US Index Futures rose on Wednesday morning, buoyed by quarterly results and awaiting Gross Domestic Product (GDP) data. European markets also operate high on Thursday, a day after the Federal Reserve raised interest rates in the United States and awaiting the decision of the European Central Bank (ECB).
By 6:58 AM, Dow Jones (DOWI:DJI) futures were up 17 points, or 0.05%. S&P 500 futures were up 0.55%, while Nasdaq-100 futures were up 1.21%. The 10-year Treasury yield was at 3.867%.
In Europe, investors await the ECB’s decision, at 8:15 am, which should increase the basic rate by 25 basis points, according to market consensus, taking interest rates to 4.25%. At 8:45 am, the president of the institution, Christine Lagarde, will discuss the decision and should give some indication about the future.
Despite some recent indicators pointing to a slowdown in inflation and activity in the bloc, the services segment continues to show resilience, which reinforces the need to increase interest rates there as a way to contain the increase in costs, both for families and for the productive sectors.
In Germany, the consumer confidence index stood at -24.4 in August, slightly below the consensus of -24.7, showing that pessimism regarding the purchasing power of the population and the situation in the country has marginally diminished, although it still persists.
On Thursday’s American economic agenda, investors will follow the release of the first reading of the US quarterly GDP for June, at 8:30 am, data for which the consensus forecasts growth of 1.80%, showing some recovery of the American economy.
Also at 8:30 am, the durable goods orders for June will be released, as well as wholesale inventories and the weekly unemployment insurance order. For the latter, the market consensus is 250,000 new orders. The government is also going to hold, at 1 pm, an auction of seven-year Treasuries.
In commodities markets, West Texas Intermediate crude for September is up 0.85% to trade at $79.45 a barrel. Brent crude for September is up 0.63% near $83.44 a barrel. Iron ore futures traded in Dalian, China, fell 1.91%, at US$118.75 per tonne, in a realization movement after a firm rise recorded in recent days.
By Wednesday’s close, the Dow was up 82.05 points, or 0.23%, to 35,520.12 points, extending its 13-session high streak. The S&P 500 was down 0.71 points, or 0.02%, to 4,566.75 points, and the Nasdaq Composite fell 17.27 points, or 0.12%, to 14,127.28 points. The yield on the government bond maturing in 2 years reached more than 10 basis points during the session. Still, shorter yields, up to one year, rose. This reflected increased market bets that the Fed might hike the Federal Funds Rate again. Yesterday’s FOMC decision, as expected, came with a 0.25 pp rise in the FFR, taking it to the 5.25% – 5.50% range. There didn’t seem to be any doubts in the market about this decision, what remained to be seen were the Fed’s future steps.
In this sense, Powell’s speech brought little news. The Fed chairman has stressed on several occasions that the choice to raise or hold the rate at the next meeting has not yet been made and that it will be completely dependent on the data to come, with “greater emphasis” on the inflation data, although the committee is looking at the data set.
Ahead of Wednesday’s corporate results, traders await reports from Royal Caribbean (NYSE:RCL), McDonald’s (NYSE:MCD), Southwest (NYSE:LUV), Mastercard (NYSE:MA), Valero (NYSE:VLO), Crocs (NASDAQ:CROX), Abbvie (NYSE:ABBV), Bristol Myers Squibb (NYSE:BMY) and Honeywell (NASDAQ:HON), prior to market opening. Post-close, widely anticipated reports are Intel (NASDAQ:INTC), Ford (NYSE:F), Roku (NASDAQ:ROKU), First Solar (NASDAQ:FSLR), T-Mobile (NASDAQ:TMUS), United States Steel (NYSE:X), among others.
Wall Street Corporate Highlights for Today
Amazon (NASDAQ:AMZN) – Amazon.com’s cloud division has attracted thousands of customers to its artificial intelligence service, competing with Microsoft (NASDAQ:MSFT) and Google (NASDAQ:GOOGL). They announced new AI tools, including Amazon Bedrock, which lets you build apps with varying AI models, and Agents for Amazon Bedrock, which builds custom chatbots. The company also launched AWS HealthScribe for transcribing and analyzing medical conversations. In other news, Amazon is cutting jobs at its US Amazon Fresh stores as part of an internal restructuring. Hundreds of employees have been laid off, but the company offers the option of looking for new roles within the company or accepting severance.
Netflix (NASDAQ:NFLX) – Netflix is overhauling its advertising partnership with Microsoft (NASDAQ:MSFT), reducing guaranteed revenue due to slowing ad growth. The streaming company also held discussions with other partners to sell ads and offered better deals. Recently, some advertisers paid between $39 and $45 per 1,000 viewers. Netflix reported a lackluster revenue increase last week, sparking concerns about the growth of its new initiatives.
Salesforce (NYSE:CRM) – Workplace messaging Slack is experiencing messaging issues, with thousands of users reporting difficulties. The company is investigating the issue and is asking customers to be patient. Tests have confirmed that messages are not being sent.
Banks – According to a report by Morgan Stanley (NYSE:MS), US banking giants can take up to four years to book profits and meet new capital requirements under new rules known as the “Basel III endgame”. The largest US lenders, including Citigroup (NYSE:C) and Goldman Sachs (NYSE:GS), will need to fund higher capital requirements within three to four years, while JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC) could do so in less than two years.
JPMorgan Chase (NYSE:JPM) – JPMorgan Chase will purchase approximately $2 billion in mortgages to facilitate the merger of PacWest Bancorp (NASDAQ:PACW) and Banc of California (NYSE:BANC). The investment bank struck a deal to buy $1.8 billion in discounted home loans. The merger will create a bank with $36 billion in assets and is expected to close in late 2023 or early 2024.
Santander (NYSE:SAN) – Santander plans to hire approximately 150 bankers, primarily in the US, as part of its efforts to expand the investment banking business. Hiring aims to diversify earnings and double the franchise in the US. The bank is also taking the opportunity to recruit bankers from Credit Suisse, with which it is struggling. Nominations will be valid from September.
Deutsche Bank (NYSE:DB) – Deutsche Bank has hired 50 senior bankers to boost its origination and advisory business at global investment banking as it seeks to weather a slump in activity. Origination and advisory fees have already shown signs of picking up, and CEO Christian Sewing predicts a “significant recovery” in 2024. The company has increased its administrative headcount by 4%.
BlackRock (NYSE:BLK) – India’s Jio Financial Services and BlackRock Inc will form a 50:50 joint venture to launch asset management services in India, with an initial investment of US$150 million each. The partnership will seek to leverage BlackRock’s expertise in investment and risk management along with Jio’s technological capability to deliver products digitally. India’s asset management industry has been growing rapidly, but penetration of investment products is still low relative to the size of the economy.
Mastercard (NYSE:MA) – Mastercard has ordered financial institutions to cease transacting marijuana on debit cards, hurting an already marginalized industry in the US financial system. Marijuana is illegal at the federal level, although states have legalized its use. The industry fights for reform such as the SAFE Banking Act.
MaxLinear (NASDAQ:MXL), Silicon Motion Technology (NASDAQ:SIMO) – Chip company MaxLinear has ended its pending acquisition of Silicon Motion Technology in a dramatic turnaround. Approval from Chinese regulators was a major hurdle, and MaxLinear cited unsatisfactory conditions and an adverse effect on Silicon Motion as reasons for the cancellation.
Tesla (NASDAQ:TSLA) – Seven major automakers have announced the creation of a new company to provide electric vehicle charging in the US, competing with Tesla and seeking the Biden government subsidies. The project aims to launch 30,000 chargers and support EV growth. The deal, which could raise antitrust concerns, has the backing of the White House but will be reviewed by the Justice Department. Tesla has the largest network of chargers, influencing industry standards. Automakers face the challenge of catching up and competing with established companies in the industry.
Stellantis (NYSE:STLA) – Carlos Tavares, head of Stellantis, stated that Tesla (NASDAQ:TSLA) profitability is declining as it faces challenges from competition and actual manufacturing. Tesla went from a profitability of more than 17% in the first half of 2022 to 10.5% in the first half of 2023. Tavares pointed out that all automakers, including Tesla, will face competition from Chinese electric vehicle manufacturers. Tesla has already cut prices in response to competitive pressure.
XPeng (NYSE:XPEV) – US-listed shares of XPeng rose 27% on Wednesday after Volkswagen (USOTC:VWAGY) said it would invest $700 million in the Chinese electric vehicle maker.
Lockheed Martin (NYSE:LMT) – Lockheed Martin has won a contract from the US Defense Advanced Research Projects Agency (DARPA) to develop a nuclear-powered spacecraft for exploration and national defense. The project, called DRACO, aims to advance nuclear thermal propulsion technology to provide faster transit times between destinations, especially for human missions to Mars. The demonstration flight into space is scheduled to take place by 2027.
RTX (NYSE:RTX) – Airline executives are concerned about new problems with RTX’s Pratt & Whitney engines, affecting approximately 1,200 engines, which could take up to 60 days for inspection and repair. The situation also puts pressure on repair facilities and affects engine availability. Hawaiian Airlines (NASDAQ:HA) warned of possible adjustments to capacity, while Spirit Airlines (NYSE:SAVE) cut earlier capacity estimates due to a lack of running engines. JetBlue (NASDAQ:JBLU) also faces similar problems, and Wizz Air (USOTC:WZZZY) expects capacity reduction in the first half, although demand can maintain profitability.
Boeing (NYSE:BA) – Boeing has announced that the first delivery of the 737 MAX 7 has been postponed to 2024 due to certification issues. The company still expects MAX 7 certification and MAX 10 flight testing in 2023, with the first delivery of the MAX 10 scheduled for 2024. The delay will affect carrier Southwest Airlines (NYSE:LUV) and its planned expansion.
United Airlines (NASDAQ:UAL) – United Airlines will reduce about 15 daily flights in Newark in August and September, affecting less than 4% of travelers. The decision comes after operational issues and the airline will also temporarily end service between Honolulu and Newark through September 4. The FAA has granted waivers to allow flight reductions at congested airports due to a shortage of air traffic controllers. United CEO Scott Kirby met with the FAA to discuss operational issues.
United Parcel Service (NYSE:UPS) – Sean O’Brien, general president of the International Brotherhood of Teamsters, reached an interim agreement with UPS after threatening a multibillion-dollar strike. The deal includes “historic pay increases” and raises the bar for all workers. O’Brien hopes to use that success to organize other businesses, including Amazon’s warehouses.
Anheuser-Busch InBev (NYSE:BUD) – Anheuser-Busch InBev plans to lay off hundreds of corporate employees in the US, representing less than 2% of its employees, due to declining sales of Bud Light and Budweiser in the US, which it has attributed to a controversial social media promotion featuring a transgender influencer.
Procter & Gamble (NYSE:PG) – Global consumer products maker Procter & Gamble has withdrawn its earlier pledge not to buy pulp from degraded forests, sparking investor discontent. The new policy could put it at odds with a European Union law against deforestation. Environmental groups and investors express concerns about its forestry practices.
Mattel (NASDAQ:MAT) – Mattel expects the “Barbie” movie to boost doll sales in the second half after its box-office success. The company posted a surprising profit in the second quarter, boosted by the film. She plans to expand her movie-related toy line and will release other Disney Princess and Hot Wheels movies soon. However, the stock fell as consumers postponed purchases in anticipation of future spending during the holiday season. Mattel COO Richard Dickson has been named CEO of Gap (NYSE:GPS) and will leave the company in August.
Earnings
McDonald’s (MCD, MCDC34) – Sales recovery in China and the success of the Grimace mascot boosted US visits. Adjusted earnings per share were $3.17 versus $2.79 expected, and revenue was $6.5 billion versus $6.27 billion expected. Global same-store sales increased 11.7%, with the Chinese market driving growth in internationally operated units. In the U.S., same-store sales grew 10.3%, and site visits increased for the fourth consecutive quarter. The company attributed some of this growth to marketing efforts, such as the Grimace Birthday Meal promotion.
Shell (NYSE:SHEL) – Shell posted a 56% drop in second-quarter profit to $5 billion due to lower oil and gas prices and refining profit margins. The company reduced share buybacks and raised dividends. The lower-than-expected results followed the high profitability of 2022, driven by the crisis in Ukraine. Shell plans to invest less in low-return renewable energy and keep oil production steady. Shell reduced its debt to $40.3 billion, lowering its debt-to-equity ratio to 17%.
eBay (NASDAQ:EBAY) – eBay forecast third-quarter profit below market expectations due to additional spending in categories such as auto parts, refurbished goods and collectibles. Second-quarter revenue was $2.54 billion, versus expectations of $2.51 billion. Gross merchandise value, a key industry metric that denotes the total value of goods and services sold in the marketplace, fell 2% to $18.2 billion in the second quarter.
Barclays (NYSE:BCS) – Barclays reported second-quarter net income of $1.68 billion, in line with expectations, but analysts called the results “modestly disappointing”. The bank expects to earn lower interest on its UK division and has announced plans for a share buyback of up to £750m. Group CEO CS Venkatakrishnan said the expected drop in net interest margins is due to some customers using their savings to pay off mortgage loans, which is positive for the bank.
ArcelorMittal (NYSE:MT) – The Luxembourgish steelmaker posted sales of US$18.61 billion in the second quarter, down 16% from 2022. Quarterly net profit was US$1.86 billion, down 52% in the year, but exceeded analysts’ expectations. The company forecasts more moderate growth in global apparent steel consumption, due to factors such as lower selling prices and higher interest rates in some regions.
Meta Platforms (NASDAQ:META) – Meta announced a strong increase in advertising revenue in the second quarter, beating Wall Street’s financial targets. The company also projected third-quarter revenue above market expectations. However, Target predicted that expenses would increase in 2023 and 2024 due to costs such as legal fees and infrastructure spending for the technology sector’s artificial intelligence race. Shares in Meta were up 7.9% in premarket Thursday.
Chipotle Mexican Grill (NYSE:CMG) – Shares in burrito chain Chipotle Mexicana were flat premarket despite selling below Wall Street expectations. The company reported adjusted earnings of $12.65 per share on revenue of $2.51 billion. Analysts had expected earnings per share of $12.31 and revenue of $2.53 billion, according to Refinitiv.
Align Technology (NASDAQ:ALGN) – The orthodontics company was flat premarket even after reporting second-quarter adjusted earnings of $2.22 per share, beating estimates of $2.03 per share, according to to Refinitiv. Revenue for the quarter also beat estimates, and the full-year revenue outlook was above analyst expectations.
Imax (NYSE:IMAX) – Shares of Imax rose 4.14% premarket after reporting better-than-expected quarterly results. The entertainment technology company posted adjusted earnings of 26 cents a share, beating analysts’ forecast of 16 cents, according to Refinitiv. Revenue reached US$98 million, beating the expected US$86.6 million.
Seagate Technology (NASDAQ:STX) – Shares in data storage company Seagate Technology were flat in premarket trading. Fiscal fourth-quarter revenue hit $1.60 billion, missing analyst forecasts of $1.68 billion, according to FactSet.
ServiceNow (NYSE:NOW) – The cloud computing company reported second-quarter adjusted earnings of $2.37 per share, beating estimates of $2.05, and revenue hit $2.15 billion, up of the US$ 2.13 billion expected by analysts. Additionally, ServiceNow announced the launch of new generative AI tools.
Lam Research (NASDAQ:LRCX) – Shares in Lam Research were up 2.8% premarket after the company reported a strong quarter. Lam posted adjusted earnings of $5.98 a share, beating estimates by 0.91 cents a share, according to Refinitiv. Revenue of $3.21 billion also beat expectations of $3.13 billion. In addition, the company’s financial projection was also higher than the estimates.
L3 Harris Technologies (NYSE:LHX) – Shares in aerospace and defense company L3 Harris Technologies were flat premarket despite earnings beating expectations. The company posted adjusted earnings of $2.97 per share on revenue of $4.69 billion and raised its revenue and earnings forecast. Analysts had forecast earnings per share of $2.94 and revenue of $4.37 billion for the latest quarter, according to Refinitiv. Meanwhile, shares of Aerojet Rocketdyne (NYSE:AJRD) were also flat following news that the Federal Trade Commission will not block its takeover by L3Harris.
Takeda Pharmaceutical (NYSE:TAK) – Japanese company Takeda Pharmaceutical beat analyst estimates with first-quarter operating profit of $1.2 billion, up 12% driven by strong drug sales and the launch of dengue vaccine. The company maintains the operating profit forecast for the year, despite the losses of drug patents.
Sunnova Energy (NYSE:NOVA) – Shares in solar energy company Sunnova fell 8% premarket on lower-than-expected second-quarter financial results. Sunnova posted a loss of 74 cents a share, greater than the expected loss of 42 cents a share, according to FactSet. Revenue reached $166.4 million, compared to expectations of $195.5 million.
Union Pacific (NYSE:UNP) – Union Pacific has named Jim Vena, a former chief operating officer, as its next CEO, hoping he will solve the rail company’s operational problems. The change comes after criticisms of the company’s performance and its operating index. The company’s operating income fell to $5.96 billion in the second quarter from $6.27 billion a year earlier. Union Pacific posted second-quarter earnings of $2.54 per share, below the average analyst estimate of $2.75 per share.
General Dynamics (NYSE:GD) – General Dynamics raised its annual revenue forecast, driven by continued demand for business jets and military equipment. The manufacturer now expects revenue of around $42.45 billion in 2023. Sales of marine systems and weapons also contributed to the growth. In the second quarter, total revenue increased 10.5% to $10.15 billion, beating expectations.
Boeing (NYSE:BA) – Boeing is ramping up production of the 737, but stabilizing facilities will take time, even with future increases planned. The company will already produce 38 jets a month, with plans to increase to 42, but it needs to ensure stability during growth. In the second quarter, Boeing achieved free cash flow of $2.58 billion, compared to a cash burn of $182 million a year earlier. The adjusted loss was 82 cents per share, against an expectation of 88 cents per share. The company’s revenue rose 18% to $19.75 billion, beating expectations of $18.45 billion. Boeing reaffirmed its plans to generate free cash flow of $3 billion to $5 billion this year, in addition to delivering at least 400 single-aisle 737s and 70 787 Dreamliners in 2023.
Coca-Cola (NYSE:KO) – Coca-Cola raised its full-year revenue and profit forecasts after better quarterly results due to higher prices and resilient demand for its soft drinks despite consumers cutting back on essential spending. Coca-Cola expects organic revenue growth of 8% to 9% for the full year. Second-quarter net income attributable to shareholders was $2.55 billion, or $0.59 per share, up from a year earlier of $1.91 billion, or $0. .44 per share.