Market Brief: July 16, 2020

A daily summary of news, analysis and data shaping the market.
Market Brief
Thursday, July 16, 2020
Dow Snaps Winning Streak. Stocks ended modestly lower on Thursday after mixed corporate earnings and economic data struggled to offer an impetus for additional gains. The Dow Jones Industrial Average shed 135 points, or 0.5%, to finish near 26,735, putting an end to its four-day winning streak. The S&P 500 fell 0.3% to 3216. The Nasdaq Composite closed 0.7% lower at 10,474. Tech companies led the market decline, with Amazon and Microsoft taking a breather from their sharp rally this year. In data, first-time U.S. jobless claims for the week ending July 11 were down only 10,000 compared with the previous week, suggesting the labor market was still under strain. In China, an unexpected fall in retail sales spooked investors.
DJIA 26,734.71 -135.39
S&P 500 3,215.57 -10.99
NASDAQ 10,473.83 -76.66
US 10-Year Note 0.62 -0.01
Dollar Index 96.33 0.25
Crude Oil 40.70 -0.50
Gold 1,796.30 -17.50
Global Dow 2,949.33 -12.44
Powered by Dow Jones Research, FactSet, Eurostat, SIX Financial Information.
Retail Sales Spiked in June. Since Then, Coronavirus Cases Have Spiked, Too.
Retail sales increased at a better-than-expected clip in June from May. And even better, sales were also up from a year earlier. The same cloud, however, hangs over this report as it has others this month: The data were collected before coronavirus cases began to spike anew.

U.S. retail and food-services sales jumped a seasonally adjusted 7.5% in June, the Census Bureau said Thursday, better than the 5.4% increase economists polled by FactSet predicted. Investors have gotten used to sizable increases in economic gauges from depressed levels in April and May, when the economy was virtually shut down and slowly reopening. But the fact that retail sales rose 1.1% in June from 2019’s level suggests some real strength beyond just favorable month-over-month comparisons.

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1.3 Million Americans Filed New Jobless Claims Last Week
In the week ending July 11, the Labor Department said there were 1.3 million first-time claims for unemployment benefits on a seasonally adjusted basis, down 10,000 from the previous week’s revised level. The four-week moving average of initial claims was 1.375 million, down from 1.435 million for the previous week. Initial claims have now exceeded the 1 million threshold for 17 straight weeks.

An additional 928,000 workers sought Pandemic Unemployment Assistance—representing gig workers and others not normally eligible for jobless benefits—in the latest week.

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Morgan Stanley’s Strong Results Stand Out
A surge in trading activity allowed Morgan Stanley to be the rare bank to see a year-over-year gain in profits as lenders struggle with the pandemic.

The investment bank reported profits of $3.2 billion, or $1.96 per share, in the second quarter, beating profits of $2.2 billion in the year-earlier period. Revenue popped to $13.4 billion—a $3.2 billion jump from last year.

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Bank of America’s Better-Than-Expected Earnings Are Still Down From a Year Ago
Bank of America shares dropped on Thursday even though the giant lender reported better-than-expected earnings.

The bank, led by CEO Brian Moynihan, posted profits of $3.5 billion, or $0.37 a share, beating expectations of earnings of $0.27 per share. But profits were down by more than half from the year-ago quarter, when the bank earned $7.3 billion. Revenue also took a hit in the second quarter, coming in at $22.3 billion, just under the $23.1 billion recorded a year earlier.

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Facebook, Other Tech Companies Could Face Pressure After EU Court Ruling
In what could turn out to be a major blow to the technology sector, the European Court of Justice on Thursday struck down Privacy Shield, a cross-border legal agreement that governs data transfers from the European Union to the U.S. The court found that Privacy Shield fails to adequately protect Europeans from weak U.S. consumer-data-privacy laws.

The ruling could cause considerable issues for tech companies like Facebook, Alphabet, and that routinely store and process data generated by European customers on U.S. servers, where they could be subject to surveillance by U.S. government authorities. More than 5,000 companies rely on the Privacy Shield agreement for cross-border data transfers.

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Twitter Suffers High-Profile Hack
A day after what was the most high-profile security breach in Twitter’s history, details remain scarce.

The company said late Wednesday in a series of tweets that hackers used some form of deception to gain access to its systems and tools normally reserved for employees—and used them to send messages asking for bitcoin from dozens of verified accounts, including those of celebrities, politicians, business tycoons, and some tech giants’ corporate accounts.

Twitter hasn’t yet disclosed details on how the attackers breached its security and exactly what the breach—known as a social-engineering attack—looked like, though it has said it is continuing to investigate the matter. U.S. lawmakers have also raised questions about the attack and asked Twitter to disclose what occurred in detail.

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American Airlines and JetBlue Team Up
JetBlue Airways and American Airlines Group are forming an alliance in which they plan to code-share flights and integrate some of their networks. It could be a sign of industry consolidation as carriers try to regain profitability in a world of sharply reduced air travel.

JetBlue and American said their partnership, announced Thursday, will include code-sharing and network cooperation. JetBlue will add more than 60 routes to its network with flights operated by American, expanding JetBlue’s presence across the three major airports in the New York region. JetBlue plans to add flights at LaGuardia and Newark and increase its presence at JFK to connect to international flights run by American.

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Target Is Latest Big Retailer to Require Customers to Wear Masks
Target said Thursday it will require customers to wear face coverings in all of its stores starting next month, following the moves by its biggest rivals Walmart and Kroger a day earlier.

The retail chain will mandate face coverings to help prevent the spread of coronavirus for all store visitors except for those with underlying medical conditions and young children starting on Aug. 1, a Target spokesperson said in a statement to Barron’s.

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Johnson & Johnson Beats Earnings Expectations, Raises Guidance
Johnson & Johnson announced second quarter financial results on Thursday morning that beat Wall Street’s expectations, reporting earnings per share of $1.67, just over the S&P Capital I.Q. Consensus estimate of $1.51. The company also raised its guidance for the 2020 fiscal year, saying it now expects earnings per share of between $7.75 and $7.95, up from its previous projection of between $7.50 and $7.90.

Yet sales were $18.3 billion for the quarter, 10.8% less than the same quarter last year. Shares of Johnson & Johnson traded lower for much of Thursday’s session but moved into positive territory late in the session.

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Domino’s Posts Better-Than-Expected Results
Pick up or delivery? It doesn’t matter. No matter how U.S. consumers choose to get their pizza pies, they are getting a lot of them. Just look at Domino’s Pizza.

The restaurant chain crushed second-quarter earnings estimates on Thursday. Domino’s earned $2.99 a share from $920 million in sales. Analysts were looking for $2.25 a share from $912 million in sales. It is the largest earnings “beat” since, well, the first quarter, when earnings exceeded analyst estimates by 32%. U.S. same-store sales, a key metric for any retail operation, advanced more than 16% year over year.

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