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Daily Market Report | August 2, 2022


Stock Indexes Decline Ahead of Pelosi’s Taiwan Visit – Wall Street Journal, 8/2/2022

  • U.S. and global stocks fell Tuesday on fears that U.S. House Speaker Nancy Pelosi’s planned visit to Taiwan could heighten tensions between Beijing and Washington and add geopolitical risk to investors’ already muted outlook.
  • The S&P 500 fell 0.4% in morning trading, a day after the broad index closed slightly lower on the first trading day of August. The Dow Jones Industrial Average dropped 0.7% on Tuesday while the technology-heavy Nasdaq Composite lost 0.3%.
  • Mrs. Pelosi is scheduled to arrive in Taiwan on Tuesday evening local time and meet with Taiwanese government officials, in what would be the first visit by a House speaker to the democratically governed island since 1997.
  • Beijing, which claims Taiwan as part of its territory, has warned Mrs. Pelosi not to do so. Chinese officials have threatened unspecified countermeasures should her visit proceed.
  • In China, the benchmark Shanghai Composite dropped 2.3%, while Hong Kong’s Hang Seng Index fell 2.4%.
  • Shares of some Chinese national defense companies surged more than 15%, making them some of the best-performing stocks in the region.
  • Shenzhen-listed Xi’an Tian He Defense Technology, a manufacturer of military equipment and smart security systems, jumped 20%.
  • Pinterest shares jumped 13% after activist investor Elliott Management confirmed it was the social-media company’s biggest investor and Pinterest’s new chief executive said he would focus on profitability.
  • Uber climbed 14% after its revenue more than doubled, signaling the ride-hailing company’s efforts to trim its losses were working.
  • Caterpillar tumbled 3.5% after reporting sales figures that missed analysts’ forecasts, while DuPont slipped 1.4% after saying foreign-currency headwinds could weigh on its third-quarter results.
  • Bond markets flashed a warning sign on Tuesday as the yield curve between three-month and 10-year Treasury notes briefly inverted for the first time since the start of the pandemic—an indicator that the Fed says has the best record of predicting a recession.
  • The difference in the yield on a three-month Treasury bill and the benchmark 10-year bond yield declined to minus 0.001 percentage point on Tuesday before edging back up, according to Tradeweb.
  • Investors were awaiting a packed day of corporate earnings, which so far have largely performed better than investors had feared. Starbucks, Airbnb, Advanced Micro Devices and Prudential Financial will report after the close.
  • Comments from Fed officials could offer clues on whether the central bank will temper the size of its rate rises at future meetings.
  • Federal Reserve Bank of Chicago President Charles Evans and St. Louis Fed President James Bullard were set to speak at separate events on Tuesday.
  • In Europe, the Stoxx Europe 600 declined 0.4%. BP jumped 3.3% after reporting soaring profits thanks to higher oil prices.

Uber Posts Stronger Operating Income as Quarterly Revenue Doubles – Wall Street Journal, 8/2/2022

  • Uber Technologies doubled quarterly revenue, improved its financial performance and said high inflation was causing more people to drive for the platform to help offset rising household costs.
  • The ride-hailing company said Tuesday that revenue grew 105% to $8.07 billion for the three months through June.
  • The company also posted adjusted earnings—a figure that excludes some expenses—of $364 million, its strongest ever. Both figures beat Wall Street expectations.
  • Uber’s ride-hailing bookings drove much of the top-line growth in the most recent quarter, recording a 55% jump, and underpinned the company’s stronger-than-expected operating income.
  • Uber Eats’ bookings grew 7% last quarter, missing analysts’ projections, weighed down by a deceleration overseas. The unit’s bookings almost doubled in the same quarter a year ago.
  • The company forecast the total value of bookings on the platform to be between $29 billion and $30 billion in the September quarter, in line with Wall Street’s forecast of $30 billion and broadly on par with the $29.1 billion in the June quarter.
  • One of its most closely watched financial metrics, adjusted earnings before interest, taxes, depreciation and amortization, should come in between $440 million and $470 million in the current quarter, the company said.
  • Chief Executive Dara Khosrowshahi said decades-high inflation was showing little impact on customers using the company’s services. “The marketplace looks strong,” he said on an earnings call.
  • There are indications that factors such as rising grocery costs are causing individuals to become Uber drivers to offset the pressure on their wallets, he added. “Over 70% of drivers say inflation has played a part in their decision to come on to the platform,” he said.

Pinterest climbs on user numbers and Elliott investment even as financials disappoint – CNBC, 8/2/2022

  • Pinterest shares jumped on better-than-expected user numbers even as earnings and revenue missed estimates and the company gave weak guidance for the third quarter.
  • Revenue: $666 million vs. $667 million expected, according to Refinitiv.
  • Pinterest said global monthly active users declined by 5% from a year earlier to 433 million. While that sort of drop-off is alarming for a social media app that relies on eyeballs to attract advertisers, analysts were expecting a steeper decline to 431 million.
  • Earnings: 11 cents adjusted per share vs. 18 cents per share expected, according to Refinitiv.
  • The company said it estimates third-quarter revenue will grow “mid-single digits on a year-over-year percentage basis,” below analysts’ projections for sales growth of 12.7%.
  • Pinterest said that its third-quarter guidance takes into account “slightly greater foreign exchange headwinds” than the previous quarter.

Activision Blizzard Profit Slumps as Sales Shrink – Wall Street Journal, 8/2/2022

  • Activision Blizzard’s sales and earnings fell in the second quarter, the latest indicator that pandemic-fueled growth is slowing as consumers are limiting their spending in response to record inflation.
  • The videogame company, which in January agreed to be acquired by Microsoft for $75 billion, recorded $1.64 billion in sales, a roughly 28% decrease from $2.3 billion in sales in 2021.
  • The Santa Monica, Calif.-based company posted $280 million in net income for the three months ended June 30, down from $876 million in the same period a year earlier. Analysts polled by FactSet expected $410.6 million.
  • Stripped of certain items such as expenses related to share-based compensation, adjusted earnings were 48 cents a share, down from $1.20 a share in the year-ago period, matching analysts’ expectations.

Marathon Petroleum posts bumper profit on soaring fuel prices – Reuters, 8/2/2022

  • Marathon Petroleum smashed quarterly profit estimates on Tuesday, the latest U.S. refiner to benefit from a surge in fuel prices sparked by tight capacity and low inventories.
  • Marathon’s refineries ran at nearly full capacity in the second quarter, resulting in a total throughput of 3.1 million barrels per day (bpd), compared with utilization of 94% and a total throughput of 2.9 million bpd a year earlier.
  • The company posted an adjusted income of $5.69 billion, or $10.61 per share, the largest in at least five years, according to Refinitiv data. The figure sailed past the average analyst estimate of $8.04 per share.
  • For the third quarter, the company expects a throughput of 2.9 million bpd.

Caterpillar Second-Quarter Sales Rise With Higher Prices for Machinery – Wall Street Journal, 8/2/2022

  • Caterpillar said Tuesday that higher prices on its equipment offset weakening demand from some foreign markets and rising expenses for materials and transportation.
  • The maker of heavy equipment said higher prices for equipment contributed $1.1 billion to an 11% increase in second-quarter sales from the same period a year earlier. The company’s overall revenue of $14.25 billion was slightly below expectations.
  • Sales of its construction equipment overall rose 7% during the quarter, despite a 17% drop in sales in the Asia-Pacific region and a 7% decline in Europe, the Middle East and Africa.
  • The company reported a 20% increase in quarterly equipment sales growth in North America—its largest market—that helped to counter lower sales in Europe and falling demand for construction machinery in Asia.
  • Caterpillar said its manufacturing costs rose by $966 million from a year earlier. The company’s operating margin was down slightly in the period, to 13.6% from 13.9% a year ago.

Marriott’s Revenue Jumps as Travel Demand Continues to Recover – Wall Street Journal, 8/2/2022

  • Marriott International’s revenue jumped in the recently ended quarter as global demand for travel continued to rebound, including in North America and Europe.
  • The company, with more than 8,100 properties globally, reported a roughly 70% jump in second-quarter revenue to $5.34 billion, topping the $4.92 billion expected by Wall Street.
  • The company said that global occupancy came in at nearly 68%, just 7 percentage points below prepandemic levels. Marriott continued to raise prices, too, with global average daily room rates for the quarter coming in more than 7% above 2019 levels.
  • Overall for the three months ended June 30, the company posted net income of $678 million, or $2.06 a share, compared with $422 million, or $1.28 a share, a year earlier.
  • The company also said it expects full-year adjusted earnings of $6.33 a share to $6.59 a share, better than the $6.01 a share that analysts surveyed by FactSet had been expecting.
  • Worldwide RevPAR for the year is expected to be between 6% and 3% lower than in 2019.
  • The company said it also resumed share buybacks in the recently ended quarter, repurchasing 1.9 million shares for $300 million.

JetBlue Reports Loss as Costs Surge – Wall Street Journal, 8/2/2022

  • JetBlue Airways lost money in the second quarter as its expenses soared, but the airline said it is turning a corner and expects to become profitable in the third quarter.
  • JetBlue also said demand soared during the summer—the airline saw a record number of customers during the second quarter, and its revenue was 16% higher than in 2019, before the Covid-19 pandemic decimated appetite for travel.
  • But the airline’s costs per seat flown a mile jumped nearly 35% as fuel prices almost doubled from the summer of 2019.
  • Excluding one-time items such as costs associated with retiring those planes, JetBlue reported an adjusted loss of $153 million, or 47 cents per share—below the 11 cent per share loss analysts had anticipated, according to FactSet.
  • JetBlue plans to keep a lid on growth for the rest of the year, with capacity expected to be flat to down 3% from 2019 flying levels.

DuPont quarterly profit beat estimates on strong electronics demand – Reuters, 8/2/2022

  • Industrial materials maker DuPont de Nemours reported a second-quarter profit that beat Wall Street estimates on Tuesday, bolstered by strong demand for electronics and construction materials.
  • Total sales jumped 7% to $3.32 billion, beating estimates of $3.25 billion.
  • To offset the inflationary pressures, Dupont hiked prices of its products by 8% during the quarter.
  • Sales from electronics and industrial unit, one of the company’s highest revenue generating segments, rose 16% to $1.53 billion in the second quarter, while the water and protection segment, which provides treatment and purification technologies, brought in $1.5 billion, up 6% from a year earlier.
  • The company’s quarterly adjusted profit of 88 cents per share, came above market estimates of 75 cents per share, according to Refinitiv IBES data.
  • The company, once part of the erstwhile chemical giant DowDuPont, lowered its full-year adjusted earnings to $3.27 and $3.43 per share from its previous guidance of $3.2 to $3.5.
  • It also toned down annual net sales forecast to between $13 billion and $13.4 billion, from up to $13.7 billion outlined earlier.

Estée Lauder in Talks to Buy Luxury Brand Tom Ford – Wall Street Journal, 8/2/2022

  • Estée Lauder is in talks to buy luxury fashion brand Tom Ford, according to people familiar with the matter, in what could be a $3 billion or more deal representing the cosmetics giant’s largest-ever acquisition.
  • There are no guarantees the two sides will reach an agreement. Estée Lauder isn’t the only suitor for Tom Ford, one of the people said.
  • Closely held Tom Ford is best-known for its menswear, though it also sells womenswear and accessories as well as a fast-growing, high-end line of cosmetics and fragrances.
  • Estée Lauder is especially interested in the beauty business, with which it already has a longstanding licensing deal, and could potentially look to license the clothing lines elsewhere, the people familiar with the matter said.


Nancy Pelosi Arrives in Taiwan as China Warns of Disastrous Consequences – Wall Street Journal, 8/2/2022

  • House Speaker Nancy Pelosi landed in Taiwan on Tuesday, defying stern warnings from Beijing against a visit that China’s Communist Party regards as a challenge to its sovereignty.
  • Mrs. Pelosi, the highest-ranking U.S. official in a quarter-century to visit the island, which Beijing claims as part of its territory, is set to meet Wednesday with Taiwan President Tsai Ing-wen and legislators in the self-ruled democracy.
  • China’s military responded with a show of force. The People’s Liberation Army sent an unspecified number of Russian-made Su-35 fighter jets “flying across the Taiwan Strait,” Chinese state broadcaster China Central Television reported minutes ahead of Mrs. Pelosi’s arrival.
  • The Pentagon has added to the naval forces operating in the region as a deterrent. The aircraft carrier USS Ronald Reagan, which last week was ordered to leave a port call in Singapore, was in the Philippine Sea with its accompanying ships plus the amphibious assault ship the USS Tripoli, defense officials said Monday.
  • U.S. officials have said that Beijing appeared to be positioning itself to make responses to the visit, including staging military drills, firing missiles into the Taiwan Strait or near the island, or sending more aircraft and naval vessels into areas closer to Taiwan where they haven’t previously operated.

Fed ‘Nowhere Near’ Finished With Inflation Fight, Daly Says – Bloomberg, 8/2/2022

  • The Federal Reserve is “nowhere near” being almost done in fighting the hottest inflation in four decades, and officials are fully committed to achieving price stability, San Francisco Fed President Mary Daly said.
  • “We have made a good start, and I feel really pleased with where we’ve gotten to by this point,” but inflation is “far too high,” Daly said in an interview on LinkedIn Tuesday. “We are still resolute and completely united on achieving price stability, which doesn’t mean 9.1% inflation — it means something closer to 2% inflation, so a long way to go.”
  • Daly, who is not a voter on this year’s policy-setting committee, said that the Fed has to make good on commitments to continue to raise interest rates.
  • “It really would be premature to unwind all of that and say the job is done,” she said. “I also think that we’ve been with this high inflation for a while, and really getting too confident that we’ve already solved the problem,” Daly said, adding that the Fed needs to “keep committed until we actually see it in the data.”
  • Chicago Fed President Charles Evans, Cleveland’s Loretta Mester and St. Louis’s James Bullard are also due to speak Tuesday.

US Job Openings Fall to 10.7 Million, Lowest Since September – Bloomberg, 8/2/2022

  • US job openings fell in June to a nine-month low, suggesting tightness in the labor market is easing somewhat amid growing economic pressures.
  • The number of available positions decreased to 10.7 million in the month from an upwardly revised 11.3 million in May, the Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS, showed Tuesday.
  • The 605,000 decline was the biggest since April 2020.
  • There were about 1.8 jobs for every unemployed person in June, down slightly from May.
  • The biggest drops in vacancies were in retail and wholesale trade as well as state and local government education. Construction also fell.
  • Some 4.2 million Americans quit their jobs in June, little changed from the prior month.
  • The quits rate, a measure of voluntary job leavers as a share of total employment, held at 2.8%.

U.S. Factory Growth Slowed in July on Decline in Orders – Wall Street Journal, 8/2/2022

  • Growth at U.S. manufacturing companies was its weakest in two years in July, but inflationary pressures showed signs of cooling as commodity prices eased, according to surveys of purchasing managers released Monday.
  • The Institute for Supply Management’s index of U.S. manufacturing activity was 52.8 in July as a drop in new orders signaled declining demand for factory products.
  • The ISM’s prices index dropped by 18.5 percentage points, its steepest decline since June 2010, as prices of raw materials rose much more slowly in July.
  • A separate measure of U.S. manufacturing produced by S&P Global also pointed to slower growth due to weaker demand. Its purchasing managers index was 52.2 in July, down from 52.7 in June.

Household debt tops $16 trillion for the first time, fueled by higher inflation and interest rates – CNBC, 8/2/2022

  • Household debt climbed past $16 trillion in the second quarter for the first time, as soaring inflation pushed up housing and auto balances, the New York Federal Reserve reported Tuesday.
  • The collective American IOU totaled $16.15 trillion through the end of June, good for a $312 billion — or 2% — increase from the previous quarter.
  • Mortgage balances rose 1.9% for the quarter, or $207 billion, to about $11.4 trillion, even though the pace of originations moved lower. That annual increase marked a 9.1% gain from a year ago as home prices exploded during the pandemic era.
  • Credit card balances surged $46 billion in the three-month period and 13% over the past year, which Fed researchers said was the largest gain in more than 20 years. Non-housing credit balances increased 2.4% from the first quarter, the biggest gain since 2016.
  • Through June, some 2.7% of outstanding debt was in delinquency, nearly 2 percentage points lower than the first quarter of 2020 as the nation was entering the Covid pandemic.


Apple chip manufacturer TSMC warns Taiwan-China war would make everybody losers – CNBC, 8/2/2022

  • If China were to invade Taiwan, then the most-advanced chip factory in the world would be rendered inoperable, TSMC Chairman Mark Liu said in an English-language interview with CNN this week.
  • In the undated interview, Liu said that if Taiwan were invaded by China, the chip manufacturer’s plant would not be able to operate because it relies on global supply chains.
  • “Nobody can control TSMC by force. If you take a military force or invasion, you will render TSMC factory non-operable,” Liu said. “Because this is such a sophisticated manufacturing facility, it depends on real-time connection with the outside world, with Europe, with Japan, with U.S., from materials to chemicals to spare parts to engineering software and diagnosis.”
  • “The war brings no winners, everybody’s losers,” Liu said.
  • TSMC manufactures Apple’s A-series and M-series chips and has over 50% of the world’s semiconductor foundry market.

BP Profit Surges on High Energy Prices – Wall Street Journal, 8/2/2022

  • BP PLC was the latest oil major to cash in on the highest energy prices in more than a decade, reporting strong second-quarter profit helped by higher margins on fuel production and oil trading.
  • London-based BP said Tuesday its underlying replacement-cost profit, a metric similar to net income that U.S. oil companies report, was $8.5 billion. That compared with a $6.8 billion average projection of 28 analysts compiled by BP and $2.8 billion in the year-ago period.
  • For the second quarter, BP increased its dividend by 10% and said it is on track for planned annual dividend increases of about 4% through 2025. The company said it would buy back another $3.5 billion in shares by third-quarter results, on top of $3.9 billion in buybacks during the first half of this year.

Maersk sees global supply chain woes for longer; lifts 2022 guidance – Reuters, 8/2/2022

  • Maersk raised its 2022 profit guidance for a second time on Tuesday after beating quarterly revenue expectations as congested global supply chains that have boosted freight rates persist longer than expected.
  • Revenue in the second quarter stood at $21.7 billion, it said, above the $19.7 billion forecast by analysts in a poll gathered by the company.
  • Underlying EBITDA was $10.3 billion, compared to the $8.2 billion forecast by analysts.
  • It now expects underlying earnings before interest, taxation, depreciation and amortisation (EBITDA) of around $37 billion versus the $30 billion it forecast earlier. Maersk had initially expected full-year EBITDA at $24 billion.
  • “Congestion in global supply chains leading to higher freight rates has continued longer than initially anticipated,” Maersk said in a statement.
  • The new guidance is based on a gradual normalisation in ocean container shipping in the fourth quarter of this year. Its previous guidance was based on that happening early in the second half of the year.

Ferrari boosts full-year guidance after a record second quarter – CNBC, 8/2/2022

  • Ferrari raised its guidance for 2022 after reporting record results for the second quarter amid unprecedented demand for its high-priced sports and grand touring cars.
  • Ferrari’s second-quarter profit, revenue and shipments all rose more than 20% from a year ago to quarterly records. Its net order intake also hit a record level in the quarter, said CEO Benedetto Vigna in a statement.
  • Revenue: 1.29 billion euros, versus 1.04 billion euros in the second quarter of 2021.
  • Ferrari shipped 3,455 vehicles in the quarter, up 29% from a year ago, on strong demand for its V8-powered Portofino M convertible and F8 mid-engine sports car.
  • Earnings per share: 1.36 euros, versus 1.11 euros in the second quarter of 2021.
  • On the strength of its first-half results and robust order book, Ferrari said that it now expects to report earnings per share between 4.80 euros and 4.90 euros ($4.89 and $4.99) for the full year, on revenue of roughly 4.9 billion euros.
  • It had previously told investors to expect full-year earnings per share to fall between 4.55 euros and 4.75 euros, on revenue of about 4.8 billion euros.

Factmonster – TODAY in HISTORY

  • The first U.S. census was completed, showing a population of 3,929,214 people. (1790)
  • The first Lincoln penny was issued. (1909)
  • Warren G. Harding, the 29th president of the United States, died in San Francisco. (1923)
  • PT-109, a torpedo boat commanded by Lt. John F. Kennedy, was sunk off the Solomon Islands by a Japanese destroyer. (1943)
  • The Potsdam Conference, in which Allied leaders planned the postwar governance of Germany, ended. (1945)
  • The Persian Gulf War broke out when Iraq invaded Kuwait. (1990)

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