Wall Street Breakfast: Earnings Season Kicks Into High Gear

Wall Street Breakfast: Earnings Season Kicks Into High Gear

Corporate results from the tech, energy, industrial and consumer sectors are all piling onto the radar as traders find themselves in the heat of earnings season. Analysts are still debating how it will all end, but so far the Dow, S&P and the Nasdaq have steadily risen over the last two weeks. Other earnings reports coming up this week include Facebook (NASDAQ:FB), Google (GOOG, GOOGL), Exxon (NYSE:XOM), Chevron (NYSE:CVX), Boeing (NYSE:BA) and Coca-Cola (NYSE:KO).


The Federal Reserve is expected to stand pat at its meeting today, bowing this time to global volatility from the U.K.’s Brexit vote after staying on hold since it raised rates in December. Central to the debate at the Fed’s policy meeting will be how to reconcile upbeat U.S. economic data, highlighted by strong job gains in June, with a slowdown in global growth and other headwinds threatening the inflation trajectory.

The Democratic Party formally nominated Hillary Clinton for president Tuesday night, making her the first woman to ever head the ticket of a major U.S. political party. In a show of unity, Bernie Sanders was the one who announced Clinton should be selected as the party’s nominee following a state-by-state roll call vote on the convention floor.

A ¥28T stimulus package? 50-year bonds? “Helicopter-money light”? Reports from Fuji TV, WSJ and the Nikkei pushed up Japanese shares overnight, with the yen weakening to as high as 106.53. Although stocks pared gains and the currency retreated after some of the rumors got shot down, investors are still anticipating a major announcement at the BOJ’s policy meeting this Friday.

Britain’s economy picked up speed in Q2, helped by the biggest upturn in industrial production since 1999. According to the Office for National Statistics, gross domestic product grew by 0.6%, up from 0.4% in the last quarter. The positive figure adds to optimism that the U.K. economy was robust going into the Brexit vote and may therefore weather possible consequences better than forecasted.

Looking to repair an economy damaged by years of political upheaval, Egypt is “nearing the final stages” of its talks with the IMF to secure $7B annually over three years. Separately, Jordan and the fund have signed a letter of intent for a $700M credit facility to augment the kingdom’s reserves and help it cope with an influx of refugees. EGX 30 +4.8% to 7,900.


Apple shares soared 6.8% in extended trading after the company’s results beat expectations, soothing fears that iPhone demand had hit a wall. Apple (NASDAQ:AAPL) shipped 40.4M iPhones, 10M iPads and 4.3M Macs in the third fiscal quarter and gave strong guidance for FQ4 with revenue expectations ranging from $45.5B-$47.5B. Tim Cook also expects services to be “the size of a Fortune 100 company by next year,” with major growth in the App Store, Apple Music and the iCloud.

European movers: Deutsche Bank’s (NYSE:DB) -4.7% premarket after net income fell nearly 100% in Q2, prompting the lender to promise a more aggressive overhaul. Pointing to continued pressure on refining margins and prices, Statoil (NYSE:STO) -4% premarket after missing expectations on both the top and bottom lines. Airbus (OTCPK:EADSY) is up 5% in France after taking over €1.4B in fresh charges for its troubled A400M and A350 programs, but reaffirmed its targets.

More earnings out of Europe: Telecom Italia (NYSE:TI) raised its full year domestic profit outlook after beating expectations and agreeing to invest $1.2B with Fastweb across 29 Italian cities. Santander’s (NYSE:SAN) profits fell on forex swings and a restructuring charge related to branch closures and employee layoffs. ARM Holdings (NASDAQ:ARMH) posted a profit and sales rise, but was unable to provide full year guidance given restrictions related to its takeover by Softbank (OTCPK:SFTBY).

“If the question is do we see a deteriorating environment, the answer is yes,” Air France-KLM (OTCPK:AFLYY) CFO Pierre-Francois Riolacci said in regards to France’s standing as a tourist hotspot. Islamic State-inspired killings are weighing on travel demand, even as fuel savings helped the carrier’s Q2 operating profit surge 77%. In addition to contending with turbulent markets, Air France flight attendants began a four-day strike today, while KLM ground crew is planning unspecified labor actions tomorrow.

Tesla’s master plan could cost the automaker “tens of billions” of dollars over the long term, but would likely require only a “modest” capital raise, Elon Musk said after a tour of his gigafactory in Nevada. Because the plan will roll out over a number of years, it could be mostly funded from sales of vehicles, particularly the Model 3, he added. Musk took heat from investors last week after delivering a plan that was short on “financing details,” and followed what was already a rocky month for Tesla (NASDAQ:TSLA) due to a fatal Autopilot crash in Florida.

A U.S. federal judge has granted preliminary approval to Volkswagen’s (OTCPK:VLKAY) $14.7B settlement with U.S. drivers, clearing the way for the company to implement its plan and put the emissions scandal behind it. The deal offers owners of 475,000 diesel-powered vehicles with two-liter engines the option of either selling back their cars or waiting until regulators approve a technical fix to make them compliant with emissions standards.

Mitsubishi Motors reported a loss of ¥129.7B ($1.2B) for the quarter ending in June after a fuel economy ratings scandal prompted the Japanese automaker to halt minicar sales and seek a rescue by Nissan (OTCPK:NSANY). Mitsubishi (OTC:MMTOY) also reiterated its forecast given last month for a ¥145B deficit for the fiscal year ending in March, which would be the company’s first annual loss in eight years.

After lowering expectations ahead of its financial results, Nintendo (OTCPK:NTDOY) posted a net loss of ¥24.5B during FQ1 due to sluggish sales of Wii U consoles and a stronger yen. The wildly popular “Pokemon Go” mobile game wasn’t reflected in the company’s earnings since it was released in the quarter that ended June. Nintendo also announced that its Pokemon Go Plus accessory will be delayed by two months until September.

More consolidation in the semiconductor industry? Analog Devices (NASDAQ:ADI) has agreed to purchase fellow chipmaker Linear Technology (NASDAQ:LLTC) for about $14.8B. By buying Linear, Analog is aiming to boost its profitability and increase its share in the fragmented market for analog chips, which process signals such as sound, light and temperature and convert them into digital signals.

China’s LeEco plans to acquire Vizio (Pending:VZIO) for $2B – a move that will create a global television powerhouse and help cement the tech giant’s presence in the U.S. LeEcos LeTV is best-known as the “Netflix of China,” but also courts consumers through low-priced smartphones and TVs, with the goal of making money by charging for content.

State Street has agreed to pay $382.4M for misleading mutual funds and other custody clients by applying hidden markups to forex trades. The settlement includes $167.4M in disgorgement and penalties to the SEC, a $155M penalty to the DOJ, and at least $60M to ERISA plan clients in an agreement with the DOL. State Street (NYSE:STT) also agreed to pay $147.6M to settle private class action lawsuits filed by bank customers alleging similar misconduct.

New York Attorney General Eric Schneiderman said his office will not comply with a subpoena issued by the House Science, Space and Technology Committee for details on its probe of whether Exxon Mobil (XOM) misled investors on climate change risks. Schneiderman feels his office is not obligated to comply with such an “unprecedented” subpoena and that the House committee does not have a constitutional right to interfere with the states’ probes.

What happened to the Brexit jitters? GlaxoSmithKline (NYSE:GSK) is investing £275M in three British manufacturing sites, dubbing the U.K. an “attractive location.” The investment will go to sites at Barnard Castle, Montrose and Ware, with “new employment opportunities” expected to be created as a result. Glaxo, like the rest of the U.K. pharmaceutical industry, backed the Remain campaign ahead of last month’s referendum on EU membership.

Tuesday’s Key Earnings

3M (NYSE:MMM) -1.1% lowering its sales growth outlook.
Anadarko (NYSE:APC) flat AH on a narrower than expected loss.
Apple (AAPL) +6.8% AH on impressive quarterly results.
Buffalo Wild Wings (NASDAQ:BWLD) +1.7% despite a same-store sales drop.
Caterpillar (NYSE:CAT) +5.2% after beating estimates.
DuPont (NYSE:DD) +0.4% following a guidance boost.
Eli Lilly (NYSE:LLY) flat after posting in-line earnings.
Freeport-McMoRan (NYSE:FCX) +2.4% on fewer write-downs.
McDonald’s (NYSE:MCD) -4.5% as comp-store sales missed estimates.
Panera (NASDAQ:PNRA) +1.3% after topping estimates.
Sirius XM (NASDAQ:SIRI) +4.8% raising full-year projections.
Twitter (NYSE:TWTR) -10.6% AH as revenue growth stalled.
U.S. Steel (NYSE:X) +7.7% improving its full-year outlook.
Under Armour (NYSE:UA) -5.1% on tightening margins.
United Tech (NYSE:UTX) +3.1% lifting its guidance range.
Valero (NYSE:VLO) +4.7% after topping expectations.
Verizon (NYSE:VZ) -1.9% impacted by a wireline strike.

Today’s Markets

In Asia, Japan +1.7% to 16664. Hong Kong +0.4% to 2219. China -1.9% to 2992. India +0.2% to 28024.
In Europe, at midday, London +0.5%. Paris +1.5%. Frankfurt +0.8%.
Futures at 6:20, Dow +0.2%. S&P +0.2%. Nasdaq +0.7%. Crude -0.6% to $42.67. Gold flat at $1320.50.
Ten-year Treasury Yield flat at 1.56%

Today’s Economic Calendar

7:00 MBA Mortgage Applications
8:30 Durable Goods
10:00 Pending Home Sales
10:30 EIA Petroleum Inventories
11:30 Results of $15B, 2-Year FRN Auction
2:00 PM FOMC Announcement

Companies reporting earnings today »