Wall Street is now stabilizing before the market this Friday, at the end of a turbulent week. The S&P 500 is barely changing, while the Dow Jones is down 0.3%. The Nasdaq is up 0.1%. Netflix is hesitating after a solid publication, marked all the same by a somewhat short quarterly revenue guidance. Microsoft is suffering on the stock market following the giant outage of which its online services were victims. CrowdStrike, a cybersecurity company involved in the outage, is collapsing before the market…
On the Nymex, the barrel of WTI crude fell 0.2% to $81.2. The ounce of fine gold lost 2% to $2,404. The dollar index gained 0.2% against a basket of currencies.
Yesterday, TSMC (Taiwan Semiconductor) had initially tried to revive the ‘semis’ values, before missing its effect and erasing its gains. The day before, the Nasdaq had stumbled by 2.8% with precisely this ‘chips’ compartment, on fears of additional restrictions targeting China or a new trade war.
On Wednesday evening, the Fed’s Beige Book of economics, a summary of regional conditions, offered little comfort, even suggesting a possible economic slowdown in the second half of the year, with uncertainty related to the US presidential election, the geopolitical context or inflation. The Fed reported a modest increase in US economic activity from the end of May to the beginning of July, while the jobs market would continue to slow.
The US market remains volatile, as operators now fear a possible increase in Sino-US trade tensions. While Trump threatens, the Biden administration is reportedly considering invoking the Foreign Direct Products rule to unilaterally restrict exports to China of products designed with American technology, according to Reuters. These concerns about a harsher US crackdown on China may well persist. The Biden administration has reportedly told its allies that it is considering using the harshest trade restrictions available if companies such as Tokyo Electron or ASML continue to give China access to advanced semiconductors.
Trump, for his part, said he plans to impose new tariffs on Chinese imports… ranging from 60 to 100 percent. In addition, a 10 percent tariff would also be imposed on imports from other countries. The measures would be part of his administration’s efforts to address trade imbalances and protect American industries, according to comments reported by Bloomberg. Trump also said in an interview that he would cut the U.S. corporate tax rate from the current 21 percent to 15 percent.
The Republican presidential candidate in November also said Taiwan should pay the United States for its defense, because it gives nothing to the country.
On the Fed side, Powell mentioned recent progress on the inflation front at the beginning of the week. “We didn’t gain confidence in the first quarter, but the three numbers in the second quarter, including last week’s, add somewhat to confidence,” the Fed leader summarized, as inflation is now moving closer to the 2% target. According to the CME Group’s FedWatch tool, the probability of a monetary status quo on July 31 at the end of the next FOMC meeting is around 95%, compared to a 5% ‘probability’ of a quarter-point easing. The probability of a rate cut on September 18, on the other hand, is… 100%…
Lorie Logan, Mary Daly and Michelle Bowman of the Fed spoke yesterday Thursday… Logan, head of the Dallas Fed, did not comment on monetary policy. Daly, head of the San Francisco Fed, said some recent inflation data had been “really good,” but that the central bank had not yet achieved its goal of price stability. She also spoke on AI, saying that artificial intelligence would tend to create jobs rather than destroy them… Note that John Williams of the Fed is speaking this Friday.
On the economic front yesterday Thursday, weekly jobless claims for the week ended July 13 came in at 243,000, compared to a FactSet consensus of 229,000 and a level of 222,000 a week earlier. The Philadelphia Fed’s manufacturing activity index for July came in at 13.9, well above the consensus of +3. The Conference Board’s leading indicator index for June 2024 was down 0.2% compared to the previous month, compared to a -0.3% FactSet consensus.
There will be no significant statistics across the Atlantic this Friday. Note that in the United Kingdom, retail sales for the month of June unexpectedly fell by 0.2% compared to the previous month, against +0.5% consensus.
Regarding companies listed on Wall Street, Netflix published yesterday evening. American Express, Schlumberger, Halliburton and The Travelers Companies announced this Friday.
Values
CrowdStrike, a Texas cybersecurity giant, is down 13% before the market opens on Wall Street. While its name is relatively unknown to the general public, the group is still worth more than $80 billion on the American market. CrowdStrike Holdings reportedly warned its customers today that its Falcon Sensor threat monitoring product was causing Microsoft’s Windows operating system to “crash,” according to Bloomberg. The announcement coincides with disruptions to Microsoft’s Azure cloud and 365 services. Computer systems crashed around the world on Friday, leading to the shutdown of services at airlines, banks and the London Stock Exchange following the crash of the widely used cybersecurity program. Microsoft has separately reported problems with its cloud services.
CrowdStrike, whose cybersecurity software is therefore in question, indicated that the malfunction had been identified and that a patch had been sent. “This is not a security incident or a cyberattack. The problem has been identified, isolated and a patch has been deployed,” the group also explained. “We are aware of an issue affecting Windows devices due to an update from a third-party software platform,” Microsoft said, adding that a solution would be adopted soon. The first problems appeared in the United States last night and were attributed to the failure of Microsoft Azure and 365 services, notes Bloomberg. Frontier Airlines grounded its flights for more than two hours… “We continue to make progress in our mitigation efforts for the affected Microsoft 365 applications and services. We continue to expect that users will see corrective measures as we resolve the residual impact,” Microsoft said.
Netflix reported a 48% increase in fiscal second-quarter earnings per share last night to $4.88, beating the consensus of around $4.74. Revenue rose 17% year-over-year to $9.56 billion, also better than expected. The company also ended the quarter with 278 million customers. The company added more than 8 million customers during the period, and also raised its full-year sales and margin forecasts.
The crackdown on password sharing and the introduction of cheaper, ad-supported subscription plans have helped Netflix deliver strong results. For the quarter, Netflix expects to generate earnings of $5.10 per share, also above Wall Street estimates, on revenue of $9.73 billion, slightly below analysts’ forecasts. Subscriber gains would be lower than last year’s 8.76 million, but that should be enough to easily beat the consensus of just over 5 million.
For the full year, the group now expects revenue to grow by 14 to 15%, compared to its previous guidance of 13 to 15%. The full-year operating margin is expected to be 26%, compared to 25% previously envisaged. “Our updated revenue guidance reflects strong membership growth trends and commercial momentum, partially offset by the strengthening of the U.S. dollar against most other currencies,” Netflix added.
Intuitive Surgical, the American giant of medical robotics, jumped 7% before the market on Wall Street, following the publication of the results of the second fiscal quarter. The group posted a turnover of approximately 2.01 billion dollars for the quarter, exceeding the consensus by 2%, to reach compared to the revenues of 1.76 billion dollars last year. The turnover of instruments and accessories on the quarter ended 16% to reach approximately 1.24 billion dollars, mainly due to the growth of the volume of Da Vinci procedures. The adjusted net income group share was 641 million dollars or 1.78 dollars per share, against 507 million dollars a year before. The consensus was 1.53 dollars of adjusted EPS.
American Express reported second-quarter results that beat market expectations, driven by leisure and travel spending. The American credit card giant, focused on its premium clientele and controlling its spending base, posted a profit of $3.02 billion, or $4.15 per share, up nearly 40% year-on-year! Adjusted earnings per share were $3.49, compared to $3.24 consensus. Provisions for credit losses were $1.3 billion, slightly higher than last year. Revenues increased 8% to a record $16.3 billion. The group is raising its annual earnings per share forecast to between $13.30 and $13.80, compared to $12.65 to $13.15 previously. It is still expecting revenue growth to be in line with the 9 to 11% range set at the beginning of the year.
Schlumberger, the oilfield services giant, reported fiscal second-quarter revenue of $9.14 billion, up 13 percent year-over-year, and adjusted earnings per share of 85 cents, up 18 percent. The consensus was for adjusted earnings per share of 83 cents on revenue of $9.08 billion. Net income attributable to equity holders of the parent was $1.11 billion, up 8 percent. Adjusted EBITDA rose 17 percent to $2.29 billion. Cash flow from operations was $1.44 billion and free cash flow was $776 million. The board of directors approved a quarterly cash dividend of $0.275 per share.
Halliburton reported diluted earnings per share of 80 cents for its fiscal second quarter, on revenue of $5.8 billion and an operating margin of 18%. Revenue fell short of expectations. The consensus was for adjusted EPS of 80 cents on revenue of $5.95 billion. Cash flow from operations was $1.1 billion, while free cash flow was about $800 million. Share repurchases for the period were about $250 million. Net income totaled $709 million. Revenue was flat compared with the prior quarter. Operating income, at $1 billion, was up 5% quarter-over-quarter.
The Travelers Companies reported second-quarter net income of $534 million, compared with a loss a year earlier, and adjusted earnings of $585 million. The consolidated combined ratio improved 6.3 percentage points to 100.2%. Net premiums written rose 8% to $11.11 billion. Adjusted earnings per share significantly beat expectations at $2.51. Revenue rose nearly 12% year-over-year to $11.28 billion. The consensus was for adjusted EPS of $1.98 on $11.34 billion in revenue.
