ReportWire

Tag: Business/Consumer Services

  • ‘The Fed will take comfort from moderating job growth’ — economists react to July’s employment report

    ‘The Fed will take comfort from moderating job growth’ — economists react to July’s employment report

    [ad_1]

    The July jobs report on Friday showed the U.S. economy gained 187,000 jobs last month, with the unemployment rate dipping to 3.5% from 3.6%.

    Economists polled by The Wall Street Journal had expected an addition of 200,000 jobs and unemployment staying at 3.6%.

    See: U.S. adds 187,000 jobs in July

    Below are some initial reactions from economists and other analysts, including their views on what the jobs report means for the Federal Reserve as the central bank considers how to proceed with interest-rate hikes. U.S. stocks
    ES00,
    +0.48%

    SPX
    looked set to trade up modestly following the data on nonfarm payrolls.

    • “The Fed will take comfort from moderating job growth, but will continue to fret about the tight labor market. So far, the July employment and CPI reports are a wash for the Fed’s September 20 decision (we expect no change in rates), placing extra pressure on the August releases to add some clarity.” — Sal Guatieri, senior economist at BMO Capital Markets, in a tweet

    • “This month’s slow job growth is a sign the economy is continuing to cool; while a negative in some senses, this is a positive indicator for the Fed and may soon end its interest rate hikes. … Moving forward, we anticipate the unemployment rate will remain low.  We also expect unemployment will rise to its natural long-run rate of 4.5% over the next two years.” — Steve Rick, chief economist at TruStage, previously known as CUNA Mutual Group, in a note

    • “Since bad news is good news these days, Jay Powell will be smiling this morning, if not entirely happy. The below consensus reading in hiring in the July payrolls is the type of labor market softening the Fed is looking for. … But there were some more mixed elements in the report as well. The unemployment rate ticked down a notch to 3.5% and average nominal wages grew 0.4% for the second consecutive month. The Fed will continue to be looking for a broader set of data and will be focused on a further deceleration in prices before throwing in the towel for September.” — Ali Jaffery, economist at CIBC, in a note

    • “The wage data is stronger than the payroll data, suggesting that demand for labor is still robust, and that the slowing pace of hiring is more due to a lack of supply of labor. [Average hourly earnings] rose 0.4% in July, same as May and June. AHE Y/Y was steady at +4.4%. This, combined with the firmer household survey data, should keep the Fed on their toes for another rate hike as soon as next month, but the [consumer price index] data next week will have a big influence in that decision as well.” — Thomas Simons, U.S. economist at Jefferies, in a note

    • “If you were to write the script of what a soft landing looks like, this is it. Payrolls grew a strong +187k, signaling a slower yet still strong — and more sustainable —pace.” — Justin Wolfers, University of Michigan economics professor, in a tweet

    [ad_2]

    Source link

  • Apple’s Tim Cook explains why he won’t showboat around AI

    Apple’s Tim Cook explains why he won’t showboat around AI

    [ad_1]

    ““We tend to announce things as they come to market, and that’s our M.O.””


    — Apple CEO Tim Cook

    If Apple Inc.’s Thursday earnings call sounded a bit different than other recent ones from Big Tech players, perhaps that was due to a noticeable lack of artificial-intelligence discussion.

    In fact, AI didn’t come up at all on Apple’s
    AAPL,
    -0.73%
    call until an analyst brought up the topic in the question-and-answer portion, commenting that Apple executives “don’t talk too much” about their AI strategy or investments, unlike many tech peers.

    See also: Apple sees sales decline for third quarter in a row — and says performance could be similar this quarter

    “If you take a step back, we view AI and machine learning as core fundamental technologies that are integral to virtually every product that we build,” Chief Executive Tim Cook replied. AI helps power recently announced software features like live voicemails and the ability to replicate your voice digitally, as well as somewhat older features like automatic crash detection and fall detection.

    AI technology has been “absolutely critical to us,” Cook said, and Apple has “been doing research across a wide range of AI technologies, including generative AI, for years,” something the company plans to continue.

    But don’t necessarily expect Apple to start showboating around its AI efforts going forward: Cook said that Apple’s “M.O.” simply is to announce products when they’re ready for consumers.

    “Apple’s reticence in being dragged into the AI hype is on-brand,” Forrester principal analyst Dipanjan Chatterjee said in emailed comments. “A maniacal focus on what Apple does for its customers and not how it does it is rooted so deeply in the brand’s DNA.”

    In all, there were just six mentions of AI or artificial intelligence on Apple’s earnings call, all of which came during the Q&A exchange with Deutsche Bank analyst Sidney Ho. Compare that to 90 mentions of those terms on Alphabet Inc.’s
    GOOG,
    +0.10%

    GOOGL,
    +0.05%
    earnings call last week, 73 mentions on Microsoft Corp.’s
    MSFT,
    -0.26%    ,
    and 62 mentions on Meta Platforms Inc.’s
    META,
    -0.36%    ,
    according to MarketWatch’s review of transcripts provided by AlphaSense/Sentieo.

    Read: Microsoft and Google can’t stop talking about AI, and this chart proves it

    Amazon.com Inc.
    AMZN,
    +0.55%    ,
    which joined Apple in posting results Thursday, falls somewhere in the middle. The topic of AI garnered 34 mentions on Amazon’s call.

    Whereas Apple has been consistent with its scant mentions of the technology, Amazon executives have been ramping up the rhetoric: AlphaSense/Sentieo data shows just one AI mention on the earnings call Amazon held in February 2022, and then no mentions until the term came up 12 times on its April 2023 call. Volume was of course up considerably from there on Thursday’s call.

    See also: The ‘stabilization’ of AWS may have been the most significant number for Amazon’s earnings

    [ad_2]

    Source link

  • The ‘stabilization’ of AWS may have been the most significant number for Amazon’s earnings

    The ‘stabilization’ of AWS may have been the most significant number for Amazon’s earnings

    [ad_1]

    For weeks, Wall Street had been closely eyeing the performance of Amazon Web Services: Would it rise more than 10% in year-over-year sales?

    It did, and then some, on Thursday when Amazon.com Inc.
    AMZN,
    +0.55%
    announced its quarterly results, boosting company shares more than 9% in after-hours trading.

    Read more: Amazon beats expectations on domestic e-commerce sales, AWS; stock jumps

    Sales for Amazon’s market-leading AWS jumped 12%, to $22.1 billion, offering proof of its “stabilization” after several rough quarters, Jefferies analyst Brent Thill told CNBC late Thursday. More important, it signals healthier days — for now — in the cloud market amid a stampede for generative-AI services and concerns about Amazon’s place in it.

    “I am bullish on AWS’s growth,” Amazon Chief Executive Andy Jassy said in a conference call with analysts late Thursday, in which he predicted AWS would become a $100 billion business within several years.

    Last week, Microsoft Corp. 
    MSFT,
    -0.26%
    said it expected revenue growth from Azure and other cloud services to continue cooling in the current quarter. Meanwhile, Alphabet Inc.’s 
    GOOGL,
    +0.05%

    GOOG,
    +0.10%
    Google Cloud revenue grew 28%, topping Wall Street estimates.

    Maribel Lopez, founder and principal analyst at Lopez Research, called Amazon’s cloud revenue “surprising” and resilient despite cost optimization among enterprise buyers. “Upcoming AI workloads should keep [Amazon] in a similar top-line growth trajectory, but the challenge will be keeping the cost to serve down,” she said in an email. “The new chipsets will assist with cost containment. Overall, the AI business will provide a bright light in the cloud market.” 

    Although Thill and other analysts openly wonder how AWS will adapt in the age of AI, the company’s second-quarter sales figures heartened Amazon’s top boss, who knows a thing or two about the cloud-computing industry.

    “Our AWS growth stabilized as customers started shifting from cost optimization to new workload deployment, and AWS has continued to add to its meaningful leadership position in the cloud with a slew of generative AI releases that make it much easier and more cost-effective for companies to train and run models,” the embattled Jassy, who previously ran AWS, said in a statement Thursday, announcing the results.

    Underscoring the importance of AWS, it was mentioned 49 times in Amazon’s second-quarter earnings release, mostly cited in customer use cases.

    [ad_2]

    Source link

  • Warren Buffett Isn’t Worried About the Fitch Downgrade

    Warren Buffett Isn’t Worried About the Fitch Downgrade

    [ad_1]

    This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.

    https://www.barrons.com/articles/warren-buffett-berkshire-hathaway-fitch-downgrade-t-bills-2a6d71a9

    • Order Reprints
    • Print Article



    Berkshire Hathaway


    CEO Warren Buffett says he’s not concerned about the Fitch downgrade of the U.S. government’s credit rating, saying his company continues to buy $10 billion of Treasury bills each week.

    [ad_2]

    Source link

  • Manufacturing stalled in the first half. But now the stage is set for a recovery, says JPMorgan.

    Manufacturing stalled in the first half. But now the stage is set for a recovery, says JPMorgan.

    [ad_1]

    The Institute for Supply Management’s manufacturing index is due for release Tuesday, which outside of inflationary periods (i.e., now), tends to be one of the more important economic indicators for financial markets, given its record as a bellwether.

    ISM manufacturing data during the current rate-hike cycle (in red) has lagged other periods.

    Even compared to other rate-hike cycles, the ISM manufacturing series has been one of the worst in history, points out Jason Daw, head of North America rates strategy at RBC Dominion Securities. Daw makes the case that the U.S. economy overall is not very strong for this period of the cycle, and the manufacturing data, not just ISM but also industrial production, has been particularly feeble.

    But the call of the day comes from JPMorgan’s economic team. They note that while global manufacturing stalled in the first half, the non-manufacturing components rose at a 3.2% annualized rate, allowing the global economy to grow at an above trend 2.7% rate.

    The team led by Bruce Kasman say that the typical channels through which weak manufacturing would bring down the broader economy haven’t materialized. “A major channel by which weakness in goods sectors broadens out is through depressing corporate income and pricing power. While our start-of-year outlook anticipated elevated wage gains to pressure corporate profits, the surprising strength in [first-half] global GDP was accompanied by upside surprises to inflation,” they say. In turn, there have been solid gains in both labor income and profits, and while margins have come off their peaks, they are well above pre-pandemic levels.

    Business hiring, they add, is the ultimate signal of confidence, and employment growth has continued even though expectations have soured.

    Now, say the JPMorgan team, the stage is set for a goods sector recovery. Labor income, when adjusted for inflation, is rising, while finished goods inflation is falling sharply.

    Also, business capital spending continues to expand, particularly in emerging economies outside of China. And importantly, inventories are swinging from a drag to a lift. In the first half, the step down in the pace of stock building depressed global industrial production by 3.4 percentage points.

    “Even if the pace of stockbuilding was only to level off, the impulse to global industry would be material. Add to that a potential desire to align the pace to firming demand growth and the boost could generate a jump in factory output in the coming months,” they say.

    Finally, they note, the tech spending decline after the 2020 to 2021 surge looks to be ending, and global motor vehicle production is picking up as supply-chain bottlenecks ease.

    The markets

    After an okay finish for the S&P 500
    SPX,
    -0.29%
    to a strong July, U.S. stock futures
    ES00,
    -0.36%

    NQ00,
    -0.42%
    were a bit lower as the seasonally weak month of August commenced. Gold futures
    GC00,
    -1.28%
    were trading below $2,000 an ounce. The dollar
    DXY,
    +0.42%
    rose.

    For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.

    The buzz

    The ISM report is due out at 10 a.m. Eastern, when the job openings and construction spending reports also come out. Monthly auto sales also will be released throughout the day.

    Pfizer
    PFE,
    -0.03%    ,
    Caterpillar
    CAT,
    +4.05%    ,
    Uber Technologies
    UBER,
    -3.96%
    and after the close, Starbucks
    SBUX,
    -0.35%
    and Electronic Arts
    EA,
    -0.61%
    highlight the day’s earnings reports. Pfizer lowered its sales guidance while Caterpillar beat Wall Street earnings estimates and Uber reported a surprise profit.

    JetBlue Airlines stock
    JBLU,
    -8.56%
    slumped as the airline says it no longer expects to report a profit in the third quarter, owing to what it called a challenging environment in the northeast, as well as a preference by consumers for long-haul international flights.

    CVS Health
    CVS,
    +0.48%
    is going to cut 5,000 corporate jobs, according to The Wall Street Journal.

    Best of the web

    BlackRock
    BLK,
    -0.56%
    and MSCI
    MSCI,
    -0.42%
    are targets of a Congressional probe into facilitating U.S. investment in China.

    The first new U.S. nuclear reactor in nearly seven years starts operations.

    Modern-day Oppenheimers see the future of nuclear energy — and it’s mobile.

    Top tickers

    Here were the most active stock-market tickers as of 6 a.m. Eastern.

    Ticker

    		 Security name
    TSLA,
    -1.13%         		Tesla
    TUP,
    +14.28%         		Tupperware Brands
    NIO,
    -4.97%         		Nio
    AMC,
    -0.27%         		AMC Entertainment
    PLTR,
    -2.60%         		Palantir Technologies
    GME,
    -1.80%         		GameStop
    NVDA,
    -0.74%         		Nvidia
    AAPL,
    -0.15%         		Apple
    NKLA,
    +14.79%         		Nikola
    AMSC,
    +54.02%         		American Superconductor

    The chart

    The inflation-adjusted equity premium is looking pretty bleak. That’s calculated by taking the expected return to the S&P 500 and subtracting 10-year TIPS yields. “While admittedly this graphic is skewed by the few megacaps trading at huge multiples, it’s sobering nonetheless,” says Michael Ashton, better known as the Inflation Guy.

    Random reads

    Granted, Philadelphia’s a big sports town, but there were actual tailgates to get the Eagles’ throwback Kelly green jerseys that went on sale.

    A Chinese zoo has denied that a bear is human after video of the creature standing on two feet.

    Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

    Listen to the Best New Ideas in Money podcast with MarketWatch financial columnist James Rogers and economist Stephanie Kelton.

    [ad_2]

    Source link

  • The ‘narrow breadth’ chorus has fallen silent. What broadening participation in stock-market rally means for investors.

    The ‘narrow breadth’ chorus has fallen silent. What broadening participation in stock-market rally means for investors.

    [ad_1]

    A wider swath of stocks have joined the S&P 500
    SPX,
    +0.15%    ’s
    upswing after the so-called Magnificent Seven — Apple
    AAPL,
    +0.32%    ,
    Amazon
    AMZN,
    +1.11%    ,
    Alphabet
    GOOG,
    +0.08%    ,
    Microsoft
    MSFT,
    -0.72%    ,
    Meta
    META,
    -2.11%    ,
    Nvidia
    NVDA,
    -0.04%
    and Tesla
    TSLA,
    +0.37%
    — single-handedly propelled the large-cap index into a bull market in early June, with the gauge now up more than 28% from its low notched last October and rising to new highs since April 2022, according to Dow Jones Market Data. 

    Hopes that the U.S. economy could pull off a soft landing and avoid a recession despite the Federal Reserve’s aggressive interest-rate hikes, as well as receding inflation pressures and expectations for the end of the Fed’s monetary tightening campaign, have underpinned a notable expansion in market breadth over the past two months, according Adam Turnquist, chief technical strategist at LPL Financial. 

    The S&P 500 Equal Weighted Index
    SP500EW,
    +0.27%    ,
    which lagged behind the market-cap-weighted S&P 500 index for most of the year, has now kicked back into gear and staged an impressive comeback in July. The equal-weighted index and the S&P 500 each advanced 3.1% this month, according to FactSet data. 

    The equal weighting eliminates the distortion of the megacap components and significantly changes several sector weightings in the S&P 500, including technology, which drops from around 29% on the SPX to only 13% on the equal-weighted index, said Turnquist in a Friday note. Meanwhile, the industrials sector has the biggest increase in weight, jumping from 9% on the SPX to 16% on the equal-weighted index.

    Another way to quantify and compare market breadth is to look at the percentage of stocks on an index trading above their longer-term 200-day moving average (dma), Turnquist said. In general, if a stock is trading above its 200 dma, it is considered to be in an uptrend, and if the price is below the 200 dma, it is considered in a downtrend. Furthermore, a higher percentage of stocks above their 200 dma implies buying pressure is more widespread — suggesting the market’s advance is likely sustainable.

    The chart below shows that 73% of stocks within the S&P 500 are trading above their 200 dma as of July 27, which compares to only 48% at the end of 2022. Moreover, the composition of breadth leadership has turned increasingly bullish. The highest sector readings include technology, industrials, energy, and consumer discretionary.

    “So not only is breadth on the index robust, but cyclical stocks are also leading,” said Turnquist. 

    SOURCE: LPL RESEARCH, BLOOMBERG

    Wall Street often views broadening participation in the stock-market rally as a measure of health and a constructive sign of the sustainability of the bull market. 

    Jimmy Lee, founder and chief executive officer of The Wealth Consulting Group said he is seeing “a lot of money” flowing into areas that are not the Magnificent Seven such as stocks in the industrials, financials, materials, energy and even real-estate sectors.

    The S&P 500’s industrials sector
    SP500.20,
    +0.23%
    climbed 2.9% in July, while the financials sector
    SP500.40,
    +0.44%
    advanced over 4.7% this month. The S&P 500’s energy sector
    SP500.10,
    +2.00%    ,
    which had been the biggest laggard when the rest of the markets exited the bear market in June, jumped 7.3% month to date after the U.S. oil benchmark
    CL.1,
    -0.20%

    CL00,
    -0.20%
    closed above $80 a barrel for the first time since April. 

    Meanwhile, the tech-heavy S&P 500’s communication-services sector
    SP500.50,
    -0.03%
    rose 6.7% in July, while the consumer-discretionary sector
    SP500.25,
    +0.56%
    gained 2.4% and the information-technology sector
    SP500.45,
    +0.13%
    was up 2.6%, according to FactSet data. 

    See: Stocks are on a seemingly unstoppable hot streak, but this bond-market ‘tipping point’ could see it end in a hurry

    Stephen Hoedt, managing director of equity and fixed income research at Key Private Bank, told MarketWatch in an interview that he doesn’t see “any reason to get bearish here with the fundamentals that are underlying,” which gives investors reason to rotate toward the more cyclical areas such as energy, financials and industrials, while broadening the market away from just being concentrated in the megacap technology names. 

    “The growth has been a surprise this year for everyone, so that’s what the market got wrong coming into this year. When I look at growth, nominal GDP growth translates directly into earnings and we’ve seen earnings continue to surprise on the upside,” Hoedt said. 

    Hoedt pointed to the direction of the 12-month forward earnings estimate for the S&P 500 as an important indicator. “As long as the direction of the 12-month forward earnings number for the S&P 500 is going up, it’s really, really difficult to be bearish on the stock market,” he said. “It seems to me that we may start to see another inflection higher in forward earnings revisions that take into account this stronger growth environment that we’re in.” 

    However, the broadening of the stock-market rally and the bullish sentiment were also driving some on Wall Street to believe stocks are overbought and due for a correction. 

    Lee said there’s still too much pessimism out there and too much concern that some investors haven’t chased the market yet. “In the second half of this year, when the Fed does stop raising rates and if the economy stays out of recession, you can see major money — trillions of dollars moving from the money market into equities and other risk assets,” he told MarketWatch in a phone interview on Friday.

    “When that happens, it’s probably going to push valuations even further. So I would imagine when that happens is when you can expect more of a correction to occur, but I think that we still have more room to go before that happens.” 

    U.S. stocks ended higher on Monday, finishing up July on a positive note. Three major stock indexes rallied this month, with the S&P 500 up 3.1% and booking its fifth monthly gain. The tech-heavy Nasdaq Composite
    COMP,
    +0.21%
    gained 4.1% month to date, while the Dow Jones Industrial Average
    DJIA,
    +0.28%
    advanced 3.4%, according to Dow Jones Market Data. 

    [ad_2]

    Source link

  • Trump’s PAC has spent $40 million on legal fees so far this year

    Trump’s PAC has spent $40 million on legal fees so far this year

    [ad_1]

    The Big Number: Former President Donald Trump’s political action committee has spent $40.2 million on legal fees in this year’s first half, according to multiple published reports citing unnamed sources.

    The PAC, called Save America, is expected to disclose the spending in a filing on Monday with the Federal Election Commission.

    What it means: The outlays show the sizable legal challenges that Trump and his associates have been dealing with.

    The 45th president, who has a big lead in polls for the 2024 Republican presidential primary, was indicted in March in a Manhattan case focused on hush-money payments, as well as indicted in June in a Miami case focused on classified documents. In addition, he could get indicted in Washington, D.C., in a case focused on the Jan. 6, 2021, attack on the U.S. Capitol and in a separate probe in Georgia’s Fulton County over election interference, and he was found liable in May for sexual abuse in a civil lawsuit.

    What people are saying: Former New Jersey Gov. Chris Christie, an outspoken Trump critic who is seeking the 2024 GOP presidential nomination, criticized their race’s frontrunner for not using his own money for the legal expenses that he and his associates are incurring.

    “He’s making regular Americans pay his legal fees. It’s outrageous,” Christie said over the weekend in a CNN interview.

    But Trump campaign spokesman Steven Cheung told CNN that the spending is needed, saying that “to protect these innocent people from financial ruin and prevent their lives from being completely destroyed, the leadership PAC contributed to their legal fees to ensure they have representation against unlawful harassment.”

    Trump’s team is now setting up a legal defense fund to help handle some of the legal fees, according to other published reports citing unnamed sources.

    Now read: Facing legal peril, Trump calls on Republicans to rally around him as he threatens primary challengers

    And see: Trump and his top 2024 primary rivals mostly ignore new federal charges against him during Iowa GOP event

    [ad_2]

    Source link

  • Amazon and Apple to headline Q2 earnings this week

    Amazon and Apple to headline Q2 earnings this week

    [ad_1]

    When Amazon.com Inc. and Apple Inc. report quarterly results on Thursday, we’ll get a look at two big companies, with big expectations, trying to do smaller things — or at least less exciting things, or things that might be more inconveniencing to customers — to stay bigger.

    For Apple
    AAPL,
    +1.35%    ,
    D.A. Davidson analyst Tom Forte said, the focus will be on the iPhone, as always, as well as demand abroad and a new VR headset, as its stock hovers near record highs and its market value holds above $3 trillion. And he said that Amazon
    AMZN,
    +3.09%    ,
    meanwhile, could face questions about the impact of cost cuts on e-commerce growth, and what AI could do to boost slower growth in its cloud business.

    The results from those companies, which are big enough to make or break a single quarter’s worth for the S&P 500 Index
    SPX,
    +0.99%    ,
    will follow those from the other tech giants like Microsoft Corp.
    MSFT,
    +2.31%
    and Facebook parent Meta Platforms Inc.
    META,
    +4.42%    .
    And they’ll arrive as Wall Street starts to get a tad more realistic about AI: Microsoft shares fell after management said the expansion of its AI capabilities would be “gradual” — and gradually more expensive.

    D.A. Davidson analyst Tom Forte, in a research note this month, said Amazon, like other big tech companies, was taking more steps to control its costs. That might help margins, he said. But he said he’d be watching for any impact to e-commerce sales growth, following thousands of layoffs and pulling back on its expansion of Amazon Fresh.

    Amazon began tacking on servicing fees onto some Amazon Fresh delivery orders this year. And Forte noted what he said were other tweaks to service: Charging for a home pickup of a defective smoke alarm that used to be free, and incentives to wait longer during Prime Day.

    “In our view, Amazon is playing a ‘game of chicken’ and banking on other e-commerce companies not to offer a superior service, instead of its historical approach of working backwards with a customer-obsessed approach,” D.A. Davidson analyst Tom Forte said in a research note.

    He added later: “We believe there is something to be said about the experience of having an Amazon-branded delivery vehicle show up at your house EVERY day. Having one show up once a week or twice is not the same.”

    At Apple, Forte said in a separate note, the iPhone, whose sales were still solid, had turned into more of a consumer staple than a discretionary buy. He also said he’d be looking for more detail about the upcoming iPhone 15 — likely to be modestly fancier than previous iPhones — the recovery in China and growth in India. Apple last month also unveiled its Vision Pro VR headset — for $3,499. Forte said he had his doubts.

    “We believe Apple will have to overcome a number of structural challenges to achieve mass adoption for its AR/VR headset,” he said.

    This week in earnings

    Apple and Amazon will report as more companies than normal report quarterly profit ahead of estimates, according to a FactSet report on Friday. For the week ahead, 170 S&P 500 companies report results, with four from the Dow, the repot said.

    Results from Uber Technologies Inc.
    UBER,
    +3.28%
    and DoorDash Inc.
    DASH,
    +4.20%
    will offer an update on the gig economy and how far app-based deliveries can go, while results from Kraft Heinz Inc.
    KHC,
    -0.11%
    will offer an update on food prices and how much they might ease from the highs seen in recent months.

    With the “Barbie” movie lifting rival Mattel Inc.
    MAT,
    -2.40%    ,
    results from Hasbro Inc
    HAS,
    -0.29%
    during the week will offer a glance at the rest of the toy industry, where demand hasn’t exactly been great, and what entertainment options Hasbro has up its sleeve to keep apace with its archrival. Drug maker Pfizer Inc.
    PFE,
    -0.36%
    reports, as does video-game maker Electronic Arts Inc.
    EA,
    +0.25%    .
    Starbucks Corp.
    SBUX,
    +0.47%
    reports as well.

    The call to put on your calendar

    “Barbie,” the Hollywood strike and Warner Bros. Discovery: Mattel has said it wants to turn “Barbie” into a content franchise. Now we’ll hear what Warner Bros. Discovery Inc.
    WBD,
    +4.07%    ,
    the media conglomerate that produced the film, thinks about the film’s results and its prospects, as studios increasingly pump out sequels or offshoots of well-known, established character universes like “Star Wars,” Marvel and DC. The company — which reports oversees Warner Bros. CNN, TNT and the streaming service Max — reports quarterly results on Thursday. But even as “Barbie” and “Oppenheimer” carry the parts of the entertainment industry that are still functioning through the Hollywood strike, Wall Street will likely be focused on contingency plans, and any sense of whether more viewers are turning to streaming with productions on pause.

    The number to watch

    Payments and crypto volumes: Results this week from trading app Robinhood Markets Inc.
    HOOD,
    +4.09%
    and crypto exchange Coinbase Global Inc.
    COIN,
    +2.23%    ,
    along with PayPal Holdings Inc.
    PYPL,
    +2.71%
    and Block
    SQ,
    +3.42%    ,
    will land at the intersection of rebounding markets and job-market concerns.

    UBS analysts predicted solid growth and cost control for Block, and “steady” e-commerce trends for PayPal. But BofA analysts said PayPal’s search for a new chief executive, following the announcement of Dan Schulman’s retirement at the end of the year, would become more important, adding that “we think investors should rightfully expect the CEO search to conclude in the near-term.” While Bitcoin’s rebound helped Coinbase, the company and others in the industry face the prospect of tougher regulations. Robinhood and PayPal report on Wednesday. Coinbase and Block report on Thursday.

    [ad_2]

    Source link

  • Consumer sentiment hits 22-month high on easing inflation

    Consumer sentiment hits 22-month high on easing inflation

    [ad_1]

    The numbers: A survey of consumer sentiment survey reached a 22-month high of 71.6 in July, helped by a slowdown in inflation and a robust jobs market.

    The final reading of the sentiment survey slipped from a preliminary 72.6 in early July, but it was up sharply from 64.4 in June, the University of Michigan said Friday.

    The consumer-sentiment survey reveals how consumers feel about their own finances as well as the broader economy.

    Also read: U.S. inflation eases again, PCE shows. Prices rise at slowest pace in almost two years

    The index has risen in fits and starts from an all-time low of 50 last year. The index rose to as high as 101 shortly before the onset of the pandemic in 2020.

    Key details: A gauge that measures what consumers think about the current state of the economy registered 76.6 at the end of July vs. an initial 77.5.

    A measure that asks about expectations for the next six months slipped to 68.3 from an initial 69.4 in early July.

    Both indexes are up sharply from June, however.

    Americans think inflation will average 3.4% in the next year.

    Big picture: Americans are less worried about a recession. Unemployment is low, wages are rising and inflation has eased.

    Yet the economy is likely to face more turbulence ahead because of higher interest rates orchestrated by the Federal Reserve to bring inflation down even further.

    Higher borrowing costs usually depress business investment and consumer spending, increase layoffs and slow the economy.

    Looking ahead: “Overall, the sharp rise in sentiment was largely attributable to the continued slowdown in inflation along with stability in labor markets,” said Joanne Hsu, director of the survey. “However, sentiment for lower-income consumers fell.”

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    +0.50%
    and S&P 500
    SPX,
    +0.99%
    rose in Friday trades.

    [ad_2]

    Source link

  • Consumer spending climbs again as Americans show confidence in the economy

    Consumer spending climbs again as Americans show confidence in the economy

    [ad_1]

    The numbers: Consumer spending rose 0.5% in June in a sign of confidence in the economy as inflation eased again and the U.S. continued to grow.

    Analysts polled by the Wall Street Journal had forecast a 0.5% increase.

    Incomes advanced 0.3% in June, the government said Friday.

    Consumer spending is the main engine of the U.S. economy. Households increased spending by a 1.6% annual pace in the second quarter running from April to June. Outlays have risen seven months in a row.

    Key details: Americans bought more trucks last month and spent more on financial advice. They also increased spending on housing, gas utilities and recreation.

    The U.S. savings rate, meanwhile, slipped to 4.3% from a 13-month high of 4.6%. Savings had fallen late last year to the lowest level since 2005.

    The so-called PCE price index, the Federal Reserve’s favorite inflation barometer, rose a modest 0.2% in June. And the rate of inflation rose at the slowest pace since September 2021.

    Big picture: A strong jobs market marked by low unemployment and rising wages have given Americans the confidence to spend more than enough to keep the economy growing. Services such as dining out, travel and recreation have especially benefited.

    Most economists predict spending will slow, however, as rising interest rates take a bigger bite out of the economy. Whether that’s enough to eventually tip the U.S. into recession is far from clear.

    Looking ahead: “Slower inflation and growing real incomes have provided some breathing room, encouraging consumers to spend on travel and recreational activities,” said senior economist Kayla Bruun of Morning Consult.

    “Momentum may begin to fade as summer splurges dry up, however,” she added. “Morning Consult’s data suggests consumers are growing increasingly price sensitive across a broad range of categories.” 

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    +0.54%
    and S&P 500
    SPX,
    +0.87%
    were set to open higher in Friday trades.

    [ad_2]

    Source link

  • U.S. inflation eases again, PCE shows. Prices rise at slowest pace in almost two years

    U.S. inflation eases again, PCE shows. Prices rise at slowest pace in almost two years

    [ad_1]

    The numbers: The cost of goods and services rose a mild 0.2% in June as inflation eased again, but another measure of prices favored by the Federal Reserve showed somewhat less progress.

    Economists polled by The Wall Street Journal had forecast a 0.2% increase in the personal consumption expenditures index.

    The increase in prices over the past year slowed to 3% from 3.8% and touched the lowest level since October 2021, the government said Friday.

    The so-called core PCE rate of inflation, meanwhile, also rose 0.2% last month. The core rate omits volatile food and energy costs and is viewed by the Fed as a better predictor of future inflation trends.

    The rate of core inflation over the past year slowed a bit less to 4.1% from 4.6% in the prior month, but that still puts it at a more than two-year low. It’s still far above the Fed’s 2% target, however.

    Big picture: Inflation has slowed a lot this year due to falling energy and food prices, but the cost of living is still rising too fast to mollify the Fed or ease the financial pain of U.S. households.

    The Fed is expected to keep interest rates high through next year to bring inflation down closer to its 2% target. The danger is that higher borrowing costs could also slow the economy enough to tip the U.S. into recession.

    The latest PCE report is likely to give the Fed more reason for optimism, however.

    Looking ahead: “Inflation cooled, but held well above 2%, meaning the Fed can’t declare mission accomplished,” said lead U.S. economist Oren Klatchkin of Oxford Economics.

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    +0.50%
    and S&P 500
    SPX,
    +0.99%
    rose in Friday trades. The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.953%
    slipped 3.96%.

    [ad_2]

    Source link

  • Digital advertising is Meta and Google’s world, and everyone else is coping with it

    Digital advertising is Meta and Google’s world, and everyone else is coping with it

    [ad_1]

    There are two certainties in the tech world when it comes to digital advertising: Google and Meta. And then there’s everyone else.

    Through economic thick and thin, Google and Meta are the gold standards by virtue of broad reach (billions of people globally), product dominance (in search and social media, respectively) and in their positions in the lightning-fast AI race. This week’s earnings results for Alphabet Inc.
    GOOGL,
    +2.46%

    GOOG,
    +2.42%
    and Meta Platforms Inc.
    META,
    +4.42%
    proved that emphatically once again.

    Both companies rebounded from recent wobbly digital ads sales of their own through gigantic consumer reach and aggressive plans to parlay AI into ad sales. Google has developed (or dabbled) in some form of AI for at least seven years, and in a conference call with analysts Wednesday, Meta Chief Executive Mark Zuckerberg said his company will focus in the near term on AI to develop agents, ad features in existing products like Instagram and Reels, and internal productivity and efficiency. “We want to scale them, but they are hard to forecast,” he admitted.

    Read more: Meta’s stock jumps after AI, ad momentum drive earnings and revenue higher

    And: Alphabet earnings push stock up 6%, fueled by strong ad sales and strides in AI

    Conversely, for companies consigned to the also-ran category, such as Snap Inc.
    SNAP,
    +3.39%
    and X — the former Twitter — the news was bleak. Snap forecast disappointing third-quarter sales amid a spending push to draw advertisers.

    “We continue to believe it will take multiple quarters of improved execution for many investors to get more comfortable with the story longer term,” JP Morgan analysts said in a note on Snap earlier this month.

    Digital-advertising leader Google sought to remind everyone it has been doing AI a long time while Microsoft Corp.
    MSFT,
    +2.31%    ,
    a major investor in ChatGPT pioneer OpenAI, tempered its approach, Josh Wetzel, chief revenue officer at OneSignal, said in an interview. “AI’s greatest immediate value may be for Facebook advertising,” he said, pointing to it as an efficient and effective tool after Facebook encountered issues with data-privacy changes Apple Inc.
    AAPL,
    +1.35%
    made to mobile devices.

    Read more: Alphabet earnings remind Wall Street of Google’s AI prowess

    “Meta’s solid quarter adds further evidence to the view that advertisers are choosing to spend their budget on the so-called market leaders, such as Facebook and Instagram, at the expense of the smaller social-media networks, like Snap,” said Jesse Cohen, senior analyst at Investing.com.

    Jon Oberlander, executive vice president of social at digital-marketing agency Tinuiti, added: “It is, to some extent, still Meta/Google’s game, especially for performance advertisers, as the ROI and scale advertisers can find in the mid-lower funnel gap above other platforms.”

    At the same time, Forrester analyst Kelsey Chickering said linear television ad revenue will slow between now and 2027 to about $65 billion from $70 billion as traditional TV continues to lose the under-25 crowd that has fled to streaming services and creator-heavy platforms like Snapchat and TikTok.

    Digital advertising is on track to grow in the high single digits, or more, in 2023, slightly ahead of June’s forecast estimates from GroupM and Magna of around 8% each, according to Brian Wieser, head of Madison and Wall, a media and advertising consultancy for investors.

    Most of that growth will benefit Google, Meta, and Microsoft’s LinkedIn, according to data from Emburse. Conversely, Emburse found ad spending on Twitter/X has plunged 54% from a year ago in May, before Elon Musk bought the company.

    “Google, Meta and LinkedIn are platforms where people go to consume information, search for ideas, or give context to what they experiencing in their personal or work lives,” Emburse Chief Experience Officer Johann Wrede said.

    While Alphabet CEO Sundar Pichai boasted Wednesday of “continued leadership in AI and our excellence in engineering and innovation are driving the next evolution of Search” and other services, as well as improved YouTube ad sales, Meta’s addition of potential X-killer Threads could dramatically inflate its ad sales going forward.

    Zuckerberg sees potential in Threads long term despite a plunge in its user sign-ups because X is hemorrhaging advertising clients, and this week reportedly slashed ad costs to lure business customers.

    “The launch of Threads holds great promise for Meta. While there are currently no ads on the app, it’s inevitable that they will come and the ability to use data from other Meta properties for targeting is a highly lucrative proposition for brands,” Aaron Goldman, chief marketing officer at Mediaocean, said in an email.

    That translates to more near-term pain for smaller platforms such as Snap and X, which are posting negative growth, Michael Nathanson of SVB MoffettNathanson warned in a note Wednesday.

    “The truth is that Alphabet started integrating machine learning and artificial intelligence into their products and ad solutions close to a decade ago,” he said. Snap and others are scrambling to catch up.

    [ad_2]

    Source link

  • Intel stock rallies after earnings show AI data-center beat, strong PC sales

    Intel stock rallies after earnings show AI data-center beat, strong PC sales

    [ad_1]

    Intel Corp. shares surged in the extended session Thursday after the chip maker posted a surprise profit, but while data-center sales came in better than expected, a larger beat in PC product sales drove margin improvement.

    Intel
    INTC,
    +0.55%
    shares surged around 8% after hours, following a 0.6% rise to close the regular session at $34.55.

    The company reported second-quarter net income of $1.48 billion, or 35 cents a share, versus a loss of $454 million, or 11 cents a share, in the year-ago period. After adjusting for restructuring charges and other items, Intel reported 13 cents a share, versus net income of 28 cents a share a year ago.

    Revenue fell to $12.95 billion from $15.32 billion in the year-ago period, and adjusted gross margins came in at 39.8%, the company said.

    Intel had forecast an adjusted second-quarter loss of 4 cents a share on revenue of about $11.5 billion to $12.5 billion for the current period, and adjusted gross margins of about 33.2% for the quarter.

    Analysts surveyed by FactSet, on average, expected a loss of 4 cents a share on revenue of $12.12 billion.

    The margin beat was “largely a function of revenue,” Intel Chief Financial Officer David Zinsner told analysts on a conference call, and that revenue beat was much more pronounced in Intel client, or PC, business than it was data center.

    “We had obviously beat revenue significantly, and we’ve got a good follow-through in the fixed-cost nature of our business, and so that really was what helped us outperform significantly on the gross-margin side in the second quarter,” Zinsner told analysts.

    Intel posted PC-group sales of $6.8 billion and data-center sales of $4 billion, while analysts surveyed by FactSet had forecast $6.08 billion and $3.8 billion, respectively.

    Before the conference call, Edward Jones analyst Logan Purk told MarketWatch in an interview following the report that most of the improvement in Intel’s gross margin came from the unexpected amount of growth in the PC business.

    “The magnitude of client computing growth, and how the PC market is recovering faster than anticipated,” came as a surprise, Purk told MarketWatch. The analyst, who has a hold rating on Intel, said he expects sequential single-digit improvement in data center going forward.

    Still, on the call, Intel Chief Executive Pat Gelsinger hammered home the point that Intel was wholeheartedly going after the AI market, which is expected to be dominated by Nvidia Corp.
    NVDA,
    +0.99%    ,
    and to a lesser extent, by Advanced Micro Devices Inc.
    AMD,
    +0.92%    ,
    which reports earnings on Tuesday.

    “We see AI being infused in everything and there’s going to be AI chips for the edge, AI chips for the communications infrastructure, AI chips for sensing devices, for automotive devices, and we see opportunities for us both as a product provider and as a foundry and technology provider across that spectrum,” Gelsinger said.

    Meanwhile, network and edge sales came in at $1.4 billion, while analysts called for $1.48 billion, and foundry services revenue rose to $232 million for the quarter, while Wall Street looked for $149.2 million.

    “In the third quarter, we do obviously at the midpoint see revenue growth sequentially and so that will be helpful in terms of gross margin,” Zinsner told analysts on the call. “We expect, again, pretty good follow-through as we get that incremental revenue.”

    Intel forecast third-quarter earnings of about 20 cents a share on revenue of about $12.9 billion to $13.9 billion and adjusted gross margins of about 43% for the current quarter. Analysts surveyed by FactSet had forecast third-quarter adjusted earnings of 16 cents a share on revenue of $13.22 billion.

    Read: Intel may have bottomed, but earnings will show if chip maker can hope to catch up to Nvidia and AMD in AI

    Year to date, Intel shares have gained nearly 31%, while the PHLX Semiconductor Index 
    SOX,
    +1.86%
    has surged 49%, the S&P 500
    SPX,
    -0.64%
    has grown 18%, the Nasdaq Composite
    COMP,
    -0.55%
    has gained 34% and the Dow Jones Industrial Average
    DJIA,
    -0.67%
    is up more than 6%.

    [ad_2]

    Source link

  • Meta’s stock jumps after AI, ad momentum drive earnings, revenue jump

    Meta’s stock jumps after AI, ad momentum drive earnings, revenue jump

    [ad_1]

    Facebook parent Meta Platforms Inc. is raking in digital ads, as its earnings attest, and Wall Street is rewarding it. The company’s stock rose about 7% in after-hours trading Wednesday.

    Meta
    META,
    +1.39%
    reported fiscal second-quarter net income of $7.79 billion, or $2.98 a share, compared with net income of $6.7 billion, or $2.46 a share, in the year-ago quarter.

    Revenue climbed 11% to $32 billion from $28.8 billion in the year-ago quarter.

    Analysts surveyed by FactSet had expected on average net income of $2.91 a share on revenue of $31.1billion.

    Also see: Zuck beats Musk at his own game with Meta’s year of efficiency

    A rebound in advertising, the monetization of Instagram and Reels, and AI-fueled ad targeting and measurement contributed to the quarter’s performance. Meta’s better-than-expected performance comes on the heels of a similarly strong quarter from Google parent
    GOOGL,
    +5.78%

    GOOG,
    +5.59%
    Alphabet Inc. and poor results from Snap Inc.
    SNAP,
    -14.23%    .

    “We had a good quarter. We continue to see strong engagement across our apps and we have the most exciting roadmap I’ve seen in a while with Llama 2, Threads, Reels, new AI products in the pipeline, and the launch of Quest 3 this fall,” Meta Chief Executive Mark Zuckerberg said in a statement announcing the results. AI has been an increasingly dominant story line for Meta, which has quickly shifted its focus from the metaverse. Zuckerberg said AI remains the company’s near-term focus, with metaverse poised to have a long-term impact.

    “In many ways, the two are interrelated,” Zuckerberg said of AI and metaverse in a conference call with analysts. He also spotlighted the potential of Threads, a Twitter-like service that launched earlier this month with much fanfare. “When it gets to hundreds of millions of users, we’ll see how it monetizes,” he said. “It is a long road ahead.”

    Meta executives forecast third-quarter revenue of $32 billion to $34.5 billion, while analysts on average were expecting $31.2 billion, according to FactSet.

    Facebook had 2.06 billion daily active users, up 5% from a year ago, and the “family” of Meta apps — which includes Instagram — reported daily active users of 3.07 billion, up 7%.

    There were blips amid the hoopla, however. Meta says it expects 2023 total expenses will be in the range of $88 billion to $91 billion, compared to the prior range of $86 billion to $90 billion because of legal-related expenses in the second quarter. And Meta’s headcount dropped 14% from a year ago to 71,469 as of June 30. Zuckerberg said Meta’s austerity program will continue into 2024.

    Meta’s stock improved 1.4% to $298.57 in the regular session. The stock has sky-rocketed 148% so far this year, while the broader S&P 500 index 
    SPX,
    -0.02%
     has increased 19%.

    [ad_2]

    Source link

  • Sales forecast sinks Snap stock, and execs say more investments are likely ahead to improve platform

    Sales forecast sinks Snap stock, and execs say more investments are likely ahead to improve platform

    [ad_1]

    Like other social-media platforms, Snap has struggled with a slowdown in the digital ad market.


    AFP/Getty Images

    Shares of Snap Inc. slid in after-hours trade Tuesday after the social-media platform forecast third-quarter sales that were below expectations, amid concerns about a wobbly digital advertising backdrop and the company’s spending push to improve the way people interact and advertise when they log on.

    Snap
    SNAP,
    -1.34%
    said it expects third-quarter revenue of $1.07 billion to $1.13 billion. The midpoint of that range was below FactSet estimates for $1.13 billion.

    Shares tumbled 18.4% after hours on Tuesday.

    “From a revenue perspective, our business remains in a period of rapid transition as we work to improve our advertising platform, while forward visibility of advertising demand remains limited,” executives said in Snap’s earnings release.

    Like other social-media platforms, Snap has struggled with a slowdown in the digital ad market, amid advertiser wariness of a recession. Snap has also faced competition from the likes of Tiktok and Instagram and Facebook parent Meta Platforms Inc.
    META,
    +0.98%    .

    Snap has invested heavily strengthening its advertising platform, to serve users with more relevant ads and bring more impact to the businesses trying to advertise. It has also been spending to boost user engagement. Management, during Snap’s earnings call on Tuesday, said it would likely make “a further step up in investment here in Q3” to accelerate the progress being made on those efforts.

    Executives said during the earnings call that engagement with Snapchat friend stories in the U.S. had started to fall more slowly, with viewership trending better than they had forecast. And they said time spent watching Spotlight — a part of the site that helps users explore and discover content — more than tripled year over year.

    JPMorgan analysts, in a note earlier this month, said they continued to monitor Snap’s “heightened infrastructure costs.” But they said that the digital ad market had “stabilized” in the second quarter and that advertisers weren’t feeling as cautious, despite worries over the state of the economy.

    “That said, we continue to believe it will take multiple quarters of improved execution for many investors to get more comfortable with the story longer-term,” the analysts said.

    For the second quarter, Snap reported a net loss of $377 million, or 24 cents a share, compared with $422 million, or 26 cents a share, in the same quarter last year. Revenue fell to $1.07 billion, compared with $1.11 billion in the prior-year quarter.

    Analysts polled by FactSet expected Snap to report a per-share loss of 25 cents a share, on revenue of $1.05 billion.

    Daily active users rose 14% year over year to 397 million.

    Evan Spiegel, Snap’s chief executive, said during Tuesday’s call that despite the competition from larger social platforms, it still had some advantages — namely, communication with friends and family.

    “We actually think providing this place for friends and family to communicate has only become more important as more and more platforms focus on public social-media-style features where people feel like they have to compete for popularity, compete for likes and comments,” Spiegel said.

    “It’s never been more important to actually build deeper relationships with your friends and family,” he added.

    [ad_2]

    Source link

  • Alphabet earnings push stock up 6%; CFO Ruth Porat to become president, chief investment officer

    Alphabet earnings push stock up 6%; CFO Ruth Porat to become president, chief investment officer

    [ad_1]

    Google parent Alphabet Inc.’s stock jumped 6% in after-hours trading Tuesday after the company beat estimates on the top and bottom line, and announced the transition of Chief Financial Officer Ruth Porat to president and chief investment officer in September.

    Fueled by strong advertising sales, Alphabet
    GOOGL,
    +0.56%
     
    GOOG,
    +0.75%
    racked up fiscal second-quarter net income of $18.4 billion, or $1.44 a share, compared with net income of $16 billion, or $1.21 a share, in the same quarter a year ago.

    Total revenue was $74.6 billion, compared with $69.7 billion a year ago. Sales minus traffic-acquisition costs were $62.06 billion, vs. $57.5 billion last year.

    Analysts surveyed by FactSet had expected on average net earnings of $1.34 a share on revenue of $72.85 billion and ex-TAC revenue of $60.25 billion.

    “There’s exciting momentum across our products and the company, which drove strong results this quarter,” Alphabet Chief Executive Sundar Pichai said in a statement. “Our continued leadership in AI and our excellence in engineering
    and innovation are driving the next evolution of Search, and improving all our services.”

    During a conference call Tuesday afternoon, he highlighted the intertwining of advertising and Alphabet’s strides in generative AI. He added the company continues to consolidate and align operations to streamline spending.

    Shares of Alphabet have advanced 39% so far this year largely on the strength of generative AI and its potential. The broader S&P 500 index 
    SPX,
    +0.28%
    is up 19%. Alphabet’s stock inched up 0.6% to $122.21 in the regular session Tuesday.

    Google’s total advertising sales improved to $58.14 billion from $56.3 billion a year ago, and edged analysts’ average expectations of $57.45 billion. Google Cloud hauled in $8 billion, compared with $6.3 billion last year. YouTube ad sales rebounded to $7.7 billion from $7.34 billion a year ago.

    “The proverbial floodgates aren’t opening yet but clients are starting to see pockets of opportunity and are willing to invest for a direct return,” Aaron Levy, vice president of paid search at Tinuiti, said in an email.

    Porat, who has played an essential role in Google’s advertising success since she became CFO in 2015, will start her new role on Sept. 1. She will be responsible for Alphabet’s investments in its Other Bets portfolio, and the company’s investments in countries and communities around the world. Porat will continue to report to Pichai.

    “We see technology can make so much of a difference in people’s lives… and in economic growth globally,” Porat said during the conference call late Tuesday.

    The monetization of AI continues to be an obsession of investors and Wall Street. Microsoft Corp.’s
    MSFT,
    +1.70%
    AI version, Bing, hit the market first, but Google’s competing entry, Bard, is making headway, according to analysts. Alphabet is ramping up AI initiatives to improve operational efficiency and productivity.

    When asked on the call about AI monetization, Pichai said the technology expands the company’s total addressable market, brings in potential new customers, deepens the versatility of its product portfolio, and differentiates core products such as cybersecurity.

    AI’s importance was underscored by a Wall Street Journal report on Tuesday that Google co-founder Sergey Brin has been spotted at the company’s Mountain View, Calif., headquarters in recent weeks working with AI researchers on a large-scale project. Brin has been largely out of sight after stepping down from an executive role at parent company Alphabet in 2019.

    [ad_2]

    Source link

  • Microsoft earnings top estimates, but stock falls as execs detail AI’s costs

    Microsoft earnings top estimates, but stock falls as execs detail AI’s costs

    [ad_1]

    Microsoft Corp. easily topped profit and revenue expectations for its latest quarter, though its shares were moving more than 3% lower in extended trading Tuesday after the company discussed the year ahead.

    The technology giant has won favor on Wall Street for its positioning in the artificial-intelligence revolution, though Chief Financial Officer Amy Hood said on Tuesday’s earnings call that “even with strong demand and a leadership position,” Microsoft’s
    MSFT,
    +1.70%
    “growth from our AI services will be gradual.” Microsoft’s AI for its Azure cloud-computing business needs to ramp, and the company is working toward the general availability of its Copilot productivity product.

    Microsoft’s AI revenue impacts will thus be weighted toward the second half of the new fiscal year that just began, she continued. Meanwhile, she expects that Microsoft’s capital expenditures will rise sequentially each quarter “as we scale to meet demand signals.”

    Hood’s commentary came as Microsoft posted fiscal fourth-quarter results Tuesday afternoon that showed a 15% jump in revenue for the company’s cloud-computing segment, which it calls Intelligent Cloud. Revenue for the segment came in at $24.0 billion, while analysts had been anticipating $23.8 billion. The growth rate was 17% on a currency-neutral basis.

    The company said revenue for Azure and other cloud services was up 26%, or 27% in constant currency. Microsoft’s forecast had been for 26% to 27% in constant-currency Azure sales growth, while the company posted 31% constant-currency growth on the metric in the March period. The FactSet consensus was for 27% growth in constant currency.

    “While we believe the Street was hoping for Azure growth more in the ~28% range, we believe the consumption part of the business held up well,” Evercore ISI analyst Kirk Materne said in a note to clients.

    For the September quarter, Microsoft anticipates 25% to 26% in constant-currency Azure growth.

    The cloud migration is still in the “early innings,” Chief Executive Satya Nadella said on the call, while also highlighting a “new world of AI driving a set of new workloads.”

    “We think of that, again, being pretty expansive from a TAM [total addressable market] opportunity and we’ll play it out,” he continued, though the company is also up against the “law of large numbers” given the massive scale of its cloud business.

    The company generated fiscal fourth-quarter net income of $20.1 billion, or $2.69 a share, compared with $16.7 billion, or $2.23 a share, in the year-earlier period. Analysts tracked by FactSet were modeling $2.55 a share.

    Overall revenue for Microsoft climbed to $56.2 billion from $51.9 billion, whereas analysts had been expecting $55.5 billion.

    See also: Microsoft bulls are excited as company reveals pricing for AI offering

    Microsoft logged $18.3 billion in revenue for its productivity and business processes unit, up 10% from a year before, or up 12% in constant currency. That part of the business includes LinkedIn and both commercial and consumer versions of Office. Analysts had been looking for $18.1 billion.

    Revenue for the More Personal Computing segment, which includes Windows and Xbox content and services, dropped 4% to $13.9 billion and was off 3% on a constant-currency basis. The FactSet consensus was for $13.6 billion.

    Nadella, meanwhile, expressed optimism about the eventual opportunities brought upon by Microsoft’s Copilot offerings.

    “I do think people are going to look at how can they complement their [operating-expense] spend with essentially these Copilots in order to drive more efficiency and, quite frankly, even reduce the burden and drudgery of work on their OpEx and their people and so on,” he said.

    Evercore’s Materne called the overall results “solid” amid “a lot of macro headwinds.”  Microsoft’s investment story “gets stronger in [the second half of the calendar year] as some optical headwinds reverse and [comparisons] soften, and Microsoft’s position in the enterprise market continues to get stronger as customers look to consolidate spending,” he wrote.

    Read: Amazon finally is nearing a bottom on this key measure, analyst says

    [ad_2]

    Source link

  • ‘Oppenheimer’ gives stock investors another reason to be bullish about nuclear energy

    ‘Oppenheimer’ gives stock investors another reason to be bullish about nuclear energy

    [ad_1]

    One of the hottest movies of the summer is the staggeringly good biopic “Oppenheimer,” about the man who oversaw the frantic race to develop the atomic bomb during World War II. 

    The atom bomb dropped on Hiroshima, Japan on Aug 6, 1945 was a fission-style device. This also happens to be the same basic physics behind nuclear reactors that are in use today. It’s a reminder that technology can be, at its essence, agnostic: Whether it is used for malevolent or benevolent purposes (in nuclear fission’s instance, an instrument of death or clean, carbon-free electricity) depends upon the intent of the user. 

    Fission reactors generate about 10% of the world’s electricity today. The United States gets even more of its electricity this way, about a fifth.

    These percentages are likely to rise as global demand for electricity — and concerns about global warming and climate change — rise. This will present opportunities for long-term oriented investors. The lion’s share of this demand — about 70%, says the Paris-based International Energy Agency (IEA), will come from India, which the United Nations says is now the world’s most populous country, China, and Southeast Asia. Put another way, “the world’s growing demand for electricity is set to accelerate, adding more than double Japan’s current electricity consumption over the next three years,” says Fatih Birol, the IEA’s executive director.

    While fossil fuels remain the dominant source of electricity generation worldwide — the Central Intelligence Agency estimates that it provides about 70% of America’s electricity, 71% of India’s and 62% of China’s, for example—the IEA report says future demand will be met almost exclusively from two sources: renewables and nuclear power. “We are close to a tipping point for power sector emissions,” the IEA says. “Governments now need to enable low-emissions sources to grow even faster and drive down emissions so that the world can ensure secure electricity supplies while reaching climate goals.”

    “ The Biden administration is a big booster of nuclear energy. ”

    It’s helpful that the Biden administration is a big booster of nuclear energy, which the White House sees as an integral part of its broader effort to move the U.S. economy away from fossil fuels. The Department of Energy says that the country’s 93 reactors generate more than half of America’s carbon-free electricity. But price pressures from wind, solar and natural gas (which the feds call “relatively clean” even though it emits about 60% of coal’s carbon levels) have putseveral reactors out of business in recent years. 

    The bipartisan infrastructure bill that Biden signed into law in November 2021 includes $6 billion, spread out over several years, for the so-called Civil Nuclear Credit Program, designed to keep reactors — and the high-paying jobs that come with them — running. If a plant were to close, it would “result in an increase in air pollutants because other types of power plants with higher air pollutants typically fill the void left by nuclear facilities,” the administration says. U.S. Energy Secretary Jennifer Granholm has said the Biden administration is “using every tool available” to get the country powered by clean energy by 2035.

    The private sector is beginning to stir. Last week, Maryland-based X-Energy said it would build up to 12 reactors in Central Washington state, for Energy Northwest, a public utility. These wouldn’t be the behemoth-type reactors we’re used to seeing, but “advanced small, nuclear reactors.” X-Energy, which is privately held,  has also been selected by Dow
    DOW,
    -1.40%
    to construct a similar facility in Texas.  

    Other companies are also rolling out new technology to meet demand. Nuclear fusion — a breakthrough in that it creates more energy than the Oppenheimer-era fission model and at a lower cost — is likely to be the basis for reactors in the years ahead; the Washington, D.C.-based Fusion Industry Association thinks the first fusion power plant could come online by 2030. After seven rounds of funding, one fusion company, Seattle-based Helion Energy, is currently valued at around $3.6 billion, and appears headed for a public offering.    

    Here too, the Biden administration is getting involved. In May, the Department of Energy announced $46 million in funding for eight other fusion companies. “We have generated energy by drawing power from the sun above us. Fusion offers the potential to create the power of the sun right here on Earth,” says Granholm.  

    There are several opportunities here for long-term investors. You can pick your way through any number of publicly held companies, including more traditional utilities, or spread your bet across the industry through a handful of exchange-traded funds. The largest of these is the Global X Uranium Fund
    URA,
    +0.78%    ,
    with about $1.6 billion in assets. It’s up about 9% year-to-date. The VanEck Uranium + Nuclear Energy Fund
    NLR,
    +0.41%
     is up almost 10% and sports a 1.8% dividend yield. These are respectable year-t0-date returns, even though they lag the S&P 500
    SPX,
    +0.32%
    (up close to 19%) by a wide margin. 

    More: Net-zero by 2050: Will it be costly to decarbonize the global economy?

    Also read: Fukushima’s disaster led to a “lost decade” for nuclear markets. Russia, low carbon goals help stage a comeback.

    [ad_2]

    Source link

  • U.S. economy grows at slowest pace in 5 months. Inflation ‘sticky,’ S&P says

    U.S. economy grows at slowest pace in 5 months. Inflation ‘sticky,’ S&P says

    [ad_1]

    The numbers: The U.S. economy grew at the slowest pace in five months in July, a pair of S&P surveys showed, and pointed to weaker conditions later in the year.

    The S&P flash U.S. services-sector index fell to 52.4 from 54.4 in the prior month. That’s the lowest reading since February.

    Most Americans are employed on the service side of the economy, in areas such as technology, healthcare, finance and hospitality.

    The S&P U.S. manufacturing-sector index, meanwhile, rose to 49 from 46.3, but it has been negative for months.

    The S&P Global surveys are among the first indicators each month to provide an assessment of the health of the economy. Any number above 50 signals expansion, while numbers below 50 point to contraction.

    One caveat: The S&P Global surveys have been more negative this year than other indicators of the U.S. economy.

    Key details: New orders, a sign of demand, rose slightly but were relatively soft. Hiring was also the weakest since January.

    Prices continued to rise for both raw materials and labor.

    “The stickiness of price pressures meanwhile remains a major concern,” said Chris Williamson, chief business economist at S&P Global. “[F]urther falls in the rate of inflation below 3% may prove elusive in the near term.”

    Big picture: The large service side of the economy is keeping the U.S. forging ahead, but it might be losing some steam. The Federal Reserve is expected to raise interest rates again this week, and higher borrowing costs have trimmed the sails of the economy.

    Manufacturers, for their part, are lagging well behind and arguably are already in a recession of sorts.

    Not just in the U.S., either. Manufacturers are struggling even more in Europe and other parts of the world as consumers shift spending to services from goods.

    Read: Eurozone Economy Contracts Further in July, PMIs Suggest

    A recession still appears far off, however. A new survey of business economists shows that 71% think a U.S. downturn is at least a year away.

    Looking ahead: “July is seeing an unwelcome combination of slower economic growth, weaker job creation, gloomier business confidence and sticky inflation,” Williamson said. “Business optimism about the year-ahead outlook has deteriorated sharply to the lowest seen so far this year.”

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    +0.52%
    and S&P 500
    SPX,
    +0.40%
    rose in Monday trades.

    [ad_2]

    Source link

  • AMC, Chevron, Tesla, Domino’s, Microsoft, and More Stock Market Movers

    AMC, Chevron, Tesla, Domino’s, Microsoft, and More Stock Market Movers

    [ad_1]

    This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.

    https://www.barrons.com/articles/stock-market-movers-2b3602a5

    • Order Reprints
    • Print Article
    [ad_2]
    Source link