by tyler | Oct 25, 2023 | CNN, investing
In an unstable economic climate marked by geopolitical unrest, concerns about the Federal Reserve and soaring Treasury yields, investors are closely watching this week’s Big Tech earnings for clues about where the volatile stock market may head next.
The world’s biggest multinational companies could offer Wall Street some insight about how the global economy is faring.
What’s happening: On Tuesday, Microsoft and Google parent Alphabet -— two of the so-called Magnificent Seven tech companies that have driven the market’s gains this year — released strong third-quarter earnings.
Still, there’s more to come from Amazon and Meta this week. Nvidia and Apple will report later this month. The top tech companies — Apple, Amazon, Nvidia, Microsoft and Alphabet — combine to make up a quarter of the S&P 500’s value, giving them an outsized impact on investors’ portfolios. That means investors are watching their earnings particularly closely for prognostications about where the market is headed next.
Tuesday’s results were a good start. Alphabet reported quarterly sales of $76.69 billion, up 11% from the same period in the prior year. The company also posted profits of $19.69 billion for the quarter.
Meanwhile, Microsoft posted revenue of $56.5 billion, representing 13% year-over-year sales growth, also beating expectations. Microsoft’s quarterly profits hit $22.3 billion, up 27% from the year-ago period.
Microsoft shares gained nearly 4% in premarket trading as traders breathed a sigh of relief. Alphabet shares fell by about 6% — the company beat analyst expectations on revenue and earnings per share, but fell short in its cloud business, sending the stock lower.
Big tech controls the market: Excluding Big Tech, the average earnings for S&P 500 companies would drop by 5% this quarter, according to Bloomberg Intelligence data. With them, the S&P 500’s earnings are expected to be flat.
Nvidia in particular is expected to be the largest contributor to earnings growth for the entire S&P 500 this quarter, according to FactSet data. If the company were excluded, the earnings decline for the S&P 500 for the quarter would increase to 1.8% from 0.4%, the company estimated.
But in a market where techs are so overweight problems can arise. “Big Tech valuations pose risks for the broader markets, as Big Tech has contributed to almost all of the stock market’s year-to-date gains,” said David Bahnsen, chief investment officer of the Bahnsen Group. “This lack of market breadth suggests that investors are still highly prone to chasing momentum and getting overly excited about different market themes and stories, such as artificial intelligence.”
It also suggests that there’s not a lot of room for any Big Tech earnings missteps. Until all the Big Techs report, investors will remain on tenterhooks.
“The movement of the Magnificent Seven after earnings will be very telling,” said Louis Navellier, chairman of Navellier & Associates.
US and Gulf nations target ‘secret’ Hamas investment portfolio worth up to $1 billion
The United States along with some Middle Eastern nations are stepping up efforts to target a “secret” Hamas investment portfolio government officials believe to be worth up to $1 billion, reports my colleague Matt Egan.
To target the Hamas investment portfolio, a US official said Tuesday the Treasury Department is working with members of the Gulf Cooperation Council: Saudi Arabia, Qatar, Kuwait, Oman, Bahrain and the United Arab Emirates.
Following the Hamas terror attacks on Israel, US and Saudi officials convened an emergency meeting on Tuesday in Riyadh of the Terrorist Financing Targeting Center, which includes the United States and the GCC nations. The meeting was originally scheduled to take place in November.
The US official said there has been a redoubling of efforts since Hamas’ October 7 attack on Israel to use the TFTC, which was created in 2017, to go after Hamas, Hezbollah and other Iranian-aligned militant groups, including by sharing relevant, timely and actionable information.
Last week, Treasury leveled sanctions on individuals that officials say are managing assets in a “secret” Hamas investment portfolio likely valued at between $400 million and $1 billion, according to a US official. The official added that the portfolio is generating significant amounts of revenue for Hamas.
Treasury has said the global portfolio of investments includes companies operating “under the guise of legitimate businesses” in Sudan, Algeria, Turkey, the United Arab Emirates and other nations.
“We cannot tolerate a world in which Hamas and other terrorist organizations’ fundraisers live and operate with impunity, abusing the financial system, to sustain their terror.” Brian Nelson, Treasury’s under secretary for terrorism and financial intelligence, said during prepared remarks at the emergency TFTC meeting.
Apple announced its second product event of the season, a month after introducing its new iPhone 15 lineup. New iMacs are likely, reports my colleague Samantha Murphy Kelly.
The company sent invitations to members of the media for a scheduled keynote on Monday, October 30 at 8 p.m. ET/5 p.m. PT, later than it typically kicks off events. It will be accessible via livestream only; Apple usually hosts its product launches both in person and online.
The tagline for the event — “scary fast” — is an apparent nod to the likely unveiling of its next-generation silicon chip, M3, as well as Halloween. The company is expected to show off new iMac computers boasting the new powerful chipset in a move that should also boost Mac sales. Mac sales have been down this year.
“Weak demand, excess inventory, and a worsening macroeconomic climate were all contributing factors for the precipitous drop in shipments of traditional PCs,” market research firm IDC said earlier this year.
by tyler | Oct 17, 2023 | CNN, investing
Lollapalooza will never be the same.
Goldman Sachs chief executive (and noted party DJ) David Solomon will no longer perform at high-profile events, picking Wall Street over South Beach, a representative from the second-largest investment bank confirmed to CNN.
“David decided to stop publicly DJing more than a year ago because of the outside attention to it,” said Goldman spokesman Tony Fratto.
Solomon, who performed under the alias DJ D-Sol, began spinning tracks at festivals and in night clubs a few years ago. “[I] kind of stumbled into it as a hobby, and now I just do it for fun,” Solomon, 61, said on a Goldman Sachs podcast in 2017.
Solomon’s hobby led him to headline a number of high-profile events, including an Amazon event in 2019 and a Sports Illustrated Super Bowl party last year. Last summer, he played at Chicago’s Lollapalooza music festival alongside acts like Metallica, Dua Lipa, Doja Cat and Green Day.
His spinning has also stirred up some controversy.
He opened for The Chainsmokers at a crowded Hamptons charity event in the midst of the Covid-19 pandemic in July 2020. The show prompted an investigation by the New York State Department of Health for what then-Governor Andrew Cuomo called “egregious social distancing violations.”
Solomon apologized to Goldman’s board for participating in the event, according to a Financial Times report.
“The vast majority of the audience appeared to follow the rules, but [Solomon is] troubled that some violated them and put themselves and others at risk,” a Goldman Sachs spokesperson said in a statement at the time.
Solomon’s unorthodox hobby likely caused some head scratching from board members who wondered why he couldn’t just take up golf, but it’s not the main reason the Goldman chief has found himself in hot water lately.
The bank executive, who is celebrating five years at the top, is reportedly being accused by former and current coworkers of poor leadership, and his ability to effectively run the company is also reportedly being questioned by former chairman and CEO Lloyd Blankfein.
Solomon’s reported potty mouth, lack of collaboration with other executives, emphasis on returning to the office and the recent failure of Marcus, Goldman Sachs’ consumer online banking product, have led colleagues to openly question his future at the company.
“David [Solomon] doesn’t work to play diplomat,” Jeffrey Sonnenfeld, who runs Yale School of Management’s Chief Executive Leadership Institute, recently told CNN. “He’s rough around the edges and he’s a bachelor, which may cause some differences socially.”
Solomon ultimately answers to shareholders, the bank’s board of directors and the bottom line. And while shares of Goldman Sachs (GS) may be down by more than 8.4% this year, they’re still up by about 40% since he took over in 2018.
Goldman Sachs announced third-quarter results on Tuesday morning, reporting earnings of $5.47 per share, which beat the $5.31 expected by analysts. Revenue clocked in at $11.82 billion versus the $11.19 billion expected, according to Refinitiv data.
Still, profit fell by 33% from a year earlier.
“We continue to make significant progress executing on our strategic priorities, and we’re confident that the work we’re doing now provides us a much stronger platform for 2024,” said Solomon.
by tyler | Oct 17, 2023 | CNN, investing
Lollapalooza will never be the same.
Goldman Sachs chief executive (and noted party DJ) David Solomon will no longer perform at high-profile events, picking Wall Street over South Beach, a representative from the second-largest investment bank confirmed to CNN.
“David decided to stop publicly DJing more than a year ago because of the outside attention to it,” said Goldman spokesman Tony Fratto.
Solomon, who performed under the alias DJ D-Sol, began spinning tracks at festivals and in night clubs a few years ago. “[I] kind of stumbled into it as a hobby, and now I just do it for fun,” Solomon, 61, said on a Goldman Sachs podcast in 2017.
Solomon’s hobby led him to headline a number of high-profile events, including an Amazon event in 2019 and a Sports Illustrated Super Bowl party last year. Last summer, he played at Chicago’s Lollapalooza music festival alongside acts like Metallica, Dua Lipa, Doja Cat and Green Day.
His spinning has also stirred up some controversy.
He opened for The Chainsmokers at a crowded Hamptons charity event in the midst of the Covid-19 pandemic in July 2020. The show prompted an investigation by the New York State Department of Health for what then-Governor Andrew Cuomo called “egregious social distancing violations.”
Solomon apologized to Goldman’s board for participating in the event, according to a Financial Times report.
“The vast majority of the audience appeared to follow the rules, but [Solomon is] troubled that some violated them and put themselves and others at risk,” a Goldman Sachs spokesperson said in a statement at the time.
Solomon’s unorthodox hobby likely caused some head scratching from board members who wondered why he couldn’t just take up golf, but it’s not the main reason the Goldman chief has found himself in hot water lately.
The bank executive, who is celebrating five years at the top, has been accused of poor leadership, and his ability to effectively run the company is being questioned.
His reported potty mouth, lack of collaboration with other executives, emphasis on returning to the office and the recent failure of Marcus, Goldman Sachs’ consumer online banking product, have led colleagues to openly question his future at the company.
“David [Solomon] doesn’t work to play diplomat,” Jeffrey Sonnenfeld, who runs Yale School of Management’s Chief Executive Leadership Institute, recently told CNN. “He’s rough around the edges and he’s a bachelor, which may cause some differences socially.”
Solomon ultimately answers to shareholders, the bank’s board of directors and the bottom line. And while shares of Goldman Sachs (GS) may be down by more than 8.4% this year, they’re still up by about 40% since he took over in 2018.
Goldman Sachs announced third-quarter results on Tuesday morning, reporting earnings of $5.47 per share, which beat the $5.31 expected by analysts. Revenue clocked in at $11.82 billion versus the $11.19 billion expected, according to Refinitiv data.
Still, profit fell by 33% from a year earlier.
“We continue to make significant progress executing on our strategic priorities, and we’re confident that the work we’re doing now provides us a much stronger platform for 2024,” said Solomon.
by tyler | Oct 17, 2023 | CNN, investing
Oil prices rose above $91 a barrel Monday as diplomatic efforts to address the crisis in the Middle East intensified, but slipped back later in the day, falling below $90 on reports that that US was nearing a deal to ease sanctions on Venezuela.
Prices dropped on Monday afternoon after the Washington Post reported that the United States and Venezuela had agreed to a deal that would ease restrictions on Venezuela’s oil industry in exchange for a freer presidential election in the country next year.
Brent crude futures, the international oil benchmark, rose as high as $91 a barrel in Asian hours Monday, up slightly from Friday’s settlement price of $90.89. They were last trading at $89.65 a barrel.
West Texas Intermediate, the US benchmark, briefly rose to $87.98, compared with Friday’s closing price of $87.68. It was last trading at $86.50.
Still, investors are concerned the Israel-Hamas war could spark a wider conflict in the oil-rich region and further tighten global oil supply.
Both futures had surged Friday, after Israel’s military warned more than 1 million people to leave northern Gaza, triggering worries about a potential ground offensive by Israel in retaliation for terror attacks by Hamas that killed at least 1,400 people.
Speaking to CBS Sunday, US National Security Adviser Jake Sullivan said that, while there was no new intelligence that the threat level from Iran had changed, “there is a risk of an escalation of this conflict.”
Analysts at ANZ Research expect oil prices to hit $100 a barrel in the short term because of the growing risk of regional escalation.
Neither Israel nor Gaza is a significant oil supplier, but the risk to oil markets will rise if “the conflict broadens,” they wrote in a research note Friday.
“If [Iran] becomes involved, up to 20 million barrels per day of oil could be at risk of disruption directly and through obstructed logistics,” they added.
The “Middle East risk” is dominating the landscape for global asset prices, said Stephen Innes, managing partner at SPI Asset Management.
“The ongoing conflict could weigh even further on the global oil supply over time by potentially reducing the probability of Saudi-Israeli normalization and posing downside risks to Iranian oil production, leading to a further surge in oil prices,” he said.
Global oil prices had risen since late June as production cuts by Saudi Arabia and Russia fueled worries about reduced global supply. New US measures, unveiled last week, aimed at raising the cost of Russia’s attempts to skirt a cap on the price of its oil might have also driven oil prices higher.
In currency markets, the shekel weakened Monday, hitting less than 4 per US dollar for the first time since 2015. The Israeli currency has tumbled close to 4% in the past 10 days.
Israel’s central bank said last week that it planned to sell up to $30 billion of foreign exchange to stabilize the shekel after it fell sharply following the Hamas attacks.
US stocks, meanwhile, closed higher on Monday as investors appeared to shrug off fears of growing geopolitical tension in the Middle East. The Dow closed 314 points, or 0.9%, higher; the S&P 500 was up 1.1% and the Nasdaq Composite gained 1.2%.
— Nicole Goodkind contributed to this story.
by tyler | Oct 12, 2023 | CNN, investing
The third-quarter earnings season begins on Friday, marking the next test for this year’s wobbly US stock market rally.
Investors had a low bar for earnings during the first half of the year, making it easier for companies to handily beat expectations, but that bar’s getting higher for the back half of the year.
The benchmark S&P 500 index has slid roughly 5% from its most recent peak in late July, as hot economic data, signs of inflation edging up and the Federal Reserve’s indication that it will keep interest rates higher for longer spooked investors and sent bond yields surging.
“Investor sentiment is fickle. If companies fail to beat loftier future earnings expectations this quarter, faltering sentiment could send stocks reeling,” wrote Michael Arone, chief investment strategist at State Street Global Advisors’ US exchange-traded funds business, in a note.
Analysts expect a 0.4% year-over-year decline in third-quarter earnings for companies in the S&P 500 index, according to FactSet. If that pans out, it’ll mark the fourth consecutive quarter of earnings declines for the index.
On the other hand, a lack of corporate news recently has helped stoke the uncertainty brewing in the market, says Jay Hatfield, chief executive at Infrastructure Capital Management. That means that as investors hear straight from the horse’s mouth what’s going on, some fear could ease and in turn lift stocks.
“We were cautious while earnings season was not going on, and now we’re getting bullish,” Hatfield said.
Banks commence the earnings season. A slew of big banks report Friday, most notably economic bellwether JPMorgan Chase. Analysts expect America’s biggest bank to report earnings per share of $3.90 and revenue of $39.57 billion for the third quarter, according to Refinitiv.
The bank’s performance so far this year bodes well for its ability to meet those expectations — which in turn could set up a promising start for third-quarter earnings season.
JPMorgan Chase reported record revenue of $41.3 billion last quarter and earnings of about $4.37 per share, excluding significant expenses like its purchase of collapsed regional lender First Republic Bank. That came after the bank roundly beat profit and revenue expectations for the first quarter.
Investors will also be on alert for comments from chief executive Jamie Dimon about the state of consumer spending, as worries that the Fed’s higher-for-longer interest rate stance could squeeze the economy loom over Wall Street.
Dimon said last quarter that consumer spending remains healthy despite cash buffers slowly draining. But he also warned that the economy faces several challenges that threaten its resilience, including inflation, high US government debt and the Fed’s efforts to shrink its balance sheet and tame inflation.
“I don’t know if it’s going to lead to a soft landing, a mild recession or a hard recession,” Dimon said during a July call with journalists.
Citigroup, Wells Fargo and BlackRock also report earnings Friday.
ExxonMobil has agreed to buy Pioneer Natural Resources, a major shale oil producer in a deal that will more than double Exxon’s footprint in the Permian Basin in the southwest United States, reports my colleague Chris Isidore.
Though it’s the largest US oil company, ExxonMobil was relatively slow to develop shale oil as the rest of the industry used it to greatly increase US oil production in the last decade. Pioneer is the largest producer in the Permian Basin, with 850,000 net acres in the area around Midland, Texas. ExxonMobil has 570,000 net acres in the Delaware and Midland Basins.
ExxonMobil’s Permian production volume would more than double to the equivalent of 1.3 million barrels of oil a day as a result of the deal, according to the company.
“Pioneer is a clear leader in the Permian with a unique asset base and people with deep industry knowledge. The combined capabilities of our two companies will provide long-term value creation well in excess of what either company is capable of doing on a standalone basis,” said ExxonMobil CEO Darren Woods.
Read more here.
Two new bills meant to protect children’s mental health online by changing the way they are served content on social media and by limiting companies’ use of their data will be introduced in the New York state legislature, state and city leaders said Wednesday.
New York Gov. Kathy Hochul and New York Attorney General Letitia James made the announcement at the headquarters of the United Federation of Teachers Manhattan, joined by UFT President Michael Mulgrew, State Sen. Andrew Gounardes, Assemblywoman Nily Rozic and community advocates.
“Our children are in crisis, and it is up to us to save them,” Hochul said, comparing social media algorithms to cigarettes and alcohol. “The data around the negative effects of social media on these young minds is irrefutable, and knowing how dangerous the algorithms are, I will not accept that we are powerless to do anything about it.”
The “Stop Addictive Feeds Exploitation (SAFE) for Kids Act” would limit what New York officials are calling the harmful and addictive features of social media for children, report my colleagues Athena Jones and Brian Fung.
The act would allow users under 18 and their parents to opt out of receiving feeds driven by algorithms designed to harness users’ personal data to keep them on the platforms for as long as possible. Those who opt out would receive chronological feeds instead, like in the early days of social media.
Read more here.
by tyler | Oct 9, 2023 | CNN, investing
Oil prices surged while stock markets and the Israeli currency fell at the start of the week as investors reacted to war between Hamas and Israel.
Although Israel is not a major oil producer, escalating tensions in the oil-rich Middle East spooked investors who had been selling off oil in recent weeks.
Inflation, fear of a global economic downturn and a correction to prices that were surging in recent months had sent US oil down from around $95 a barrel in late September to just above $80 last week.
But on Monday, US oil prices traded 4% higher above $86. Brent crude, the global benchmark, was also up almost 4%, trading at nearly $88 a barrel.
Israel formally declared war on Hamas Sunday after the Islamist militant group launched its deadly surprise assault Saturday.
More than 700 people have been killed in Israel, and more than 400 Palestinians have been killed, according to authorities.
“With the Israeli government warning of a long and difficult war, there are concerns that deep and incessant retaliative strikes on Gaza could potentially bring Iran into the conflict and have an impact on the flow of energy in the region,” Susannah Streeter, head of money and markets at Hargreaves Landsdown, wrote in a note.
On Monday, the Israeli shekel weakened to 3.92 to the US dollar, its worst level since 2016.
Israel’s central bank said it would sell up to $30 billion worth of foreign currencies to stabilize the currency and to “provide the necessary liquidity for the continued proper functioning of the markets.”
In a statement, the Bank of Israel said it would provide an additional $15 billion of support if needed, saying it would “continue monitoring developments, tracking all the markets, and acting with the tools available to it as necessary.”
In equity markets, US stocks, which surged Friday on a surprisingly strong American job market report, were mixed, but relatively unchanged after ticking down earlier in the session.
The Dow opened lower but by midday Monday it was up by 39 points, or 0.1%. The S&P 500 added 0.05% and the Nasdaq Composite declined 0.3%.
Global investors fear the conflict in Israel could spill over to the wider region, and that prolonged tensions in the Middle East could hurt the fragile global economic recovery.
European stocks also fell at the open Monday as traders digested the news. But they later steadied a little, with France’s CAC 40 index falling 0.6%, while Germany’s DAX index dipped 0.7%. London’s FTSE 100 inched up 0.03%, propped up by gains in the shares of oil companies.
In Asia, initial reaction among investors was mixed.
In mainland China, the Shanghai Composite slipped 0.4% after it reopened following a holiday week. Meanwhile, Australia’s S&P/ASX 200 ended 0.2% higher.
Hong Kong’s Hang Seng index ticked up 0.2% when trading resumed following a morning suspension due to a typhoon, while markets in Japan and South Korea were closed for holidays.
The key question for markets now “is whether the conflict remains contained or spreads to involve other regions, particularly Saudi Arabia,” analysts at ANZ wrote in a report Monday.
“Initially at least, it seems markets will assume the situation will remain limited in scope, duration, and oil price consequences. But higher volatility can be expected.”
— Robert North and Krystal Hur contributed to this report.
