At the close of trading, Wall Street fell back on Friday, at the end of a turbulent week.
The S&P 500 is back -0.71%, returning to 5,505 pts (-2.24% over the week). The Dow Jones is down -0.93% to 40,287 pts. The American industrial index is up +0.19% over the week. The Nasdaq Composite is down -0.81% this Friday, to 17,726 pts. After its multiple records, the American technology index is back -4.04% on a weekly basis.
Netflix showed hesitation despite a solid publication, marked all the same by a somewhat short quarterly revenue guidance. Microsoft was shaken following the giant outage of which its online services were victims. CrowdStrike, the cybersecurity company involved in the outage, fell early in the stock market…
On the economic front, there were no significant statistical releases across the Atlantic this Friday.
On Thursday, weekly jobless claims for the week ended July 13 came in at 243,000, compared with the FactSet consensus of 229,000 and the 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% from the prior month, compared with the FactSet consensus of -0.3%.
On the political front, the question of whether Joe Biden should remain in the presidential race is more pressing than ever, as more and more voices are calling for his replacement within the Democratic faction. According to information from the Washington Post, Barack Obama himself reportedly said that Joe Biden’s path to victory had narrowed considerably. According to him, the White House incumbent should seriously consider the viability of his candidacy, the newspaper wrote on Thursday.
On Wednesday evening, the Fed’s Beige Book of economics, a summary of regional conditions, offered no 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 oil side, the barrel of WTI crude fell by -2.87% to $80.13 (-2.21 over the week).
The dollar is trading at 0.918 euros (+0.03% over the week).
The ounce of fine gold ended under pressure at $2,398 (-0.90% weekly).
The American publishing ball will continue next week. On Monday, Cadence Design Systems, NXP Semiconductors and Verizon will publish.
The only important data from the start of the week on the macroeconomic side: the Chicago Fed’s national activity index (2:30 p.m.).
Values
* CrowdStrike (-11.10% to $304.96). The Texan cybersecurity giant is collapsing. Although its name is relatively unknown to the general public, this group is still capitalized at more than $80 billion on the American market. CrowdStrike Holdings reportedly warned its customers this Friday 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 went down around the world this Friday, leading to the shutdown of services for airlines, banks and the London Stock Exchange following the crash of the widely used cybersecurity program.
Microsoft (-0.74% to $437.11) separately reported problems with its cloud services.
CrowdStrike, whose cybersecurity software is at fault, said the issue had been identified and a patch deployed. “This is not a security incident or cyberattack. The issue has been identified, isolated, and a patch has been deployed,” the company said. “We are aware of an issue affecting Windows devices due to an update from a third-party software platform,” Microsoft said, adding that a fix would be implemented soon. The first issues appeared in the United States last night and were attributed to the failure of Microsoft Azure and 365 services, Bloomberg notes. 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 users to see corrective actions as we resolve the residual impact,” Microsoft said.
* Travelers Companies (-7.76% to $203.48). The American insurance group announced a net profit of $534 million for the second quarter – against a loss a year earlier – and an adjusted profit of $585 million. The consolidated combined ratio improved by 6.3 points to 100.2%. Net written premiums increased by 8% to $11.11 billion. Adjusted earnings per share significantly exceeded expectations, at $2.51. Revenues increased by nearly 12% year-on-year to $11.28 billion. The consensus was for $1.98 in adjusted EPS on $11.34 billion in revenues.
* Halliburton (-5.6% to $34.4). The American oil services specialist announced for its fiscal second quarter a diluted profit per share of 80 cents, on revenues of $5.8 billion and an operating margin of 18%. The turnover is below expectations. The consensus was for 80 cents of adjusted EPS on $5.95 billion of revenues. Cash flow from operations was $1.1 billion, while free cash flow represented approximately $800 million. Share buybacks over the period were approximately $250 million. Net income totaled $709 million. Revenues were stable compared to the previous quarter. Operating income, at $1 billion, increased by 5% from one quarter to the next.
* American Express (-2.74% to $242.38). The payment card issuer 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, (consensus of $3.24). 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 (previously $12.65 to $13.15). It is still counting on revenue growth in line with the range of 9 to 11% set at the beginning of the year.
* Netflix (-1.51% to $633.34). The group published, Thursday evening for the 2nd fiscal quarter, a very strong increase of 48% in earnings per share to $4.88, exceeding the consensus which was around $4.74. Revenues increased by 17% year-on-year to $9.56 billion, also better than expected. The group also ended the quarter with 278 million customers. The group recovered more than 8 million customers over the period, and also raised its annual 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 (+9.34% to $455.01). The American medical robotics giant posted revenue of approximately $2.01 billion for the second fiscal quarter, beating consensus by 2%, compared to revenue of $1.76 billion last year. Revenue from instruments and accessories for the quarter ended increased by 16% to approximately $1.24 billion, mainly due to growth in the volume of Da Vinci procedures. Adjusted net income group share was $641 million or $1.78 per share, compared to $507 million a year ago. Consensus was $1.53 for adjusted EPS.
* Schlumberger (+2.44% to $46.2). The oil services giant reported fiscal 2nd quarter revenues of $9.14 billion, up 13% year-on-year, for adjusted earnings per share of 85 cents, up 18%. The consensus was for adjusted earnings per share of 83 cents for $9.08 billion in revenues. Net income attributable to equity holders of the parent was $1.11 billion, up 8%. Adjusted EBITDA increased 17% to $2.29 billion. Cash flow from operations reached $1.44 billion and free cash flow $776 million. The board of directors approved a quarterly cash dividend of $0.275 per share.
