Market Brief: July 31, 2020

A daily summary of news, analysis and data shaping the market.
Market Brief
Friday, July 31, 2020
Tech Earnings Lift Market. Stocks ended slightly higher Friday, with the S&P 500 and Dow Jones Industrial Average erasing earlier losses in late trade as shares of Apple built on gains to rally more than 10% after it and other tech giants delivered blowout earnings results the previous evening. The Dow ended with a gain of around 115 points, or 0.4%, near 26,428, according to preliminary figures, while the S&P 500 advanced around 25 points, or 0.8%, to close near 3271. The tech-heavy Nasdaq Composite jumped around 157 points to finish near 10,745, a gain of 1.5%. For the month, the Dow rose 2.4%, while the S&P 500 advanced 5.5% and the Nasdaq Composite gained 6.8%.
DJIA 26,428.32 114.67
S&P 500 3,271.12 24.90
NASDAQ 10,745.27 157.46
US 10-Year Note 0.53 -0.02
Dollar Index 93.46 0.44
Crude Oil 40.42 0.50
Gold 1,991.00 48.70
Global Dow 2,920.20 -29.48
Powered by Dow Jones Research, FactSet, Eurostat, SIX Financial Information.
Americans Slowed Spending as Income Fell in June. That’s Before Covid Cases Spiked Anew.
Personal income fell and spending slowed in June even before coronavirus cases began to surge again in July and prompt an increase in layoffs.

The Bureau of Economic Analysis said Friday that income across American households declined 1.1% in June from May, slightly worse than the 0.8% rate of decline economists polled by FactSet predicted. That’s as government aid payments (the one-time checks) fell from May, partially offset by increases in compensation as businesses reopened and rehired.

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Exxon Misses Expectations and Says It Won’t Take on More Debt
Exxon Mobil missed analysts’ earnings expectation in the second quarter, posting a wider-than-expected loss as Covid-19 lockdowns and global oil oversupply hurt results.

Exxon reported on Friday an adjusted loss of 70 cents a share, versus the consensus analyst expectation for a 62-cent loss. Its revenue of $32.6 billion also missed expectations for $38.2 billion. Shares traded lower on Friday.

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Chevron Misses Earnings Expectations Amid Large Write-Downs
Chevron missed analysts’ earnings expectations for the second quarter after posting an $8.3 billion loss and writing down the entire value of its Venezuelan operations.

The company posted an adjusted loss of $3 billion, or $1.59 per share, versus analysts expectation for a 93-cent loss. Its revenue of $13.5 billion also missed expectations for $21.9 billion.

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Apple Reports Strong Earnings, Announces Stock Split
Apple late Thursday posted second-quarter results that crushed Street estimates, and announced a 4-for-1 stock split.

Apple reported revenue for its fiscal third quarter ended June 30 of $59.7 billion, up 11% from a year ago, and well ahead of the Wall Street analyst consensus at $52.1 billion. Profits were $2.58 a share, soaring past the Street consensus at $2.09.

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Facebook Stock Is Up Because Analysts Are Praising Its Upbeat Earnings
Facebook stock surged nearly 8% in Friday trading, as analysts applauded the company’s robust second-quarter earnings report. Wall Street argues that results demonstrate the company’s ongoing value, despite numerous headwinds.

Facebook’s earnings and sales came in ahead of investor expectations, and it was a welcome relief. The social media firm faces a huge boycott from advertisers, a congressional antitrust investigation, and questions about its role in the coming presidential election.

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Amazon Crushes Earnings Estimates
With a huge boost from the accelerated adoption of e-commerce amid the Covid-19 pandemic, Amazon. com posted second quarter financial results that dramatically beat Wall Street’s estimates and the company’s own guidance.

For the quarter, Amazon reported sales of $88.9 billion, well ahead of the company’s own guidance range of $75 billion to $81 billion. Profits were $5.2 billion, or $10.30 a share, about five time the Wall Street analyst consensus at $2.09 a share. Operating income was $5.8 billion, far above the company’s expectations for a break-even quarter.

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Alphabet Beats Earnings Estimates Despite a Decline in Google Search Advertising
Similar to the other large tech companies that reported earnings Thursday, Alphabet’s business is holding up relatively well during the Covid-19 pandemic.

Wall Street had scaled back expectations for the search titan after the coronavirus pandemic spread across the world. The company topped those new estimates, and Alphabet reported second-quarter net income of $6.96 billion, which amounts to $10.13 a share, compared with a profit of $9.95 billion, or $14.21 a share, in the year-ago period. Revenue fell 2% to $38.3 billion from $38.94 billion a year ago.

The company’s YouTube ad unit was the sole bright spot amid its advertising-driven segments, growing to $3.81 billion from $3.6 billion in the year-ago quarter. The remainder of Alphabet’s advertising sales fell compared with a year ago, including its search ads and display network.

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Caterpillar’s Earnings Beat Forecasts, but Analysts Didn’t Expect Much
Caterpillar reported second-quarter numbers that cruised by reduced expectations, triggering an initial sigh of relief among investors. Cat stock was up 1.3% in premarket trading, but shares faded when the market opened. Shares closed about 2.8% lower on Friday. The industrial economy still isn’t out of the woods.

Caterpillar earned $1.03 a share from $10 billion in sales. Wall Street was looking for 64 cents in per-share earnings from $9.3 billion in sales. It’s a big outperformance relative to expectations for earnings. Still, the actual results were hard-hit by the pandemic: Sales and earnings fell 31% and 64% year over year, respectively.

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Under Armour Closes Lower Despite a Smaller-Than-Feared Loss
Under Armour traded lower Friday—following a short-lived pop higher—even though the athletic gear maker’s second-quarter earnings report wasn’t as bad as many investors feared. The Covid-19 pandemic nearly halved sales.

Under Armour said it lost $182.9 million, or 40 cents a share, compared with a loss of 4 cents per share in the year-ago period. On an adjusted basis, Under Armour lost 31 cents a share, as revenue fell 41% year over year to $707.6 million. Analysts were looking for a per-share loss of 41 cents on revenue of $537 million.

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Glaxo and Sanofi Will Sell 100 Million Vaccine Doses to the U.S. for Less Than $10.50 Each
The European drugmakers Sanofi and GlaxoSmithKline announced on Friday morning a $2.1 billion deal with the U.S. government for 100 million doses of the Covid-19 vaccine the two companies are developing.

The companies said that “more than half” of the $2.1 billion was meant to support development and clinical trials of the experimental vaccine, while the rest would be for manufacturing and delivery of the 100 million doses.

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