The Dow Jones, S&P 500 index and Nasdaq composite were little changed for the week amid mixed earnings and President Donald Trump’s headlines and tweets. Netflix (NFLX) earnings topped views, but subscriber growth and guidance fell well short, sending shares tumbling. Amazon.com (AMZN) Prime Day appeared to be a hit, despite some early glitches. The European Union slapped a big fine vs. Alphabet (GOOGL) unit Google. ASML (ASML), United Airlines (UAL), CSX (CSX) and Abbott Laboratories (ABT) were notable breakouts on earnings. Microsoft (MSFT) jumped on strong earnings and guidance, but Alcoa (AA) said steel and aluminum tariffs are hurting the company.
Stocks Edge Higher
The Dow Jones, S&P 500 index and Nasdaq composite were little changedfor the week, though the Nasdaq marked a fresh high Tuesday and the S&P 500 set at a five-month best. Netflix was a big loser, but Microsoft, ASML, United Airlines and CSX shined, with Amazon Prime Day a success.
Netflix Misses Q2 Subscriber Target, Guides Lower
Internet television network Netflix added 5.2 million subscribers, missing its target by 1 million. Netflix earned 85 cents a share on sales of $3.91 billion in the June quarter. Analysts expected the company to earn 79 cents a share on sales of $3.94 billion. It also guided below views for the current quarter. Netflix forecast earnings per share of 68 cents on sales of $3.99 billion in the September quarter. Wall Street was modeling for Netflix to earn 73 cents a share on sales of $4.13 billion in the third quarter. Netflix tumbled nearly 9% for the week, breaking 50-day line support.
Microsoft Beats Forecasts On Cloud Strength
Microsoft earnings rose 7% vs. a year earlier, topping fiscal Q4 views. Revenue climbed 17% to $30.1 billion, the second-straight quarter of accelerating growth, fueled by cloud services demand. The Dow Jones software giant also gave strong guidance for the current quarter. Microsoft rose 1.8% on Friday. Earlier, Microsoft won a five-year cloud services contract from Walmart (WMT) as both vie with e-commerce giant Amazon.com.
Amazon Prime Day
Amazon called Prime Day its biggest shopping period, despite early glitches, as the stock hovered near a record high. Top sellers included Amazon-branded goods such as the Echo Dot smart speaker and Fire TV Stick. The company does not release specific sales figures for Amazon Prime Day, but analysts think sales approached $3.4 billion over the 36-hour event. That compares with an estimated $2.4 billion in 2017. Amazon said small- and medium-size businesses selling on its website far exceeded $1 billion in sales on Prime Day.
EU Fines Alphabet $5 Billion Over Android
Google parent Alphabet plans to appeal a record $5 billion fine. The European Union says Google used its Android mobile phone operating system to bully smartphone makers to pre-install its suite of apps in order to gain access to the Google Play store. Google has $105 billion in net cash and can easily pay the fine if it loses the appeal, which could take years. Analysts say consumers will likely download apps such as Gmail, Chrome, Maps, YouTube, Drive and Photos on their own. Google paid a separate $2.7 billion EU fine over shopping-search results last year.
Boeing Is Top Gun At Farnborough Airshow
Boeing (BA) wrapped up the Farnborough Airshow with orders and commitments for 673 commercial airplanes beating Airbus‘ (EADSY) 431 orders and commitments. Narrow-body orders dominated and cargo freighters were a bright spot after a disappointing year in 2017. But many major deals came from unidentified customers, at a higher rate than usual for air shows. Analysts believe many of the mystery orders were from Chinese carriers. The defense side was quieter than usual. The U.S. didn’t show up with as much firepower as expected, according to analysts. The U.K. debuted the Tempest, its sixth-generation fighter concept, as London shifts away from buying American to producing locally.
Powell Sticks To Gradual Fed Rate Hikes
Federal Reserve Chairman Jerome Powell said that gradual Fed rate hikes are the right idea “for now,” even as the Treasury yield curve flattens to post-recession lows. He voiced some concern about President Trump’s trade war and backed up the Fed’s Beige Book. Meanwhile, Trump criticized Fed rate hikes multiple times.
Industrial production remains strong, though the Philly Fed manufacturing index saw the prices-paid index pop to a 10-year higher. Retail sales rose solidly last month.
ASML, Skyworks Beat Views; TSMC Disappoints
Chip gear maker ASML Holding (ASML), Mellanox Technologies (MLNX) and Apple (AAPL)-supplier Skyworks Solutions (SWKS) kicked off the second-quarter earnings season with upbeat reports. But Taiwan Semiconductor Manufacturing (TSM) disappointed with a mixed Q2 report and cautious guidance. Taiwan Semi, the world’s largest contract chipmaker, cut its full-year sales outlook on a slowdown in demand for cryptocurrency mining and smartphones. Taiwan Semi makes chips for companies like Apple, Nvidia (NVDA) and Qualcomm (QCOM), so it’s seen as a chip and tech bellwether. TSMC stock still jumped while chip-gear giant ASML broke out. Mellanox was little changed while Skyworks sold off despite strong guidance.
CSX Booms On Earnings As Rail Rivals Also Report
Railroad giant CSX powered into a buy zone after reporting that EPS jumped 58%, while revenue climbed 6% to $3.1 billion. Canadian Pacific Railway (CP) also advanced after a double beat, but Union Pacific (UNP) fell back even after earnings came in above estimates. Kansas City Southern (KSU) earnings topped but missed on revenue.
UnitedHealth Group (UNH) comfortably beat Wall Street EPS views, earning $3.14 a share, up 28% from a year ago, while posting in-line revenue growth of 12%. The diversified health care giant, whose success has CVS Health buying Aetna and Cigna buying Express Scripts, saw its shares briefly knocked out of a buy zone before paring its losses. On Thursday, UnitedHealth dipped as the Trump administration said that its plan to take on pharmacy benefit managers, the drug industry middlemen, will be “economically significant.”
Alcoa Warns On Trump Tariffs
Alcoa stock plunged 15% after the aluminum giant cut its outlook, in part due to President Trump’s tariffs on steel and aluminum. Q2 earnings exploded by 145% while revenue jumped 25% to $3.579 billion, both beating. Meanwhile steelmaker Nucor‘s (NUE) EPS vaulted 107% as revenue soared $6.461 billion, fueled by Trump tariffs on steel. But those missed raised guidance, sending shares lower Thursday.
American Express Revenue Misses
American Express (AXP) fell slightly short of analysts’ revenue expectations, with sales rising 20% to $10.002 billion. Profit topped by a penny, growing 25% to $1.84 a share. Shares fell 2.7% Thursday after nearly hitting a buy point on Wednesday, but were just slightly lower for the week. Capital One (COF), which fell Thursday with AmEx, soared Friday as earnings and revenue easily beat.
Intuitive Surgical Earnings Soar 38%
Robot surgery systems maker Intuitive Surgical (ISRG) reported adjusted income of $2.76 per share on $909 million in sales, topping consensus expectations and rising a respective 38% and 19.8%. Intuitive Surgical stock hit a new high Friday morning but reverse to close down 0.9%.
Goldman’s Blankfein To Exit Sept. 30
Goldman Sachs‘ (GS) Lloyd Blankfein will exit as CEO on Sept. 30, replaced by President and co-COO David Solomon. Blankfein will retire as chairman at year-end. The bank’s Q2 results also beat estimates, but equity trading was flat. Bank of America (BAC) and Morgan Stanley (MS) also topped expectations.
Drugmakers Top Views, Curb Prices
Abbott Laboratories and Novartis (NVS) both topped second-quarter views on Wednesday. Abbott Labs hit a buy point after raising full-year earnings estimates. Novartis core earnings edged past views. The Swiss giant kept its full-year outlook despite announcing that it won’t raise U.S. drug prices through year-end, as President Trump pressures Big Pharma. Merck (MRK) and other drugmakers also joined Novartis and Pfizer (PFE).
Schlumberger, Baker Hughes Results So-So
Schlumberger (SLB) earnings met analyst forecasts, but revenue missed amid costly new projects and some delays. Baker Hughes‘ (BHGE) equipment-unit revenue tumbled. Crude prices continued to retreat as Treasury Secretary Steven Mnuchin said the U.S. may extend waivers to some companies or countries to do business with Iran. The Energy Information Administration said U.S. output hit 11 million barrels per day. Domestic stockpiles increased by 5.8 million barrels vs. the 3 million-barrel drop analysts expected.
GE Stock Dives On Power Woes
General Electric (GE) earnings fell 32% to 19 cents a share while revenue rose 2% to $30.10 billion. But GE now sees 2018 free cash flow near the bottom of its $6 billion to $7 billion target, as its Power business continues to struggle GE stock fell sharply on Friday. Honeywell (HON) EPS increased 18% to $2.12 as sales climbed 8% to $10.92 billion. Honeywell raised its full-year EPS target. Honeywell soared Friday, clearing both the 50-day and 200-day moving averages.
News In Brief
Dow Jones component Johnson & Johnson (JNJ) topped estimates with $20.83 billion in sales and adjusted earnings of $2.10 per share.
Amazon and Cisco (CSCO) both denied a report that Amazon Web Services was going to invade Cisco’s turf by developing network switches.
United Airlines raised its full-year earnings-per-share outlook, even as higher fuel prices threaten to crimp airlines’ profits. The carrier cited cost controls and confidence in its expansion plan, which includes more flights to smaller cities. Shares jumped to a buy zone.
VF earnings leapt 48% to 43 cents a share. The parent of The North Face, Vans, Timberland and other top brands also topped revenue views. Shares of the apparel maker and retailer jumped to a new high.
Domino’s Pizza (DPZ) revenue and same-store sales fell short, sending shares lower.
Tilray (TLRY), a Canadian pot producer, became the first pure marijuana-industry IPO on a big U.S. exchange after pricing late Wednesday at $17. Tilray rallied 30% in Thursday’s debut, then soared 33% Friday.
Shares of eBay (EBAY) tumbled 9% after missing on revenue and guiding low for Q3.
Tech billionaire and Tesla (TSLA) Chief Executive Elon Musk apologized to a British diver involved with the cave rescue for calling him “pedo guy” in a tweet over a dispute, suggesting the diver was a pedophile.
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