The trend remained positive on Tuesday on the American market, despite the consolidation of the “Mag 7” (Apple, Amazon, Microsoft, Nvidia, Tesla, Alphabet, Meta), while Donald Trump’s increased chances for the presidential election following the assassination attempt on Saturday during a meeting in Pennsylvania still seem to support the rating… It is mainly the financial and banking sector that stands out, in the wake of Bank of America. In addition, the latest comments from Fed Chairman Jerome Powell suggest that a rate cut is imminent. The S&P 500 is still up 0.64% to 5,667 points, its highest ever. The Dow Jones is catching up and is also at the top, with a jump of 1.85% to 40,954 points. The Nasdaq is almost stable at 18,509 points.
On the Nymex, the barrel of WTI crude dropped 1% to $80.65. The ounce of fine gold gained 0.9%, to its highest level in history at $2,467. The dollar index gained 0.2% against a basket of reference currencies.
Speaking at the Economic Club of Washington, Powell discussed recent progress on the inflation front. “We didn’t gain confidence in the first quarter, but the three numbers in the second quarter, including last week’s, add a little bit to confidence,” the Fed leader summarized, as inflation approaches the 2% target. The consumer price index excluding volatile food and energy prices rose 3.3% year-on-year in June, compared with 3.4% in May and 3.6% in April. Powell therefore believes that confidence is increasing with “more reliable inflation data.” “And lately, we’ve had some of that,” the leader insisted.
In political news, Donald Trump has chosen Senator JD Vance to be his vice president. Trump was also warmly welcomed at the Republican convention in Milwaukee, two days after the assassination attempt. The billionaire has also been officially nominated by the Republicans for the November election and has therefore decided to nominate Vance as his running mate.
On the economic front on Wall Street this Tuesday, import prices in the United States for the month of June came out stable compared to the previous month, against a consensus of -0.2% and after a decline of 0.2% a month earlier.
U.S. retail sales for June were flat compared to May, compared to the FactSet consensus of -0.2%. A month earlier, these sales had climbed 0.3%. Excluding autos, retail sales rose 0.4% month-over-month, compared to +0.1% consensus and +0.1% for the previous month’s revised reading. Finally, excluding autos and gasoline, retail sales rose 0.8%, compared to +0.3% consensus and +0.3% in May – in revised data.
The NAHB and Wells Fargo U.S. Housing Market Index for July 2024 came in at 42, compared to a consensus of 43 and a level of 43 also a month earlier.
US business inventories for May 2024, which were also just released, rose slightly more than expected, up 0.5% month-on-month versus a market consensus of 0.4%.
Values
Alphabet (-1.4%), Google’s parent company, is reportedly on the verge of making its largest acquisition in history. Talks are reportedly in advanced stages to acquire cloud cybersecurity startup Wiz, multiple media outlets including CNN have reported. A CNN source familiar with the discussions adds that Google and Wiz’s talks reportedly began after the startup raised $1 billion from venture capitalists earlier this year. CNN reports that terms of a potential deal have yet to be finalized and that negotiations could still fall apart. The Wall Street Journal first reported the talks. The $23 billion valuation would be nearly double the $12 billion posted in the last round.
Bank of America (+5.3%) is gaining ground on Wall Street, as the Charlotte-based bank reported better-than-expected results for its second fiscal quarter. Net income came in at $6.9 billion, or 83 cents per share, compared with $7.4 billion a year earlier. Net interest income, at $13.9 billion on an adjusted basis, also beat consensus, as did trading revenues. Total revenues for the period were $25.4 billion, compared with $25.2 billion expected by analysts on average. Provisions for credit losses were $1.5 billion, in line with expectations. Net interest income forecasts are also better than expected.
Morgan Stanley (+0.9%) reported second-quarter earnings per share of $1.82, above market expectations, for total revenues of $15 billion, also better than expected. Net interest income of $2.07 billion was above expectations, while wealth management revenues were somewhat disappointing. Trading revenues were robust. Ted Pick, CEO of the New York bank, called it “another strong quarter in an improving capital markets environment.” For the first half of the year, revenues reached $30.2 billion, for earnings per share of $3.85 and a ROTCE of 18.6%. Total client assets rose to about $7.2 trillion.
UnitedHealth (+6.5%), a U.S. health insurance company, is maintaining its annual guidance for adjusted earnings per share ranging from $27.5 to $28. The company’s medical loss ratio, which corresponds to the percentage of premiums devoted to medical care, was 85.1% in the second quarter, compared to 83.2% a year earlier and 84.4% consensus. For the quarter ended, adjusted earnings per share were $6.80, higher than the market consensus. Revenues increased by nearly $6 billion, to $98.9 billion. The impact of the cyberattack is however heavy, at 92 cents per share in the second quarter, with an annual impact estimated between $1.90 and $2.05.
State Street (+7.5%) reported total revenues for its second fiscal quarter up 3% to $3.19 billion, with net income down 7% to $711 million. Management reported an encouraging financial performance, with an increase in revenues and controlled expenses. Earnings per share came to $2.15. The famous NII, net interest income, increased 6%. ROE reached 11.9%.
Match Group is up 7.4% as Tinder’s parent company is benefiting from speculation that activist investor Starboard has increased its stake to around 6.5%. The activist is reportedly pushing for a sale of the group if its recovery is not achievable, according to the Wall Street Journal.
PNC Financial Services (+4.7%) reported net income of $1.5 billion, or $3.39 per share, for its fiscal second quarter. Net interest income was $3.3 billion, compared with $3.26 billion a quarter earlier and $3.51 billion for the second quarter of 2023. Total revenue was $5.41 billion, compared with $5.29 billion a year earlier.
Charles Schwab (-10%!) is down on Wall Street, as new brokerage accounts came in below consensus, at 985,000 versus 1.04 million expected. For the quarter ended, Schwab still posted a net profit of $1.33 billion, compared to a consensus of around $1.2 billion. Earnings per share were 66 cents. The group now oversees more than $9.4 trillion in total client assets.
Tesla (+1.5%). Multi-billionaire Elon Musk intends to commit around $45 million per month to a political action committee supporting former President Donald Trump, according to the well-informed Wall Street Journal. Trump is gaining more and more support, particularly in the business world. “I completely rally behind Donald Trump and hope he recovers quickly,” Musk wrote on July 14 to his 189 million subscribers on X, the day after the assassination attempt. His enthusiasm only grew in the hours that followed, as he added, still on his own network, that “the last time America had a candidate this strong, it was Theodore Roosevelt.” The markets are betting on a Trump victory, which could translate into a dynamic trade policy and relaxed regulations. Trump is also known for putting pressure on the Fed, at the risk of rekindling inflation…
