UPS employees approved a new five-year union contract with the delivery giant Tuesday, about a month after reaching a tentative deal that averted a strike of 340,000 United Parcel Services workers.
The Teamsters said 86.3% of members voted for the “historic” deal, saying it was “the highest vote for a contract in the history of the Teamsters at UPS.” UPS, -0.97%
“Teamsters have set a new standard and raised the bar for pay, benefits and working conditions in the package-delivery industry,” Teamsters General President Sean O’Brien said in a statement. “This is the template for how workers should be paid and protected nationwide, and nonunion companies like Amazon AMZN, -0.32%
better pay attention.”
Among the parts of the contract the union highlighted were $2.75-an-hour raises for existing full- and part-time union members this year, and a total of a $7.50-an-hour raise over five years. All existing part-timers will earn at least $21 an hour starting immediately per the contract, according to the Teamsters.
The union also noted that the pay increases for full-timers will keep UPS Teamsters as the highest-paid delivery drivers in the country, with the average top rate rising to $49 an hour. In addition, the Teamsters said the new contract ends what it called the two-tier wage system at the company, with all UPS Teamster drivers currently classified as “22.4s” — or hybrid drivers and warehouse workers who were paid less than full-time drivers — to be reclassified immediately as RPCDs, or regular package car drivers.
A UPS spokesperson sent the following statement from the company: “Our Teamsters-represented employees have voted to overwhelmingly ratify a new five-year National Master Agreement that covers more than 300,000 full- and part-time UPS employees in the U.S.”
Amazon did not immediately respond to a request for comment.
One local supplemental agreement that affects 174 workers in Florida will be renegotiated, the union said. The national master agreement will go into effect as soon as that supplement, which is one of 44 local supplements, has been renegotiated and ratified, the union said.
U.S. banks and regional banks fell across the board on Tuesday, after S&P Global Ratings downgraded five smaller players after a review of risk related to funding, liquidity and asset quality with a focus on office commercial real estate.
Adding to the gloom, Republic First Bancorp. Inc.’s stock FRBK, -41.90%
tanked by 39%, after Nasdaq told the company that its stock would be delisted on Wednesday, after it failed to file its annual report in time.
S&P’s move comes just days after Fitch Ratings analyst Christopher Wolfe reduced his operating environment score for U.S. banks to aa- from aa due to the unknown path of interest rate hikes and regulatory changes facing the sector.
And Moody’s Investors Service just two weeks ago upset investors when it downgraded some lenders and said it was reviewing ratings on bigger banks, including Bank of New York Mellon BK, -1.71%,
State Street STT, -1.59%
and Northern Trust NTRS, -1.73%.
The S&P 500 Financials Sector has fallen for seven consecutive days, and is on pace for its longest losing streak since April 7, 2022, when it also fell for seven straight trading days.
Individual bank names are also performing poorly, with Goldman Sachs Group Inc. GS, -0.94%
and Citigroup Inc. C, -1.68%
down for 10 of the past 11 days and Charles Schwab Corp. SCHW, -4.84%
down 11 straight days.
Goldman alone has fallen for seven straight days for a total loss of 6.3%. It’s the longest losing streak since Feb. 28, 2020, when it also fell for seven straight days as the pandemic was taking hold.
The KBW Nasdaq Regional Banking Index KBWR
is down for 11 straight days. and the KBW Nasdaq Bank Index BKX
is down for seven straight days.
S&P downgraded Associated Banc. Corp. ASB, -4.20%,
Comerica Inc. CMA, -3.82%,
KeyCorp KEY, -3.58%,
UMB Financial Corp. UMBF, -2.42% % and Valley National Bancorp. VLY, -4.19%
by one notch and said the outlook on all five is stable.
The rating agency affirmed ratings on Zions Bancorp ZION, -4.17%
and maintained a negative outlook, meaning it could downgrade them again in the near-term. And it affirmed ratings and a stable outlook on Synovus Financial Corp. SNV, -3.37%
and Truist Financial Corp. TFC, -1.36%
“We reviewed these 10 banks because we identified them as having potential risks in multiple areas that could make them less resilient than similarly rated peers ,” S&P said in a statement.
“For instance, some that have seen greater deterioration in funding—-as indicated by sharply higher costs or substantial dependence on wholesale funding and brokered deposits—-may also have below-peer profitability, high unrealized losses on their assets, or meaningful exposure to CRE.”
The steep rise in interest rates orchestrated by the Federal Reserve over the past year has raised deposit costs as banks are now competing for savers seeking higher returns and that’s forced some to pay up on deposits and discourage their clients from heading to other institutions and instruments.
However, S&P said about 90% of the banks it rates have stable outlooks and just 10% have negative ones. None have positive outlooks.
The widespread stable outlooks shows that stability in the U.S. banking sector has improved significantly in recent months.
S&P is expecting FDIC-backed banks in aggregate to earn a relatively healthy ROE of about 11% in 2023.
KeyCorp. and Comerica both fell more than 3% on the news. Of the two, KeyCorp. has more outstanding debt and its 10-year bonds widened by about 5 to 10 basis points, according to data solutions provider BondCliq Media Services.
As the following chart shows, the bonds have seen better selling on Wednesday with buyers emerging around midmorning.
KeyBank net customer flow (intraday). Source: BondCliQ Media Services
The next chart shows customer flow over the last 10 days.
Most active KeyBank issues with net customer flow (last 10 days). Source: BondCliQ Media Services
The next chart shows the outstanding debt of the downgraded banks, with KeyCorp. clearly the leader with almost $16 billion of bonds.
Outstanding S&P downgraded banks debt USD by maturity bucket. Source: BondCliQ Media Services
Wall Street looks ready to build on Monday’s gains, the first in five sessions for the S&P 500 SPX
and Nasdaq Composite COMP.
That’s as expectations build around Nvidia, which has had a lackluster August, to knock it out of the park with earnings on Wednesday.
Investors have had months to focus on AI darlings such as Nvidia. In our call of the day, Goldman Sachs takes a look at stocks to trade after the big AI trade. A team led by strategists Ryan Hammond and David Kostin complied a basket of companies with the biggest potential long-term earnings per share boost from the impact of AI adoption on labor productivity.
Their analysis indicates that following widespread AI adoption, EPS for the median stock in that basket could be 72% higher than the baseline, versus 19% for the median Russell 1000 stock.
“We estimate the potential productivity-related EPS boost from increased revenues or increased margins, using a combination of company-level estimates of the share of the wage bill exposed to AI automation and the labor cost to revenue ratio,” said the Goldman team.
Since early 2023, when AI emerged as a theme for investors, they note their long-term basket of stocks has outperformed the equal-weight S&P 500 by just 6 percentage points, far less than near-term beneficiaries such as Nvidia NVDA, -0.49%,
Microsoft MSFT, +0.94%
or Meta META, +0.51%.
Goldman Sachs Investment Research
“The estimated AI-driven earnings boost is likely to occur over the next few years, but should be reflected in stock valuations sooner. However, the eventual share price impact will depend on the ability of companies to use AI to enhance earnings,” said Goldman.
While unable to pin it exactly, Goldman expects AI adoption will start to a have a “meaningful macro impact” between 2025 and 2030, with regulatory constraints and data privacy concerns likely to slow widespread adoption. Nearly 75% of CEOs see AI take-up impacting companies or cutting labor needs within the next five years, even if they don’t right now.
Firms with the biggest workforce exposure to AI and larger and more innovative ones, will likely adopt generative AI earlier than others, say the strategists. They say to “expect valuation multiples for these companies to increase first as the adoption timeline crystallizes, even if actual adoption and the associated EPS boost is occur later.”
Goldman’s estimates on the potential earnings boost for those long-term AI beneficiaries consist of several factors: the share of each company’s wage bill exposed to AI automation, how much of a company’s wage bill is exposed to AI automation and labor cost as a share of revenue.
“For the typical Russell 1000 stock, 33% of the wage bill is potentially exposed to AI automation and labor costs currently represent 14% of total sales. The potential boost from higher sales would increase earnings by 11% and reduced labor costs would increase earnings by 26%, all else equal,” say the strategists.
Here is a taster of their long-term AI beneficiaries basket:
The world’s biggest miner BHP BHP, -0.98%
reported a 58% slump in annual profit amid tumbling commodity prices in part due to China’s economic troubles. U.S.-listed shares are up 4%.
Arm Holdings filed its long-awaited IPO, which could be the year’s biggest. The chip designer aims to raise up to $10 billion with a valuation of $60 billion to $70 billion.
Existing home sales for July are due at 10 a.m., with several Fed speakers throughout the day: Richmond Fed President Tom Barkin at 7:30 a.m. and Chicago Fed President Austan Goolsbee and Fed. Gov. Michelle Bowman both at 2:30 p.m.
Is tech dancing to the beat of its own drum? The Chart Report flagged this one from Scott Brown, founder of Brown Technical Insights, showing performance of the Technology Select Sector SPDR ETF XLK
:
@scottcharts
“It’s only been a week, but consensus and conventional wisdom suggest higher yields are bad for Growth/Tech stocks. Meanwhile, Tech is acting like it never got the memo. It’s still too early to tell if Tech is trying to tell us something, but Scott points out that the sector is facing a crucial test this week at the March 2022 highs (around $163). $XLK is solidly above $163 after today’s bounce, but where it ends the week will likely hinge on $NVDA, as the company releases earnings on Wednesday evening,” says Patrick Dunuwila, editor and co-founder of The Chart Report.
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.
Microsoft will change the terms of its Activision Blizzard buyout offer in a new effort to win approval from the U.K. competition regulator.
The regulator, the Competition and Markets Authority, said Microsoft MSFT, +1.71%
will now license Activision’s global cloud streaming to Ubisoft Entertainment, for any game available now or in the next 15 years. Ubisoft, in its own release, highlighted the ability to stream the popular Call of Duty franchise.
Financial terms were not released, but the regulator said Ubisoft will make a one-off payment and also agree a market-based wholesale pricing mechanism.
The license will be exclusive except in the European economic area. Ubisoft would have the ability to require Microsoft to provide versions of games on operating systems other than Windows, such as Linux.
Ubisoft shares UBI, +5.80%
jumped nearly 5% in opening Paris trade.
The regulator now says it’s inviting comments on the structure of the new offer. “This is not a green light. We will carefully and objectively assess the details of the restructured deal and its impact on competition, including in light of third-party comments,” said the regulator’s CEO, Sarah Cardell.
Microsoft last year agreed to buy Activision Blizzard for $68.7 billion, or $95 per share. Activision stock ATVI, +0.28%
closed Monday at $90.72.
In a blog post, Microsoft Vice Chair Brad Smith said it anticipates the CMA review processes can be completed before the 90-day extension in its acquisition agreement with Activision Blizzard expires on Oct.18. He also said the deal with Ubisoft was carefully structured not to interfere with an existing deal struck with European regulators.
An exchange-traded fund set up to buy stocks recommended by CNBC personality Jim Cramer will be closed and liquidated, its provider said Monday.
Shares of the Long Cramer Tracker ETF LJIM
will see their last day of trading on Cboe on Sept. 11, which will also be the last day the fund will accept creation units from authorized participants, Tuttle Capital Management said in a news release Monday afternoon.
“We started LJIM in order to facilitate a conversation with Jim Cramer around his stock picks as the other side to the Short Cramer ETF SJIM,
” said Matthew Tuttle, the fund’s adviser, in the news release.
“Unfortunately, Mr. Cramer and CNBC have been unwilling to engage in dialogue and instead have chosen to ignore the funds, therefore there is no reason to keep the long side going,” Tuttle said. “Going forward we will just focus on the short side.”
CNBC didn’t immediately respond to a request for comment.
The Inverse Cramer ETF aims to achieve the inverse of Cramer’s recommendations by going short anything he recommends buying and going long anything he doesn’t like. The ETFs were launched in March.
The Long Cramer ETF opened at $24.96 on March 2, according to FactSet. It surged in June and early July, closing at a high of $29.42 on July 19. It’s retreated sharply in August, falling 12.1% so far this month, ending Monday at $25.79.
The Inverse Cramer ETF, as would be expected, fell sharply in June and early July, but is up 13.1% in the month to date. The Long Cramer ETF is up 3.3% since its launch, while the Inverse Cramer ETF is down 3.9%.
Cramer last October said on Twitter that he welcomed people betting against him, after Tuttle Capital Management filed papers for the ETFs with the Securities and Exchange Commission.
In response to the launch of the ETFs in March, a CNBC spokesperson said that it was Cramer’s mission “to encourage long-term investing and a balanced portfolio that includes index funds and individual stocks.”
Arm Holdings Ltd. filed its long-awaited initial public offering late Monday, following last year’s failed bid by Nvidia Corp. to acquire the U.K.-based chip architecture company.
Arm has reportedly been seeking to raise $8 billion to $10 billion at a valuation of $60 billion to $70 billion, making its IPO the biggest of the year so far, and a number of large tech companies, including Amazon.com Inc. AMZN, +1.10%, Intel Corp. INTC, +1.19%
and Nvidia NVDA, +8.47%,
are reportedly in the mix to be anchor investors.
At the time of the breakup, chips sales had hit record highs in 2021, surging 26.2% to a record $555.9 billion, fueled by pandemic-triggered shortages. But the chip industry has since swung to a glut.
Arm listed Barclays, Goldman Sachs, JP Morgan, Mizuho, BofA Securities, Citigroup, and Deutsche Bank Securities among the IPO’s underwriters.
Recent reports said SoftBank was in discussions to purchase the 25% stake in Arm that it does not outright own, which is held by its Vision Fund 1, ahead of the IPO.
Arm reported net income of $524 million, or 51 cents a share, on revenue of $2.68 billion for fiscal 2023, which ended March 31, compared with net income of $549 million, or 54 cents a share, on revenue of $2.7 billion, in fiscal 2022, and $388 million, or 38 cents a share, on revenue of $2.03 billion in fiscal 2021.
Arm uses an architecture that is different from the once-standard x86 one built by Intel in the early days of computing.
The company said it has shipped more than 250 billion Arm-based chips since its started in 1990 as a joint venture between Acorn Computers, Apple AAPL, +0.77%
and VLSI Technology. In fiscal 2023, Arm said it shipped 30.6 billion chips.
The company said it is going public as the “resources required to develop leading-edge products are significant and continue to increase exponentially as manufacturing process nodes shrink.” Transistors are expressed in scales of nanometers, with design costs running about $249 million for a 7-nanometer chip and about $725 million for a 2-nm chip.
“As the world moves increasingly towards AI- and [machine language]-enabled computing, Arm will be central to this transition,” the company said in the filing. “Arm CPUs already run AI and ML workloads in billions of devices, including smartphones, cameras, digital TVs, cars and cloud data centers.”
Arm said it is working with Alphabet Inc. GOOG, +0.64%
Nvidia Corp.’s earnings are drawing nearer, and yet another analyst is feeling upbeat heading into the upcoming report.
KeyBanc analyst John Vinh hiked his price target on Nvidia’s stock NVDA, +7.31%
to $620 from $550 Sunday, writing that despite tight supply, Nvidia could see strong AI demand and incremental capacity drive upside. Nvidia is scheduled to report fiscal second-quarter earnings after the close of markets on Wednesday.
“Given the pushout of [Advanced Micro Devices Inc’s] AMD, +2.31%
MI300X, we believe Nvidia has been able to source increased [chip on wafer on substrate] capacity at Taiwan Semiconductor Manufacturing Co. TSM, +1.44%,
” Vinh said.
Shares of Nvidia rallied more than 5% to an intraday high of $456.56 in Monday trading, after having logged declines in each of the prior three sessions for a total loss of 1.5%. The shares are up more than 210% on a year-to-date basis, compared with a 39% gain in the PHLX Semiconductor Index SOX,
a 14% rise in the S&P 500 SPX
and a 28% surge in the tech-heavy Nasdaq Composite COMP
over the same span.
In addition, Nvidia plans a fall launch of its L40S GPU for small to medium-sized model training and inferencing with competitive performance versus its A100. That debut will be significant given tech restrictions related to China.
“Given L40S meets the performance threshold of export restriction and doesn’t require CoWoS packaging, combined with favorable pricing (est. $7K-$8K/GPU), we expect this lineup can incrementally fulfill some of the pent-up GPU demand in the near term, particularly in China,” said Vinh, who has an overweight rating on the stock.
Vinh raised his fiscal second-quarter revenue forecast to $12.7 billion and upped his earnings outlook to $2.49 a share. His prior expectations were for $11.1 billion and $2.05, respectively.
He also now forecasts fiscal third-quarter revenue of $14.8 billion and earnings per share of $3, up from prior projections of $12.4 billion and $2.34, respectively.
Of the 50 analysts who cover Nvidia, 43 had buy-grade ratings, six had hold ratings and one had a sell rating, along with an average price target of $432.99.
When Nvidia Corp. last reported quarterly results, the chip maker forecast record revenue that was far above anything it had put up before. In response, investors sent the stock into orbit. On Wednesday, the latest round of earnings for the company will be a test of Nvidia’s status as the darling of the AI investment boom, and a test of whether it can deliver on its own lofty expectations.
The results will also be an update of tech demand overall, after businesses tightened their IT budgets following worries about an economic slowdown. But even with Nvidia’s NVDA, -0.10%
stock up more than 200% so far this year and expectations rising just as much, some analysts still say there’s room for shares to go higher, despite supply-side logjams.
Barclays said that Nvidia, whose chips analysts say will help power AI technology in the days to come, has “monopolized the economics of the AI boom, with no clear competitor close behind.” They added that “cloud capex budgets are being funneled towards AI.”
Signs that Nvidia might be falling behind on meeting chip demand have started to emerge. But as businesses rush to mark their territory, or potential territory, in the world of AI, Wedbush analysts have asked whether Nvidia’s results and forecast would even matter, as today’s production constraints turn into tomorrow’s sales.
“We don’t think NVDA results/guidance need to hit the high end of expectations,” Wedbush analyst Matt Bryson said in a research note on Friday.
“With demand for AI training having lifted substantially in the past quarter and with no other silicon supplier now capable of providing part volumes within an order of magnitude of NVDA’s output, we believe any unfilled demand will just be pushed into forward quarters fueling future sales and (earnings per share),” he continued.
Synovus analyst Daniel Morgan was also bullish on Nvidia’s business targeted toward data centers, as those facilities try to integrate generative AI and large language models. And within Nvidia’s gaming segment, he said the company’s new Ada Lovelace graphics-processing unit ecosystem “appears to be seeing a high level of success in retail.”
Still, the longer a stock runs higher, the harder it can fall. And Nvidia’s $1 trillion valuation, Morgan said, “is not for the faint-hearted.”
This week in earnings
Along with Nvidia, China search giant Baidu Inc. BIDU, -3.63%
reports, as the nation’s economic rebound sputters. And if more businesses are still cautious about cloud spending, or shifting spending to AI, the mood could filter through to results from Splunk Inc. SPLK, +0.35%
and Snowflake Inc. SNOW, +0.47%.
Peloton Interactive Inc. PTON, +1.59%,
Workday Inc. WDAY, +0.16%
and Marvell Technology Inc. MRVL, +0.05%
also report.
The call to put on your calendar
Zoom and offices: If even Zoom is calling some of its workers back to the office, what could that possibly mean for its results on Monday and the business of videoconferencing? Zoom Video Communications Inc. ZM, +1.42%
hasn’t been spared from the wave of tech-industry layoffs, and the company is trying to branch out from its pandemic-mainstay video-call platform, and harnessing its technology to handle phone calls and customer contact centers. Benchmark Research analyst Matthew Harrigan, in a note last week, said he still liked Zoom’s prospects, even though he wasn’t expecting “much instant gratification.” “We do expect AI to crystallize as a significant positive for Zoom even as it navigates through customer pushback on using customer data to train AI models off privacy concerns,” he said.
The numbers to watch
Sales, forecasts and inventories from retailers: Last week, Target Corp. TGT, +0.85%
reported what one analyst called “the definition of mixed results,” while another said the results amounted to “Recessionary trends without the recession.” Sales of essentials like groceries, as they have over the past year, helped Walmart Inc.’s WMT, +1.44%
results, but management said that consumers were still feeling the pain from inflation, which for some shoppers over the past year has left little room for much beyond the basics.
In the week ahead, we’ll get results whole bunch of retailers that don’t sell basics — like department stores Macy’s Inc. M, +0.53%
and Kohl’s Corp. KSS, +3.53%
; clothing chains Nordstrom Inc. JWN, +0.47%,
Gap Inc. GPS, +2.17%,
Urban Outfitters Inc. URBN, +2.00%
; shoe retailer Foot Locker Inc. FL, +0.60%
and beauty-products chain Ulta Beauty Inc. ULTA, +1.40%.
Those retailers will report as prices for some things start to come down, or at least not rise as fast, and as some economists overcome their recession fears. But remarks from executives could offer some sense of the impact from higher borrowing costs and the return of student loan payments, and how much they’ll be able to bank on the back-to-school season and wealthier — and more carefree — consumers.
Dollar-store Dollar Tree Inc. DLTR, +0.44%
will also report results, as low-income consumers suffer more under inflation and deal with the end of pandemic-era supplemental food assistance. Off-price retailer Burlington Stores Inc. BURL, +1.43%
reports as well, after Ross Stores Inc. ROST, +5.01%
Chief Executive Barbara Rentler said that while its low- and moderate-income shoppers were still hurting, shoppers overall “responded well to our improved value offerings throughout our stores.”
The majority of second-quarter earnings season is over, with a handful of major technology and retail names left to report this week. Economists will be focused on any news from an annual gathering of monetary policy thinkers and practitioners in Jackson Hole, Wyoming.
Amazon.com Inc. AMZN, -0.57%
has relaunched its Amazon Shipping delivery service after a pandemic-era pause, the company confirmed on Friday. The news, reported on earlier in the day by the Wall Street Journal, marks the return of a segment of the online retailer that went head-to-head with the likes of FedEx Corp. FDX, -0.85%
and United Parcel Service Inc. UPS, +0.29%
The service, which processes packages sold via Amazon and other outlets, is now running in most of the U.S., the Journal said. The shipping segment was put on halt after being overwhelmed by the boom in online demand during the pandemic, the Journal said. “We’re always working to develop new, innovative ways to support Amazon’s selling partners, and Amazon Shipping is another option for shipping packages to customers quickly and cost-effectively,” Amazon spokesperson Olivia Connors said in a statement. “We’ve been providing this service for a while with positive feedback so we’re now making it available to more selling partners.” Shares of Amazon were 0.1% lower after hours on Friday.
Palo Alto Networks Inc. shares rallied Friday after hours as the cybersecurity company topped expectations with its latest earnings, as well as with its forecasts for profit and billings, outlining that new reporting rules and AI-backed adversaries are driving adoption.
The stock PANW, +1.02%
was rallying more than 9% in the extended session, following a 1% gain in the regular session to close at $209.69.
Palo Alto Networks forecast first-quarter adjusted earnings of $1.15 to $1.17 a share on revenue of $1.82 billion to $1.85 billion and billings of $2.05 billion to $2.08 billion. Analysts were estimating $1.11 a share on revenue of $1.93 billion and billings of $2.04 billion for the first quarter.
For the year, the company expects $5.27 to $5.40 a share on revenue of $8.15 billion to $8.2 billion on billings of $10.9 billion to $11 billion. Analysts tracked by FactSet had been projecting $4.98 a share on revenue of $8.38 billion and billings of $10.81 billion for the year.
The company defines billings as “total revenue plus the change in total deferred revenue, net of acquired deferred revenue, during the period,” and is a metric used to account for subscriptions.
On the extended call with analysts, Nikesh Arora, the company’s chairman and chief executive, said that while strong fourth-quarter results did not come as a surprise, what did come as a surprise was the speed of adoption of its Cortex XSIAM AI-driven security platform, especially now that regulators are going to start requiring quick disclosures for material cyberattacks.
Palo Alto Networks reported fiscal fourth-quarter net income of $227.7 million, or 64 cents a share, compared with $3.3 million, or a penny a share, in the year-ago period. Adjusted earnings, which exclude stock-based compensation expenses and other items, were $1.44 a share, compared with 80 cents a share in the year-ago period.
Revenue rose to $1.95 billion from $1.55 billion in the year-ago quarter, while billings rose 18% to $3.2 billion. Analysts surveyed by FactSet had forecast $1.29 a share in adjusted earnings on revenue of $1.96 billion and billings of $3.18 billion.
The company launched XSIAM in October, and set a goal of booking more than $100 million in the first year. Arora said that in less than a year, XSIAM has already brought in $200 million, indicating that interest in applying AI to enhance security is “very high.”
“Our customers have told us loud and clear that the legacy products powering their stacks are no longer working and they need to reduce by an order of magnitude,” Arora told analysts. “This becomes increasingly important with the new SEC rules detailing that all public companies will be required to report material breaches within four business days.”
On the call, Lee Klarich, Palo Alto Networks chief product officer, told analysts that it wasn’t long ago that the average time between an initial hack and stealing data was about 44 days. Now, that can happen in a matter of hours, which is a huge problem, Klarich said, noting that attackers are adopting AI to perform attacks.
“On average the industry is able to respond and remediate attacks in about six days: That doesn’t work,” Klarich said. “And even more challenging now with the SEC new rules of being able to disclose within four days, none of the math adds up.”
Nvidia Corp. NVDA, -0.10%,
which also has a huge stake in AI, reports results after the bell on Wednesday.
Palo Alto Networks is a new entrant to the S&P 500 index SPX, having gotten the nod in June. As of Friday’s close, Palo Alto Networks shares have gained 50.3% year to date, compared with a 12.4% gain on the ETFMG Prime Cyber Security exchange-traded fund HACK,
a 13.8 % gain on the S&P 500, and a 27% rise on the tech-heavy Nasdaq Composite COMP.
The so-called Magnificent Seven grouping of technology stocks lost some of its luster this week after four of the seven moved into correction territory, meaning their stocks have fallen at least 10% from their recent peaks.
The corporate-bond market, in contrast, seems to like all seven names.
One caveat: Tesla has no outstanding bonds. In the past, the electric-car maker issued convertible bonds, but they have all been converted into equity.
The group is credited with helping drive the stock market’s gains in the first half of the year, driven by excitement about artificial intelligence. But the rally has stalled in recent weeks as investors have fretted over the potential for U.S. interest-rate increases, surging Treasury yields and China worries, with property developer Evergrande filing for U.S. bankruptcy protection late Thursday.
On Thursday, Meta followed Apple, Microsoft and Nvidia into correction territory, as MarketWatch’s Emily Bary reported. Tesla, meanwhile, is in a bear market, meaning it’s down more than 20% from its recent peak.
The following series of charts from data-solutions provider BondCliQ Media Services show how many bonds each company has issued by maturity and how they have traded as the stocks have pulled back.
The first chart shows that Microsoft has by far the most bonds, mostly in the 30-year bucket. The software and cloud giant has more than $50 billion in long-term debt, according to its 2023 10-K filing with the Securities and Exchange Commission.
Outstanding Magnificent Seven debt by maturity bucket.
Source: BondCliQ Media Services
This chart shows trading volumes over the last 10 days, divided by trade type. The green shows customer buying, while the red is customer selling. The blue shows dealer-to-dealer flows. Microsoft, for example, has seen almost $1.3 billion in customer buying from dealers in the last 10 days and $960 million in customer sales to dealers.
This chart shows that every name in the group has enjoyed better net buying in the last 10 days, with Microsoft leading the way.
Net customer flow of Magnificent Seven debt (last 10 days).
Source: BondCliQ Media Services
This chart shows spread performance over the last 50 days for an intermediate-term bond from each of the seven issuers. Most have tightened or remained steady over the period.
Historical spread performance of Magnificent Seven debt.
Apple’s stock entered correction Wednesday upon falling more than 10% from its July 31 peak of $196.45. The company sells mainly discretionary products, and right now “consumers are still being pinched” and thinking more carefully about where they spend their money, according to Matt Stucky, senior portfolio manager for equities at Northwestern Mutual Wealth Management.
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crushed Wall Street’s earnings estimates and increased fiscal-year financial guidance. The stock, however, was down. Current results were great, but investors are worried about whether the current phase of rising demand for agricultural equipment is over.
U.K. retail sales fell more than expected in July, driven by both declining food and nonfood purchases, with clothes sales especially suffering amid unseasonably wet weather in the month.
Retail-sales volumes ticked down 1.2% on month, a swing from the 0.6% increase in June, data from the Office for National Statistics showed Friday.
The reading was compares with expectations of a 0.4% decline in volumes from a consensus of economists polled by The Wall Street Journal.
Novartis said the planned spinoff of its Sandoz generic pharmaceuticals and biosimilars business is expected to occur on or around Oct. 4.
The Swiss pharmaceutical giant said Friday that the separation will take place through a proposed distribution of Sandoz shares to its existing shareholders. Novartis shareholders will get one Sandoz shares for every five Novartis shares held and one Sandoz American depositary receipts–or ADRs–for every five Novartis ADRs, the company said.
Novartis had previously said it expected the spinoff to happen early in the fourth quarter.
The Sandoz spinoff remains subject to approval by Novartis’s shareholders. Novartis has scheduled an extraordinary general meeting for Sept. 15 to vote on the proposed distribution of Sandoz shares and a reduction in its own share capital in connection with the spinoff, it said.
Following the separation, Sandoz would be listed in SIX Swiss Exchange, with an ADR program in the U.S., Novartis said.
Write to Adria Calatayud at adria.calatayud@dowjones.com
Heavily-indebted Evergrande, which has symbolized China’s property crisis, made its filing amid growing fears that the sector’s troubles will spread to other parts of the country’s economy.
Since mid-2021, companies accounting for 40% of Chinese home sales have defaulted, stoking fears about the resilience of the world’s second-largest economy.
A Chapter 15 bankruptcy is a way for foreign companies with U.S. assets to get access to domestic courts.
Spillover from Evergrande’s 2021 debt woes rattled investors in stocks and spurred a flight to safety in U.S. government bonds. Investors this week have been closely monitoring developments in China’s property markets.
Stocks were headed for another week of losses on Thursday, with the Dow Jones Industrial Average DJIA
off 2.3% so for the week, the S&P 500 index SPX
2.1% lower and the Nasdaq Composite Index off 2.4%, according to FactSet. Dow YM00, -0.08%
and S&P 500 ES00, -0.15%
futures fell slightly late Thursday.
Chris Low, FHN Financial’s chief economist, said the “mess in China” was resulting in a flight-to-quality bid for 10-year Treasurys, in a Wednesday note to clients. The 10-year yield BX:TMUBMUSD10Y
shot up to 4.307% on Thursday, the highest since November 2007, according to FactSet.
Adyen shares fell as much as 22% on Thursday as the fast-growing Dutch payment company’s first-half results lagged estimates.
Adyen’s ADYEN, -25.02%
first-half profit was virtually flat at €282.2 million ($307 million), while net revenue rose 21% to €739.1 million, missing the consensus of €777 million.
Its earnings before interest, tax, depreciation and amortization fell 10% to €320 million, lagging the consensus of €379 million.
Adyen has previously lamented not being able to grow its team in North America, which it said is impacting now. “We now see the impact of a sales team size that did not match our ambitions, particularly in North America,” the company said in its shareholder letter. In the first half, it added 551 full-time employees, three-quarters in tech roles. The company blamed the adjusted profit decline on increased wages and salaries.
Inflation was a problem for its customers, too. “As a natural consequence of the shifting economic climate – driven by higher inflation and interest rates – profit outweighed growth for many North American digital businesses in the first half. Enterprise businesses prioritized cost optimization, while competition for digital volumes in the region provided savings over functionality,” the company said.
The company reiterated its longer-term revenue and margin goals, including for revenue growth between the mid-twenties and low-thirties. “We know that growth is not always linear, and reiterate our financial objectives,” the company said.
Vlatko Andonovski has resigned as head coach of the U.S. women’s national soccer team, according to multiple reports Wednesday, following a disappointing early exit from the Women’s World Cup.
The soccer blog 90min first reported Andonovski’s departure, and the news was confirmed by ESPN and The Athletic late Wednesday. ESPN reported the U.S. Soccer Federation is expected to make an official announcement Thursday.
