DAILY MORNING CHAI UP TO PDATES
The S&P 500 futures trade 17 points, or 0.5%, below fair value following some negative-sounding updates regarding U.S.-China relations, coronavirus relief bill negotiations, and corporate news. The tech-heavy Nasdaq 100 futures trade 1.4% below fair value.
Specifically, China ordered the U.S. to close its consulate in Chengdu in retaliation for the closure of the Chinese consulate in Houston, and The New York Times reported that Senate Republicans and the Trump administration are still at odds on how to extend unemployment benefits, thus delaying the bill's release until Monday.
On the corporate side, shares of Intel (INTC 52.48, -7.92, -13.1%) have dropped 13% in pre-market action after the company announced it will delay its 7nm product transition to late 2022/early 2023 and guided Q3 EPS below consensus. Walt Disney (DIS 115.80, -2.32, -2.0%) has reportedly delayed several high-profile movies by a year.
In economic data, investors will receive New Home Sales for June (Briefing.com consensus 680,000) at 10:00 a.m. ET.
U.S. Treasuries continue to trade near their flat lines. The 2-yr yield is flat at 0.15%, and the 10-yr yield is down one basis point to 0.58%. The U.S. Dollar Index is up 0.1% to 94.76. WTI crude futures are up 0.1% to $41.12/bbl.
In U.S. Corporate news:
- Intel (INTC 52.48, -7.92): -13.1% after delaying its 7nm product transition to late 2022/early 2023 and guiding Q3 EPS below consensus. Intel also beat top and bottom-line estimates and issued upbeat FY20 guidance.
- American Express (AXP 95.80, -0.87): -0.9% after releasing a mixed earnings report. EPS was better than expected, but revenue missed expectations.
- Verizon (VZ 56.32, +0.47): +0.8% after beating top and bottom-line estimates.
- Walt Disney (DIS 115.80, -2.32): -2.0% after reportedly delaying several movies, including Mulan, Star Wars, and Avatar, by a year.
- Goldman Sachs (GS 204.50, +1.48): +0.7% after settling the 1MDB case for $3.9 billion.
NEW YORK (AP) — Slumping stocks across most of Wall Street sent the S&P 500 to its worst loss in nearly four weeks on Thursday, undercut by a report showing layoffs are picking up across the country with coronavirus counts.
Technology stocks had the sharpest drops after a better-than-expected profit report from Microsoft failed to satisfy investors expecting even more from the company, whose stock has largely defied gravity and the pandemic this year. The sector helped drag the S&P 500 down 40.36 points, or 1.2%, to 3,235.66 for its first loss in five days.
The Dow Jones Industrial Average lost 353.51 points, or 1.3%, to 26,652.33. The Nasdaq composite fell 244.71, or 2.3%, to 10,461.
Other stock indexes around the world were mixed, while uncertainty across markets helped gold touch its highest price in nearly nine years.
The setback wiped out three-quarters of the S&P 500′s gains from earlier in the week. Overall, the market is in a holding pattern and will likely remain there as investors gauge the path of the pandemic, business reopenings and the government’s reaction to them, said Jason Pride, chief investment officer of private wealth at Glenmede.
“We’re going to be dealing with that until we get a vaccine or cure, whether we like it or not,” he said.
“I don’t envy the people who have to make decisions regarding risk of this spreading versus the risk to people’s livelihoods. It’s a hard choice.”
Thursday’s headline economic report was one that has taken on much more importance for markets through the pandemic: the weekly tally of workers applying for unemployment benefits. Last week, the count rose by 109,000 to a little more than 1.4 million.
It breaks a stretch of 15 straight weeks of improvements, a streak that had raised investor optimism that the recession could prove to be shorter than expected. It comes as coronavirus counts continue to rise across much of the Sun Belt, leading to more business closures.
the market’s heaviest weights was Microsoft, which fell 4.3% despite reporting a bigger quarterly profit for the spring than Wall Street expected. It’s a relatively rare stumble for the giant, which has cruised to records recently on expectations that it can continue to grow whether the economy is locked down or not.
But with the rise come greater expectations, and analysts pointed to a 47% growth rate reported for Microsoft’s Azure cloud business during the quarter. That fell short of analysts’ forecast.
Because Microsoft is one of the largest U.S. stocks by market value, its movements have an outsized effect on indexes like the S&P 500.
Apple, the other titan that trades off with Microsoft for the title of most valuable U.S. stock, was also down 4.6%. Other high-flying tech-oriented giants also stumbled, including a 3.7% drop for Amazon. Those three stocks alone accounted for more than half of the S&P 500’s loss.
Smaller stocks held up better, and the Russell 2000 index of small-cap stocks was virtually unchanged. It added 0.06 points to 1,490.20. Even within the S&P 500, 44% of stocks rose.
On the winning end were several big companies that reported more encouraging trends in their business during the spring than Wall Street expected.
Whirlpool jumped 8% for the biggest gain in the S&P 500 after the appliance maker reported a profit for the spring that was more than double what analysts expected. It also said that it saw demand recover in markets around the world in June, while saying it doesn’t expect sales over the course of 2020 to drop as much as it had earlier forecast.
Twitter rose 3.9% after its quarterly report showed the strongest growth in its history for users.
Investors are also hoping that Congress can agree on more aid for out-of-work Americans just as an extra $600 in weekly unemployment benefits is set to expire.
Republicans in the Senate were set to unveil their proposals for a $1 trillion COVID-19 rescue package Thursday morning, but that got delayed. Finding a compromise with the Democratic-controlled House of Representatives could also be more difficult than it was in March, when Congress produced a $2 trillion rescue package.
Thursday’s trading is a microcosm of the volatile moves that have dominated the market in recent weeks.
Helping to lift stocks have been several reports on the economy and corporate profits that showed improvements from the spring and were better than expected. That’s layered on top of massive aid for the economy promised by the Federal Reserve, including nearly zero interest rates.
But weighing markets down is a long list of challenges beyond the worsening coronavirus counts across much of the United States. They include worries about rising tensions between the United States and China, the world’s largest economies, and the effect of the upcoming U.S. elections.
The yield on the 10-year Treasury dipped to 0.58% from 0.59% late Wednesday. It tends to move with investors’ expectations for the economy and inflation.
Gold for delivery in August rose $24.90 to settle at $1,890.00 per ounce. Benchmark U.S. crude fell 83 cents to settle at $41.07 per barrel. Brent crude oil for September delivery fell 98 cents to $43.31 a barrel.
Major European stock indexes were close to flat, while Asian markets were down modestly.
MITO, Japan (AP) — Worsening China-U.S. friction and worries over aid to Americans and U.S. businesses combined to push world shares lower on Friday.
Wall Street appeared set to extend losses from the previous day, with Dow and S&P 500 futures both down 0.3%. Germany's DAX index fell 1.5% to 12,913, while the CAC 40 in Paris skidded 1.2% to 4,972. Britain's FTSE 100 shed 1.1% to 6,144.
Trump administration officials have escalated their public condemnations of China in the last several weeks, with speeches by FBI Director Chris Wray, Attorney General William Barr and Secretary of State Mike Pompeo.
Earlier this week, the U.S. ordered the Chinese consulate in Houston, Texas closed. On Friday, as expected, China's Foreign Ministry ordered the closure of the U.S. consulate in the western city of Chengdu.
Shanghai led regional declines, with its Composite index giving up 3.9% to 3,196.77. The Hang Seng in Hong Kong lost 2.2% to 24,705.33.
The latest dust up between the two biggest economies comes amid allegations of theft of U.S. intellectual property — including by Chinese researchers with military and government connections — for Beijing’s benefit.
“Alongside the eviction of the Houston Chinese Consulate, the risk of the U.S.-China conflict escalating into a ‘Cold War’ is worrying,” said Hayaki Narita of Mizuho Bank.
A speech Thursday by U.S. Secretary of State Mike Pompeo saying that “securing our freedom from the Chinese Communist Party is the mission of our time” adds to the rhetoric certain to incense Beijing, making it still more difficult for either side to back down, he said.
“And so, while the inevitability of deteriorating U.S.-China relations as a structural feature of our geo-political landscape was never in doubt, the shifts appear to be hastened,” Narita said.
In other Asian trading, the S&P/ASX 200 in Australia gave up 1.2% to 6,024.10. South Korea's Kospi shed 0.7% to 2,200.44.
Shares in Shanghai plunged nearly 4% overnight as China ordered the U.S. to close its consulate in the southwestern city of Chengdu, a day after Washington forced Beijing to leave its mission in Houston, citing alleged spying. The Chengdu consular district serves as a key U.S. listening post for developments in Tibet and China's development of strategic weapons in neighboring regions. It's the latest flashpoint between the two countries as the tit-for-tat spat clouds prospects for trade between the world's two largest economies.
Adding to the tensions is a speech from Secretary of State Michael Pompeo that depicted China's leaders as tyrants bent on global hegemony. "If the free world doesn't change Communist China, Communist China will change us," he declared. "If we bend the knee now, our children's children may be at the mercy of the CCP, whose actions are the primary challenge to the free world." Pompeo also discussed the tech frontier. "We have stopped pretending Huawei is an innocent telecommunications company... we have called it what it is, a national security threat, and taken action accordingly."
Tech is under more pressure today with Nasdaq futures down 1.1%, while contracts tied to the Dow and S&P 500 are off 0.4%, as tensions rise between Beijing and Washington. Another rebound of business activity across the eurozone didn't help markets there as the Euro Stoxx 50 fell 1.6%. Over in the U.S., Senate Republicans scrapped their plans to release a proposal for the next coronavirus relief bill Thursday after continued differences with the White House. Stocks have been sensitive to cues about stimulus, as well as the flurry of corporate earnings. On the calendar today, Verizon (NYSE:VZ) and Honeywell (NYSE:HON) are set to report.
One of the world's greatest financial scandals
Goldman Sachs (NYSE:GS) has agreed to a $3.9B settlement with the Malaysian government over the multibillion-dollar 1MDB scandal. Backdrop: Malaysian prosecutors filed charges in December 2018 against three Goldman units for misleading investors over bond sales totaling $6.5B that the bank helped raise for the sovereign wealth fund. However, Goldman has pleaded not guilty to the charges, saying that certain members of government and 1MDB lied to it about how proceeds from the bond sales would be used. GS +1.7% premarket.
End of aircraft subsidies dispute
Along with the governments of France and Spain, Airbus (OTCPK:EADSY) has agreed to amend so-called launch aid arrangements, a subsidy designed to help manufacturers develop new plane models. "After 16 years of litigation at the World Trade Organization, this is the final step to stop the longstanding dispute," Airbus said in a statement, after the U.S. was given the go-ahead to impose tariffs on as much as $7.5B worth of European exports annually. Back in February, Washington state lawmakers also repealed a key tax break for Boeing (NYSE:BA) to head off a parallel action by the EU at the WTO.
A bid for Brooks Brothers
Major U.S. mall owners have been increasingly looking for deals to salvage retailers - in many cases major tenants - that have been hit hard by the coronavirus pandemic. The latest? A company known as Sparc, which is comprised of Simon Property Group (NYSE:SPG) and Authentic Brands, has been designated as the "stalking horse" for bankrupted Brooks Brothers after making a $305M bid. The offer, still subject to better and higher bids and court approval by Aug. 5, pledges to keep at least 125 of Brooks Brothers' stores open for business (it currently has 250 locations in North America).
Tech antitrust hearing delay
A high-profile House Antitrust hearing on Monday is likely headed for a delay due to a ceremony for the late Rep. John Lewis, Politico reports. When it does come, the hearing - set to feature Amazon's (NASDAQ:AMZN) Jeff Bezos, Facebook's (NASDAQ:FB) Mark Zuckerberg, Apple's (NASDAQ:AAPL) Tim Cook and Google's (GOOG, GOOGL) Sundar Pichai - will be one of the most highly anticipated such appearances in years. Not only will it be the first time the four testified at the same hearing, it will be the first congressional appearance for Bezos. In related news, Apple shares stumbled 4.5% yesterday on reports that multiple U.S. states are probing the tech giant for deceptive trade practices.
Film release shakeup
Just hours after Disney (NYSE:DIS) cleared the decks by delaying Mulan for the fourth time, as well as pushing back Star Wars and Avatar movies, more high-profile film releases are packing up for later dates. Paramount's (NASDAQ:VIAC) Top Gun: Maverick, a sequel to 1986 hit Top Gun, was set to bow on Dec. 23 but now heads to July 2021. The studio had previously delayed A Quiet Place Part II to Labor Day weekend, as well as Sonic the Hedgehog 2, Jackass, Under the Boardwalk and The Tiger's Apprentice. Sony (NYSE:SNE) is also moving its latest Spider-Man live-action sequel back a month.
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