domestic product grew at a 6.5% annual rate in the second quarter, up slightly from earlier in the year, pushing the economy’s size beyond its pre-pandemic level.
- Economists surveyed by The Wall Street Journal estimated that gross domestic product, the broadest measure of goods and services made in the U.S., grew at an 8.4% annual rate in the April-to-June period.
- Still, the growth propelled GDP beyond pre-pandemic levels, a milestone that underscores the speed of the recovery that began last summer.
- Economists expect growth to remain strong, fueled by job gains, pent-up savings and continued fiscal support. Still, many say growth likely peaked in the second quarter and will cool as the initial boost from reopenings and fiscal stimulus fades.
Jobless Claims Resumed Decline Last Week – Wall Street Journal, 7/29/2021
- Workers’ filings for new unemployment benefits resumed their decline last week and remain near a pandemic low as the labor market continues to recover from the pandemic, economists say.
- New jobless claims dropped slightly to 400,000 for the week ended July 24 from a revised 424,000 the week before, the Labor Department reported Thursday. The four-week moving average, which smooths out volatility in the weekly figures, edged higher to 394,500.
- The number of people receiving jobless benefits from regular state programs, so-called continuing claims, rose by 7,000 to 3.3 million in the week ended July 17.
- The number of people receiving jobless benefits through all programs, including those created as part of federal pandemic-relief assistance, rose by more than half a million to 13.2 million in the week ended July 10.
U.S. Pending Home Sales Decline Unexpectedly on Record Prices – Bloomberg, 7/29/2021
- A gauge of contract signings to purchase previously owned U.S. homes fell in June, indicating high prices and a limited number of available properties are discouraging prospective buyers.
- The National Association of Realtors’ index of pending home sales declined 1.9% from May, according to data released Thursday. The median estimate in a Bloomberg survey of economists was for no change.
- Compared with a year earlier, contract signings were down 3.3% on an unadjusted basis
- Pending home sales decreased in the South and West, and rose 0.5% in the Northeast and 0.6% in the Midwest last month
- The biggest drop was in the West, with a decline of 3.8%, the most since February. The South retreated 3%
Bipartisan Infrastructure Deal Advances in Senate – Wall Street Journal, 7/29/2021
- A bipartisan group of senators struck an agreement on a roughly $1 trillion infrastructure package Wednesday after grinding months of talks, hammering out enough details to propel the deal past its first procedural hurdle just hours later.
- The Senate voted 67-32 to begin consideration of the bill, above the 60 required and reversing a failed effort a week earlier when many specifics of the deal were still under negotiation.
- Completing the infrastructure agreement, which lawmakers and aides said would provide for roughly $550 billion in spending above projected federal levels, is the first step Democrats hope to take toward approving much of President Biden’s agenda on Capitol Hill in the coming months.
- Mr. Biden supported the bipartisan approach and cheered the deal Wednesday, calling it “the most significant long-term investment in our infrastructure and competitiveness in nearly a century.”
Biden Asks Congress to Extend Federal Eviction Moratorium – Wall Street Journal, 7/29/2021
- The Biden administration is requesting that Congress act to extend a federal moratorium on the evictions of tenants who have fallen behind on their rent during the Covid-19 pandemic, citing tenants’ “heightened vulnerability” because of the Delta variant of the virus.
- President Biden would have “strongly supported” a move to further extend the existing moratorium, scheduled to expire on Saturday, but that option is no longer legally viable after a recent Supreme Court ruling, the administration said in a statement by press secretary Jen Psaki.
EUROPE & WORLD
Euro zone sentiment hits record high in July, peak may be near – Reuters, 7/29/2021
- Euro zone economic sentiment hit a record high in July, estimates from the European Commission showed on Thursday, but a drop in optimism among consumers and the slower rate of increase may signal the peak is fast approaching.
- The EU executive said its monthly survey that sentiment in the 19-country single-currency bloc rose to 119.0 points in July, a record since data began to be collected in 1985, from 117.9 in June, which was already a 21-year high.
- However, as the positive impact of the reopening of economic activities begins to wane and fears grow around the Delta coronavirus variant, sentiment grew at a slower pace.
- The rise in sentiment in July was supported by a new surge of optimism in the manufacturing sector which reached another all-time-high after repeated increase this year as factory managers remain largely upbeat.
- Confidence also rose to its highest level since August 2007 in the services sector, which has been hit hardest during the pandemic and is the chief beneficiary of the current reopenings.
Airbus ups forecasts after big H1 but cautious on virus – Reuters, 7/29/2021
- Europe’s Airbus doubled its full-year profit forecast and raised the outlook for jet deliveries after posting better-than-expected half-year results, pushing its shares to the highest level since the start of the coronavirus crisis.
- Led by its commercial aerospace and helicopter divisions, Airbus swung to an operating profit of 2.01 billion euros in the second quarter, compared with a loss of 1.23 billion a year earlier, as revenue rose 70% to 14.18 billion euros.
- For the first half, Airbus posted operating earnings of 2.70 billion euros, eclipsing its previous full-year goal.
- Airbus said it expected to deliver 600 aircraft in 2021, up from a previous target of at least 566, and doubled its forecast for operating income to 4 billion euros ($4.7 billion) while predicting 2 billion euros of free cashflow.
AstraZeneca Loses Money on Covid-19 Vaccine for Second Straight Quarter – Wall Street Journal, 7/29/2021
- AstraZeneca narrowed losses from its Covid-19 vaccine in the second quarter but its earnings fell below forecast, highlighting the divide between it and rivals, such as Pfizer, that are profiting from their shots.
- AstraZeneca’s overall second-quarter revenue was $8.2 billion, a 30% increase that beat analysts’ expectations. Excluding the vaccine, revenue was up 14% at $7.3 billion.
- The vaccine boosted second-quarter revenue by $894 million, but contributed to about $13 million in losses in the quarter, shaving 1 cent off the company’s per-share earnings.
- AstraZeneca lost around $40 million on its Covid-19 vaccine in the first three months of this year.
- A key benchmark, product sales, increased 31% from the year-earlier period to $8.2 billion, boosted by sales of core cancer drugs and treatments for asthma.
- A second-quarter net profit of $550 million fell short of analysts’ estimates, hurt by vaccine costs more than anything else, as well as increased profit-sharing commitments tied to certain drugs. Profit was $738 million in the year-earlier period.
Samsung Profit Rises 73% as Memory-Chip Demand Surges – Wall Street Journal, 7/29/2021
- Samsung Electronics offset relative weakness in smartphone shipments by capitalizing on another quarter of roaring demand for its memory chips.
- Revenue increased 20% to 63.67 trillion won.
- Operating profit for Samsung’s chip division in the April-to-June quarter rose 28% from the prior year to 6.93 trillion won, while revenue rose 25% to 22.74 trillion won.
- Operating profit for the company’s mobile division in the second quarter declined 26% from the previous quarter to 3.24 trillion won, while revenue fell 22% to 22.67 trillion won.
- The South Korea-based company posted second-quarter net profit of 9.63 trillion won, or the equivalent of $8.37 billion. That represented a 73% increase from 5.56 trillion won a year earlier.
- Artist Vincent van Gogh died of a self-inflicted gunshot wound in Auvers, France. (1890)
- President Eisenhower signed the congressional act that created the National Aeronautics and Space Administration (NASA) was authorized by Congress. (1958)
- Prince Charles, heir to the British throne, married Lady Diana Spencer. (1981)