Tag: industrial news

Nordea Raises Guidance After Beating 2Q Net Profit Views

[ad_1]

By Dominic Chopping

Nordea Bank on Monday raised guidance and posted a forecast-beating second-quarter net profit as net-interest margins improved and corporate lending grew.
The Helsinki-based bank posted net profit attributable to shareholders of 1.34 billion euros ($1.5 billion), from EUR1.06 billion in the same period a year earlier, as net-interest income rose 40% to EUR1.83 billion.

A poll of analysts by FactSet had forecast net profit of EUR1.26 billion and net interest income of EUR1.8 billion.
“It is clear that the economic slowdown and interest rate increases have had a negative impact on our business volume growth, mainly in mortgages,” Chief Executive Frank Vang-Jensen said.
“Our corporate lending volumes continue to grow, particularly in Norway and Sweden.”
Full-year 2023 return on equity is now expected to be above 15%, from above 13% previously. Nordea maintained its full-year 2025 financial target of return on equity above 13%, supported by a cost-to-income ratio of 45%-47% and an annual net loan loss ratio of around 10 basis points.
“We are reassessing our long-term financial target for 2025. We will provide a target update in conjunction with the release of our fourth quarter report,” Vang-Jensen said.
Nordea’s common equity Tier 1 ratio was 16.0%, from 16.6% a year earlier.
Write to Dominic Chopping at dominic.chopping@wsj.com

[ad_2]

Source link

July 16, 2023

The nation’s biggest banks are gearing up for more consumer struggles ahead

[ad_1]

JPMorgan Chase & Co. Chief Executive Jamie Dimon on Friday said the U.S. economy was basically doing OK, even if customers were spending “a little more slowly.”

But with rivals like Bank of America Corp., Goldman Sachs Group Inc. and American Express Co. set to report quarterly results this week, recession agita still prevails.

For evidence, look no further than JPMorgan’s
JPM,
+0.60%
own quarterly results. The bank’s second-quarter profit blew past expectations, but it set aside $2.9 billion during the second quarter to cover potentially bad loans, amid concerns that more consumers could run into more difficulty paying their bills on time as higher prices manage to stick at stores.

That figure was well up from $1.1 billion in the same quarter last year, although still far below the billions it stowed away when the pandemic first hit. Similarly, Wells Fargo & Co.
WFC,
-0.34%
on Friday set aside $1.7 billion for loan losses in this year’s second quarter, nearly triple what it was a year ago.

The figures underscore the anxiety over the second half of this year, when many economists expect the economy to tilt into a recession. However, for the 500 companies in the S&P 500 index, Wall Street analysts still expect profit growth.

Any downturn could be exacerbated by the pressure investors have put on companies, potentially via more layoffs and money-saving technology, to keep prices high and cut costs to replicate the abnormally large profit-margin gains they put up in 2021 and 2022. Businesses have indeed kept prices high, at least for many basic necessities, in an effort to cover their own higher costs and to pad profits.

When Bank of America
BAC,
-1.89%
reports this week, the results will narrow the lens on lending and spending in the U.S. Results from Morgan Stanley
MS,
-0.50%
and Goldman Sachs
GS,
-0.76%
will fill in the gaps on trading and deal-making. American Express
AXP,
-0.49%
will give a more detailed breakdown of what consumers are still spending their money on, after Delta Air Lines Inc.
DAL,
-2.35%
— which has a partnership with AmEx — said that travel demand remained “robust.”

Banks shoveled more money into their reserve stockpiles in 2020 to bulk up against the pandemic’s shutdown of the economy. A year later, they started releasing those funds as the economy reopened and recovered. FactSet expects the broader banking sector to plump up its cash cushion during this year’s second quarter to account for more late loan payments or potential defaults.

In a report on Friday, FactSet said the 15 banking-industry companies in the S&P 500 Index tracked by the firm were on pace to set aside $9.9 billion to cover losses from souring loans in the second quarter. That’s more than double the amount set aside a year ago. And if that $9.9 billion figure, based on actual and projected financial figures, ends up as the actual figure at the end of the quarter, it would mark the highest since the beginning of the pandemic and the third highest in five years, according to FactSet data.

“The U.S. economy continues to be resilient,” Dimon said in a statement on Friday. “Consumer balance sheets remain healthy, and consumers are spending, albeit a little more slowly. Labor markets have softened somewhat, but job growth remains strong.”

However, he noted difficulties in JPMorgan’s investment banking segment. And he said consumer savings were slowly eroding as inflation endures.

As the nation’s biggest bank, JPMorgan has flexed its financial muscle this year, swallowing up First Republic after that bank got into trouble. But as it consolidates power and influence, building thicker armor against shocks to the economy, its financial results might not always reflect the struggles of its smaller rivals, where difficulties are likely felt more acutely. Analysts at Raymond James said that while JPMorgan remained a “best in breed” bank, its outlook pointed to “heightened challenges for smaller banks.”

See also: Jamie Dimon says U.S. consumers are in ‘good shape.’ This evidence may prove otherwise.

This week in earnings

For the week ahead, 60 S&P 500 companies, including five from the Dow, will report quarterly results, according to FactSet. Two big oil companies, Halliburton Co.
HAL,
-2.28%
and Baker Hughes Co.,
BKR,
-0.95%
will report, as oil prices fall from levels seen last year. Results from two transportation giants — trucking company J.B. Hunt Transport Services
JBHT,
-0.42%
and railroad operator CSX Corp.
CSX,
-0.27%
— will also be a proxy for how much people are buying things and having them shipped. United Airlines Holdings Inc.
UAL,
-3.42%
and American Airlines Group
AAL,
-1.68%
will also report.

The call to put on your calendar

Netflix results: Hollywood shutdown, ‘slow-growth’ expectations. Hollywood’s writers — and now its actors — have gone on strike, and Netflix Inc.
NFLX,
-1.88%
reports second-quarter results on Wednesday. The streaming platform will likely face questions over how much content it has left in the tank, as the strike upends studio-production schedules and leaves viewers with vast expanses of reruns. Still, Macquarie analyst Tim Nollen said that the production standstill “may ironically drive even more viewers to streaming services.”

The writers and actors argue that the studio industry — increasingly consolidated, increasingly publicly traded, increasingly oriented around a handful of film franchises — has profited immensely while skimping on things benefits and streaming residuals. But after a decade-long rise, and a recent shift in investor focus from subscriber growth to profit growth, Netflix has emerged as one of the biggest production powerhouses in the business. And after years of flooding customers with new films and shows, it’s trying to squeeze out sales via more boring ways: things like a password-sharing crackdown and ads.

Daniel Morgan, senior portfolio at Synovus Trust Co., said Netflix still faced a plenty of streaming competition amid “muted” subscriber growth. But Wedbush analyst Michael Pachter said investors should look at Netflix as a profitable, albeit more mature company.

“We think Netflix is well-positioned in this murky environment as streamers are shifting strategy, and should be valued as an immensely profitable, slow-growth company,” Pachter said in a research note on Friday.

“Even while the ad-supported tier is not yet directly accretive (we think it will be accretive over time), the ad-tier should continue to reduce churn and draw new subscribers to the service,” he continued.

The number to watch

Tesla sales. Electric-vehicle maker Tesla Inc. also reports second-quarter results on Wednesday. And like streaming, some analysts say the fervor for EVs has faded.

However, they also said that Tesla
TSLA,
+1.25%
had so far been immune from the malaise. And even though Elon Musk remains preoccupied with Twitter — which now faces competition from Meta Platforms Inc.’s
META,
-1.45%
Threads — Tesla’s second-quarter deliveries were far above expectations. Sales are expected to be big. And one analyst said that price cuts, which Tesla has used to capture more of the auto market in China, were likely “fairly minimal” during the second quarter. But some analysts wondered what the blowout delivery figures would mean for margins. And the industry, broadly, has increasingly tested the patience of profit-minded investors.

“We’ve now seen a market where demand is constrained, capital has been tighter, and there is less tolerance for EV related losses,” Barclays analysts said in a note last week, adding that there was a “step back from EV euphoria.”

Claudia Assis contributed reporting.

[ad_2]

Source link

July 16, 2023
After years of delays, Tesla builds its first Cybertruck

[ad_1]

After years of delays, Tesla Inc.’s first Cybertruck rolled off the assembly line Saturday in Austin, Texas.

“First Cybertruck built at Giga Texas!” the electric-vehicle maker tweeted Saturday. “Congrats Tesla Team!,” Chief Executive Elon Musk replied on Twitter.

A prototype of the angular, futuristic-looking pickup was unveiled by Musk in 2019, but production was repeatedly delayed due to what Tesla said were supply-chain issues.

Earlier this year, Musk said the first Cybertrucks would be made this year, with volume production starting in 2024.

The Cybertruck will be Tesla’s biggest new-vehicle launch since the Model Y in 2020, and analysts have high expectations that it will help to significantly boost sales.

Wall Street expects fewer than 10,000 Cybertruck deliveries this year, according to Barron’s, but closer to 100,000 in 2024.

Read more: With the Cybertruck, Tesla faces its Edsel moment

Tesla shares
TSLA,
+1.25%
have surged 128% year to date, compared to the S&P 500’s
SPX,
-0.10%
17% gain.

Updated with the Model Y being the previous major launch.

[ad_2]

Source link

July 16, 2023
Here’s how many Diet Cokes you’d have to drink daily to get too much aspartame

[ad_1]

A leading global health body has declared that the artificial sweetener aspartame, commonly used as an ingredient in diet soda, chewing gum and vitamins, may cause cancer.

But the World Health Organization’s report late Thursday also noted that people would have to be exposed to extreme amounts of aspartame — whether through diet, occupational exposure or other means — to be at risk.

So how much aspartame is too much?

It’s safe to consume up to 40 milligrams of aspartame per kilogram, or 2.2 pounds, of body weight per day, a WHO and Food and Agriculture Organizations joint committee of experts on food additives said. So, a person who weighs 154 pounds would need to drink nine to 14 cans of, say, Diet Pepsi or Diet Coke per day to exceed that level, assuming there are 200 to 300 milligrams of aspartame in each can.

“We’re not advising consumers to stop consuming [aspartame] altogether,” said WHO’s nutrition director, Dr. Francesco Branca. “We’re just advising a bit of moderation.”

The Food and Drug Administration has an even higher daily aspartame-exposure limit: 50 milligrams per kilo of body weight.

Even heavy aspartame users — Donald Trump, the former U.S. president, for example, drank a reported 12 cans of Diet Coke a day in his White House years — would struggle to consume that much of the sweetener in an average day.

But consumers should also note that a food being labeled “safe” is not equivalent to its being healthy. There has been plenty of research to suggest that sipping too many sweetened beverages, including diet drinks with artificial sweeteners, may be linked to health problems and elevated risk of death.

Aspartame is used in products that millions of people use every day, including Diet Coke and Diet Pepsi, Pepsi Zero Sugar and Coca-Cola Zero Sugar, the Mars Wrigley chewing gum Extra and some Snapple drinks, as well as some protein drinks, among thousands of others, by the Calorie Control Council’s count.

Aspartame was developed beginning in the mid-1960s by Skokie, Ill.–based G.D. Searle & Co., now a Pfizer
PFE,
+0.72%
subsidiary, which branded the sweetener NutraSweet. It secured ultimate FDA approval, after initial hiccups, for use in dry goods and then in carbonated soft drinks in 1981 and 1983, according to the Calorie Control Council.

The organization that this week labeled aspartame possibly carcinogenic was the World Health Organization’s cancer-research arm, the International Agency for Research on Cancer. The IARC said its aspartame declaration is based on “limited evidence” of cancer in humans, specifically a type of liver cancer called hepatocellular carcinoma.

What should consumers do with this aspartame news? “At least when it comes to beverages, our message is your best choice is to drink water or an unsweetened beverage,” said Dr. Peter Lurie, executive director of the Center for Science in the Public Interest, which previously nominated aspartame for IARC review.

More aspartame news on MarketWatch:

What is aspartame, and is it bad for you? Here’s what health experts say

Aspartame is possibly carcinogenic, according to WHO’s cancer-research agency

[ad_2]

Source link

July 14, 2023
Here’s how many Diet Cokes you’d have to drink daily to get too much aspartame

[ad_1]

A leading global health body has declared that the artificial sweetener aspartame, commonly used as an ingredient in diet soda, chewing gum and vitamins, may cause cancer.

But the World Health Organization’s report late Thursday also noted that people would have to be exposed to extreme amounts of aspartame — whether through diet, occupational exposure or other means — to be at risk.

So how much aspartame is too much?

It’s safe to consume up to 40 milligrams of aspartame per kilogram, or 2.2 pounds, of body weight per day, a WHO and Food and Agriculture Organizations joint committee of experts on food additives said. So, a person who weighs 154 pounds would need to drink nine to 14 cans of, say, Diet Pepsi or Diet Coke per day to exceed that level, assuming there are 200 to 300 milligrams of aspartame in each can.

“We’re not advising consumers to stop consuming [aspartame] altogether,” said WHO’s nutrition director, Dr. Francesco Branca. “We’re just advising a bit of moderation.”

The Food and Drug Administration has an even higher daily aspartame-exposure limit: 50 milligrams per kilo of body weight.

Even heavy aspartame users — Donald Trump, the former U.S. president, for example, drank a reported 12 cans of Diet Coke a day in his White House years — would struggle to consume that much of the sweetener in an average day.

But consumers should also note that a food being labeled “safe” is not equivalent to its being healthy. There has been plenty of research to suggest that sipping too many sweetened beverages, including diet drinks with artificial sweeteners, may be linked to health problems and elevated risk of death.

Aspartame is used in products that millions of people use every day, including Diet Coke and Diet Pepsi, Pepsi Zero Sugar and Coca-Cola Zero Sugar, the Mars Wrigley chewing gum Extra and some Snapple drinks, as well as some protein drinks, among thousands of others, by the Calorie Control Council’s count.

Aspartame was developed beginning in the mid-1960s by Skokie, Ill.–based G.D. Searle & Co., now a Pfizer
PFE,
+0.72%
subsidiary, which branded the sweetener NutraSweet. It secured ultimate FDA approval, after initial hiccups, for use in dry goods and then in carbonated soft drinks in 1981 and 1983, according to the Calorie Control Council.

The organization that this week labeled aspartame possibly carcinogenic was the World Health Organization’s cancer-research arm, the International Agency for Research on Cancer. The IARC said its aspartame declaration is based on “limited evidence” of cancer in humans, specifically a type of liver cancer called hepatocellular carcinoma.

What should consumers do with this aspartame news? “At least when it comes to beverages, our message is your best choice is to drink water or an unsweetened beverage,” said Dr. Peter Lurie, executive director of the Center for Science in the Public Interest, which previously nominated aspartame for IARC review.

More aspartame news on MarketWatch:

What is aspartame, and is it bad for you? Here’s what health experts say

Aspartame is possibly carcinogenic, according to WHO’s cancer-research agency

[ad_2]

Source link

July 14, 2023
Microsoft Stock Is a Buy, American Tower Can Climb, and More Analyst Reports

[ad_1]

These reports, excerpted and edited by Barron’s, were issued recently by investment and research firms. The reports are a sampling of analysts’ thinking; they should not be considered the views or recommendations of Barron’s. Some of the reports’ issuers have provided, or hope to provide, investment-banking or other services to the companies being analyzed.

[ad_2]

Source link

July 14, 2023
Should Twitter have rejected Musk’s offer and remained publicly traded?

[ad_1]

Would Twitter have been better off to remain a public company rather than be taken private by Elon Musk?

We’ll never know for sure, of course. But it’s hard to imagine that it would have performed any worse. Twitter as a private company is hemorrhaging advertisers, and according to a recent Fidelity analysis its market value is down nearly two-thirds from the $44 billion Musk paid for it.

Grading Twitter’s performance as a private company is more than an idle armchair exercise. It goes to the heart of an age-old debate over whether companies can be more profitably managed when private rather than public. The private equity (PE) industry not surprisingly claims that its approach is superior, and much of Wall Street agrees since many PE firms have produced impressive long-term returns.

The industry’s claims are not devoid of dissenters. Consider a recent study from Verdad Capital entitled “Private Equity Operational Improvements.” It was conducted by Minje Kwun of Dartmouth College and Lila Alloula of Yale University.

In order to overcome the otherwise insuperable obstacle of being unable to measure how private companies are performing, the researchers focused on a subset of leveraged buyouts (LBOs) from 1996 to 2021 in which the private equity firms issued public debt. In order to sell debt to the public, of course, the PE firms had to issue financial statements publicly, and that enabled the researchers to analyze the LBOs’ performance after going private, relative to public companies in the same industry sector.

Kwun and Alloula focused on six indicators of financial performance: Revenue growth, EBITDA margin, capital expenditures as a percentage of sales, and the ratios of gross profit to total assets, EBITDA to total assets, and debt to EBITDA. (EBITDA, of course, refers to Earnings Before Interest, Taxes, Depreciation and Amortization.)

Relative to public companies in the same sector over the three years after going private, LBOs on average did not show any operational improvement along these six dimensions. The researchers conclude: “The [private equity] industry mythology of savvy and efficient operators streamlining operations and directing strategy to increase growth just isn’t supported by data.”

Their results are consistent with those of a near-decade ago study by Jonathan Cohn and Lillian Mills of the University of Texas and Erin Towery of the University of Georgia. They used a different technique to access the otherwise inaccessible financial data of newly-private companies: Their tax returns. The professors focused on the operating performance of a sample of companies that had gone private between 1995 and 2007, comparing them to otherwise-similar companies that remained public. On average over the three years after going private, the researchers found, the private companies performed no better than the public ones.

The source of PE’s industry high returns

What, then, is the source of the increased return that the private equity industry often produces? The answer appears to be increased leverage. Leverage increases returns on the upside, even if it magnifies losses on the downside. Leverage has worked to the PE industry’s advantage over the last several decades since public markets have on balance have risen significantly.

Notice that increasing leverage requires no particular management expertise or shrewd strategic planning. In principle it’s no more difficult than you or me purchasing stock on margin.

These studies are not the final word on the subject. Some other studies, using alternate methodologies, have found some operational improvement at companies after being taken private. If different methodologies can reach such different conclusions, however, that would suggest that the benefits of going private are not as obvious and overwhelming as the private equity industry would have us believe.

At a minimum, Kwun and Alloula argue, we should be skeptical “of any claims of operational improvements being a major contributor to PE’s performance relative to public markets.”

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com

More: These 5 fast-growing stocks pay generous dividends you can count on

Also read: Top investment newsletters are down on tech, Tesla and Meta Platforms. Here’s what they like.

[ad_2]

Source link

July 14, 2023
Virgin Islands seeking at least $190 million in damages from JP Morgan over Jeffrey Epstein

[ad_1]

The U.S. Virgin Islands said it will seek damages of at least $190 million from JP Morgan Chase & Co.
JPM,
+0.60%,
according to a filing Friday. In a late Friday report, CNBC said the damages were related to a lawsuit that accuses the bank of protecting customer Jeffery Epstein. JP Morgan shares were down 0.4% after hours Friday, following a 0.6% rise to close the regular session at $149.77.

[ad_2]

Source link

July 14, 2023
U.S. bank lending holds steady in latest week

[ad_1]

The numbers: Commercial and industrial loans — a key economic driver — held roughly steady in the week ending July 5, the Federal Reserve said Friday. Loans rose $200 million to $2.754 trillion, the central bank said.

Bank lending has been slowly decelerating, falling for three straight months. C&I loans hit a peak of $2.82 trillion in mid-March, right before the collapse of Silicon Valley Bank.

Uncredited

Key details: Total bank deposits rose by $24.9 million to $17.367 trillion in the same week. Deposits have been shrinking slowly. They peaked at $18. 21 billion in mid-April.

Big picture: In the wake of the collapse of Silicon Valley Bank in March, economists have been watching the data carefully for signs of a credit crunch, as banks have weak balance sheets as a result of the Fed’s swift increases in interest rates since March 2022.

San Francisco Fed President Mary Daly said Monday she hadn’t seen credit tightening that is in excess of normal.

“I do think, from research literature, that this takes a while to show itself, and so I think we are still looking into the fall before we would have a declarative statement to make about the extent of credit tightening and the impact on the economy,” Daly said.

Market reaction: Stocks
DJIA,
+0.33%

SPX,
-0.10%
finished the week higher on Friday. The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.832%
rose to 3.83%.

[ad_2]

Source link

July 14, 2023
Gold should be dead, but somehow it’s still adding value

[ad_1]

Why isn’t gold dead yet?

It hasn’t served a vital economic function since the government stopped treating it as money back in 1971. Actually, you could argue it stopped being necessary long before that.

Yes, some people prefer it in jewelry. It is used in some technological equipment, and sometimes, still, in dentistry. But so what? According to authoritative data from the World Gold Council, even all those uses only account for about half of the world’s supply each year. Logically, this should mean that there is a gigantic glut of gold and that its price would be in free fall.

But it isn’t. Gold is beating U.S. stocks and bonds this month. And this isn’t even a rarity. I’ve run some numbers and have found a couple of things that could be very important to retirees, and for all of us suckers saving for retirement.

Even though, according to traditional financial theory, they really make no sense at all.

Don’t miss: Gold headed for best week since March after U.S. inflation reports

Also see: Why gold will beat the stock market in the coming weeks

The first thing is that over the past century including some gold in your portfolio alongside stocks and bonds has genuinely added value. It has produced higher average returns, less volatility and fewer of those disastrous “lost decades” where your portfolio ended up whistling Dixie.

The second thing is that this peculiarity has been showing no signs of letting up in recent years or decades — even though, if anything, gold makes even less sense today than it used to.

Let me explain.

As usual, I’ve tapped the excellent database maintained by the NYU Stern School of Business, which tracks asset values going back to 1928.

Over that period, a conventional so-called balanced portfolio invested 60% in the S&P 500
SPY,
-0.06%
index of large-company stocks and 40% in U.S. 10-year Treasury bonds
TMUBMUSD10Y,
3.832%
has generated an average return of 4.9% a year in “real” terms, meaning above inflation.

A portfolio that’s 60% invested in the S&P 500, 30% in the bonds and 10% in gold
GC00,
-0.26%
earned a slightly higher average, 5.1% a year in real terms. But the volatility was lower: The portfolio that included the gold had a lower standard deviation of returns, and a much higher “median” return, meaning the middlemost return if you ranked all the years from best to worst. The portfolio including gold beat the traditional one by five full percentage points in total over the typical 10-year period, and failed to keep up with inflation for 10 years on only five occasions — half as often as the portfolio consisting exclusively of stocks and bonds.

Nor is this just about olden times. The portfolio including 10% gold has beaten the traditional 60/40 by an average of 0.4 percentage point a year since President Richard Nixon finally killed the gold standard in 1971. And it has beaten the traditional portfolio by the same amount, an average of four-tenths of a percentage point, so far this millennium. (The 60/40 portfolio has done better if you start measuring only in 1980, as that ignores the golden 1970s but includes the long bear market for gold of the 1980s and 1990s.)

And gold has added value in five of the last seven years (while in the other two it was effectively a tie).

It’s not so much that gold is a great long-term investment on its own. It’s that gold has seemed to shine when others, specifically stocks and bonds, have failed. And it still does. It held up during the crash of 1929-32. But it also held up during the crash in 2002. And in 2008. And 2020.

A financial expert told me this was “hindsight bias.” But so is most financial analysis.

When your financial adviser tells you what you might reasonably expect from large stocks, small stocks, international stocks, real estate and so forth in the decades ahead, he or she is basing that on history. (In some cases this has been downright hilarious, as when advisers said you should still expect “average” historical returns of 5% a year from Treasurys, even when they had only a 2% yield.)

I’m danged if I know why. But so far this year, once again, you’ve been better off in a portfolio of 60% stocks, 30% bonds and 10% gold than in just 60% stocks and 40% bonds. Make of it what you will.

[ad_2]

Source link

July 14, 2023

Nokia Preliminary 2Q Sales EUR5.7B

[ad_1]

By Dominic Chopping

Nokia on Friday lowered its full-year net sales guidance and narrowed its operating margin outlook amid a weaker demand picture in its network infrastructure and mobile networks businesses due to a tougher macroeconomic environment and as customers work through built-up inventory.

The Finnish telecommunications-equipment company now sees sales of between 23.2 billion euros and 24.6 billion euros ($26.05 billion-$27.62 billion) from EUR24.6 billion to EUR26.2 billion previously.

The comparable operating margin is seen at 11.5% to 13% from 11.5% to 14% previously.

“Customer spending plans are increasingly impacted by high inflation and rising interest rates along with some projects now slipping to 2024–notably in North America,” Nokia said.

“There is also inventory normalization happening at customers after the supply chain challenges of the past two years.”

Ahead of the company’s second-quarter earnings on July 20, Nokia also reported preliminary net sales of around EUR5.7 billion for the three-month period and a comparable operating margin of around 11%, with operating profit boosted by EUR80 million related to catch-up payments in its technologies unit.

The company said it will continue to take measures to ensure it remains on track towards its long-term targets of growing faster than the market and delivering a comparable operating margin of at least 14%.

Write to Dominic Chopping at dominic.chopping@wsj.com

[ad_2]

Source link

July 13, 2023

FTC files appeal, again seeks to block Microsoft-Activision deal

[ad_1]

The Federal Trade Commission on Thursday asked an appeals court to temporarily block Microsoft Corp.’s $69 billion acquisition of Activision Blizzard Inc. while it challenges a ruling earlier this week green-lighting the deal.

The FTC on Thursday asked U.S. District Judge Jacqueline Scott Corley to postpone her ruling — which she promptly denied — and also appealed to the Ninth U.S. Circuit Court of Appeals in San Francisco to pause the acquisition “to preserve the status quo” while the case is reviewed, claiming it is likely to succeed in its appeal.

According to the filing, the FTC claims the judge applied the wrong legal standard to its request for a preliminary injunction, and erred in a number of other matters.

The deal is set to close in the coming days, and letting it happen will “irreparably harm the public interest and the FTC,” regulators said.

Also see: GOP blasts FTC Chair Khan as a ‘bully’ after agency’s loss in Microsoft case

In a response filed with the court, Microsoft said the FTC “failed to carry its burden on independent, fact-based grounds” and “dragged its heels” before appealing.

“The court has already found that it would be inequitable” to order an injunction that could lead to “the potential scuttling of the merger,” Microsoft said, in asking for the FTC’s request to be denied.

The FTC has claimed the tie-up of a major videogame platform — Microsoft’s
MSFT,
+1.62%
Xbox — with a major videogame publisher — Activision
ATVI,
-0.51%
makes the wildly popular “Call of Duty,” among other titles — would be harmful to the videogame industry and consumers.

Microsoft has pledged to keep “Call of Duty” available to Sony’s
SONY,
+2.82%
PlayStation console for 10 years, and will make it available for Nintendo’s
7974,
-0.36%
Switch and some cloud-gaming platforms.

In her ruling clearing the deal Tuesday, Corley said the FTC did not show “this particular vertical merger in this specific industry may substantially lessen competition.”

Bloomberg News reported late Thursday that Microsoft and Activision are considering giving up some control of their cloud-gaming business in the U.K. to win approval of British regulators, who — if the U.S. appeals court does not act — are the final hurdle to the deal closing on time.

FTC Chair Lina Khan testified on Capitol Hill on Thursday, where Republican lawmakers assailed her actions and sharply criticized her agency’s court losses in trying to block the Microsoft-Activision deal and Meta’s
META,
+1.32%
acquisition of a virtual-reality gaming company earlier this year.

Read more: After Microsoft defeat, ‘toothless’ FTC needs to pick better battles if it wants to rein in Big Tech

Also: FTC’s probe of OpenAI marks key moment in Khan’s push to rein in Big Tech

[ad_2]

Source link

July 13, 2023
Fed’s Waller, unimpressed by inflation data, calls for two more rate hikes this year

[ad_1]

Federal Reserve Board Gov. Christopher Waller said Thursday he was not swayed by June’s benign consumer inflation data, and said he wants the central bank to go ahead with two more 25-basis-point rate hikes this year.

“I see two more 25-basis-point hikes in the target range over the four remaining meetings this year as necessary to keep inflation moving toward our target,” Waller said in a speech to bond-market experts, known as The Money Marketeers of New York University.

That would bring the Fed’s benchmark rate to a range of 5.5%-5.75%.

Waller said that, while the cooling of CPI data for June was welcome news, “one data points does not make a trend.”

“The report warmed my heart, but I have got to think with my head,” Waller said.

He noted that inflation slowed in the summer of 2021 before rocketing higher.

In his remarks, Waller said he is now more confident that the contagion from the collapse of Silicon Valley Bank in March will not create a significant problem for the economy.

“I see no reason why the first of those two hikes should not occur at our meeting later this month,” he said.

Traders in derivative markets have priced in high odds of a rate hike after the Fed’s meeting in two weeks. But traders have been skeptical the Fed will follow through with a second hike, even before the soft CPI data.

Waller said the timing of the second hike depends on the data.

“If inflation does not continue to show progress and there are no suggestions of a significant slowdown in economic activity, then a second 25-basis-point hike should come sooner rather than later, but that decision is for the future,” he said.

During a question-and-answer session, Waller stressed that September was a “live meeting,” meaning the Fed could hike rates at that time.

Some economists had thought the Fed was moving to an “every-other-meeting” pace of hikes, but Waller said he did not favor such mechanical moves, and that data should be the deciding factor.

Some Fed officials want the central bank to hold rates steady in July, and perhaps through the end of the year, thinking the economy is going to be hit by “lagged” effects from past rate hikes.

Waller said he believes the bulk of the effects from last year’s tightening have passed through the economy already.

“Pausing rates now, because you are waiting for long and variable lags to arrive, may leave you standing on the platform waiting for a train that has already left the station,” he said.

The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.786%
has fallen to 3.77% this week after a lower-than-expected gain in jobs in the June report and the cooling of inflation. The yield had hit a recent high of 4.07% ahead of those softer reports.

[ad_2]

Source link

July 13, 2023
Consumers are shopping in more stores than ever before to save money

[ad_1]

Consumers are still showing signs of being highly sensitive to inflationary pressures and are shopping around to maximize their budgets, according to PepsiCo Inc. Chief Executive Ramon Laguarta.

“ ‘We’re seeing consumers shopping in more stores than before. They’re looking for better deals. They’re starting to look for optimization. They are going to channels that have better perceived value.’”

— Ramon Laguarta, CEO, PepsiCo Inc.

Laguarta told analysts on the company’s second-quarter earnings call on Tuesday that consumers are buying more in dollar stores or buying more in bulk or at wholesale clubs.

“So every segment of the consumer is making adjustments,” he said, according to a FactSet transcript.

Still, PepsiCo
PEP,
+1.89%
saw better elasticities in the three-month period, he said, referring to consumers’ sensitivity and response to higher prices.

Like many consumer companies, the snacks and beverages giant has been raising prices to combat its own higher costs in the current inflationary period. But, “we’ve been able to raise prices and consumers stay within our brands,’ he said.

See: U.S. inflation slows again, CPI shows, as Fed weighs another rate hike

One supportive factor is low unemployment, said Laguarta. Unemployment is currently low in developed and developing markets and is trending at a record low in Mexico and certain Asian markets, he said.

“So we’re seeing overall very good consumer behavior, especially when it refers to our categories, and that’s why we raised guidance on our top line and because of the first factor we raised guidance on the bottom line as well,” he said.

See also: ‘Greedflation’ is replacing inflation as companies raise prices for bigger profits, report finds

PepsiCo earlier posted better-than-expected earnings for the latest quarter and raised its fiscal 2023 guidance.

Some of PepsiCo’s more popular brands, including Lay’s, Doritos, Cheetos, and Ruffles, generated double-digit net revenue growth, along with smaller, emerging brands aimed at consumers seeking healthier choices, such as PopCorners, SunChips, Bare, and Off The Eaten Path, said the company.

The stock was up about 1% Thursday and has gained 2.4% in the year to date, while the S&P 500
SPX,
+0.65%
has gained 16%.

For more, see: PepsiCo’s stock gains after beating estimates in latest quarter and raising guidance again

[ad_2]

Source link

July 13, 2023
Delta Air Lines stock surges to 2-year high after earnings beat, raised outlook

[ad_1]

Shares of Delta Air Lines Inc. surged toward a more-than two-year high Thursday, after the air carrier reported second-quarter profit and revenue that rose above forecast, and boosted its full-year outlook citing continued “robust” travel demand.

Delta
DAL,
-1.46%
said net income more than doubled to $1.83 billion, or $2.84 a share, from $735 million, or $1.15 a share, in the year-ago period.

Excluding nonrecurring items, adjusted earnings per share of $2.68 beat the FactSet consensus of $2.40.

Revenue grew 12.7% to $15.78 billion, well above the FactSet consensus of $14.44 billion,

For 2023, the company raised its EPS guidance range to $6 to $7 from $5 to $6, and increased its outlook for free cash flow to $3 billion from $2 billion.

The stock jumped 3.5% in premarket trading, putting it on track to open at the highest price seen during regular-sessions hours since April 2021.

“Consumer demand for air travel remains robust,” said Chief Executive Ed Bastian.

Traffic increased 18.0% to 60.80 billion revenue passenger miles while capacity grew 17.1% to 68.99 billion available seat miles. Load factor improved one percentage point to 88%, to beat the FactSet consensus of 87.2%.

The stock has run up 42.1% over the past three months through Wednesday, while the U.S. Global Jets exchange-traded fund
JETS,
-0.81%
has climbed 22.1% and the S&P 500 index
SPX,
+0.74%
has gained 9.3%.

[ad_2]

Source link

July 13, 2023
UK Economy Contracted in May as Industry Feels Pain
[ad_1]
```
By Ed Frankl
```
The U.K. economy contracted in May as industrial output slid on month, a signal that rising interest rates are weighing on economic activity.

The country’s gross domestic product declined 0.1% on month in May, from a 0.2% growth in April, data from the Office for National Statistics showed Thursday.
The reading was a little better than expectations in a poll of economists by The Wall Street Journal, which expected a 0.2% fall.

The decline was driven by industrial production falling 0.6% in May, weaker than the fall of 0.2% in April, with the construction sector falling 0.2% in May, while services-sector output flatlined in the month, according to the data.

The U.K. registered no growth in GDP in the three months to May, when compared with the three months to February, with monthly GDP now estimated to be 0.2% above prepandemic levels in February 2020, the ONS said.

Write to Ed Frankl at edward.frankl@wsj.com
[ad_2]

Source link
July 12, 2023
As food prices rise in June, analysts warn of a ‘tipping point’ for Americans

[ad_1]

Food prices grew at a slower pace in June, but economists remain concerned that prices will reach a level where consumers will make dramatic changes in their behavior.

Food prices rose 3% in June compared to a year ago, according to the latest data from the Bureau of Labor Statistics. After a year of price hikes, consumers continued to see food prices rise, but at a slower rate.

Grocery prices were 5.7% higher in June compared to a year ago, and dining out was 7.7% more expensive. That’s significantly lower than the 13.5% peak inflation for grocery prices last August and the 8.8% peak inflation for dining out.

“Overall, there continues to be a similar narrative of extended upward pressure on food prices as we try to discern whether this stress has led to a tipping point where consumers are struggling to buy the foods that they want,” said Jayson Lusk, the head and distinguished professor of Agricultural Economics at Purdue University.

Reported food insecurity across households of different income levels reached 17% in June, the highest level since March 2022, according to the monthly Consumer Food Insights Report from Purdue University. Although it didn’t deviate too much from the normal range — food insecurity hovered at 14% two months ago — Lusk said the increase is concerning given the amount of pressure on more financially vulnerable consumers.

“Reported food insecurity across households of different income levels reached 17% in June, the highest level since March 2022, according to Purdue University. ”

The pandemic-era expansion of the Supplemental Nutrition Assistance Program ended in March, meaning SNAP recipients are now receiving $90 less on average every month, according to the Center on Budget and Policy Priorities, a progressive policy think tank based in Washington, D.C.

The recent rise in food insecurity could be a lag from households adjusting to the policy change, Lusk said. On average, consumers are spending about $120 per week on groceries and $70 per week on dining out or takeout, the report found.

Middle-income households earning $50,000 to $100,000 a year and low-income households earning less than $50,000 a year cut weekly spending on groceries and dining out by about $10 a week, Purdue found. The average weekly grocery expenditure for low-income households was $103 in June; for middle-income households, it was $118. Households earning more than $100,000 a year spent $141 a week on groceries in June.

Around 47% of low-income households — those earning less than $50,000 a year — said they relied on SNAP benefits in May, up from roughly 40% in February, according to a recent Morning Consult report.

For low-income households, rising food insecurity is often coupled with juggling bills such as utilities and rent, which has also led to rising eviction rates in recent months, according to Propel, an app that aims to help low-income Americans improve their financial health. Propel surveys SNAP users on insecurity around food, finance and their housing situation.

Nearly half of the survey respondents said they cannot afford the food they want. “We were unable to pay bills because we had to buy food. We’re about to lose our home,” a South Carolina user named Anna told the Propel survey.

The share of surveyed households that paid their utilities late rose 11% from May to June, and only 27% of respondents paid their utility bills on time and in full, according to Propel’s June survey.

[ad_2]

Source link

July 12, 2023
FTC will appeal judge’s ruling clearing Microsoft-Activision deal

[ad_1]

The Federal Trade Commission late Wednesday filed notice that it will appeal a judge’s ruling this week that gave Microsoft Corp. the green light to proceed with its $69 billion acquisition of Activision Blizzard Inc.

In a filing with the Ninth Circuit Court of Appeals in San Francisco, the FTC is seeking to overturn U.S. District Judge Jacqueline Scott Corley’s ruling Tuesday, which said the deal would not hurt competition.

“The District Court’s ruling makes crystal clear that this acquisition is good for both competition and consumers,” Brad Smith, Microsoft’s vice chair and president, said in a statement.” We’re disappointed that the FTC is continuing to pursue what has become a demonstrably weak case, and we will oppose further efforts to delay the ability to move forward.”

The FTC has claimed the tie-up of a major videogame platform — Microsoft’s
MSFT,
+1.42%
Xbox — with a major videogame publisher — Activision
ATVI,
-1.09%
makes the wildly popular “Call of Duty,” among other titles — would be harmful to the videogame industry and consumers.

“The facts haven’t changed,” an Activision spokesperson said Wednesday. “We’re confident the U.S. will remain among the 39 countries where the merger can close. We look forward to reinforcing the strength of our case in court, again.”

Microsoft has pledged to keep “Call of Duty” available to Sony’s
SONY,
+1.78%
PlayStation console for 10 years, and will make it available for Nintendo’s
7974,
+1.63%
Switch and some cloud-gaming platforms.

The deal faces a July 18 deadline, and still must gain regulatory approval in the U.K.

Tuesday’s ruling was yet another antitrust setback for the FTC, which has failed to do much to rein in Big Tech, and one analyst told MarketWatch on Tuesday that the regulators need to do ” a much better job of picking their battles,”

Read more: After Microsoft defeat, ‘toothless’ FTC needs to pick better battles if it wants to rein in Big Tech

[ad_2]

Source link

July 12, 2023
Nasdaq is making a big change to its most popular index. Here’s how it might impact your portfolio.

[ad_1]

Big Tech has gotten too big for Nasdaq’s liking.

So the exchange has decided to make some changes to the Nasdaq 100 index, its most popular index, according to company representatives, ostensibly to diminish the concentration risk that accompanies having an index that derives more than half of its value from just seven companies.

Nasdaq announced late last week that the Nasdaq 100
NDX,
+1.24%
will undergo a special rebalancing that will take effect prior to the market open on July 24. It’s only the third time that Nasdaq has announced such an impromptu rejiggering of how much individual stocks contribute to the index. Although Nasdaq can also reconstitute the index regularly every December, and there’s also a mechanism to rebalance every quarter as well.

In a statement announcing the move, the exchange alluded to the fact that the largest companies in the technology sector have too much sway over the index’s price. Nasdaq said special rebalancing can be implemented “to address overconcentration in the index by redistributing the weights.”

The rebalancing comes at a critical time. The Nasdaq 100 has risen 40% since the start of 2023, largely thanks to the “Magnificent Seven,” a handful of megacap technology names that have powered much of the U.S. stock market’s rally this year.

These gains have pushed the index to its highest level since mid-January 2022, meaning that Big Tech has now retraced nearly all of last year’s losses, and might soon be headed for the all-time highs from November 2021.

As of Thursday, the Magnificent Seven stocks — Nvidia Corp.
NVDA,
+3.53%,
Apple Inc.
AAPL,
+0.90%,
Microsoft Corp.
MSFT,
+1.42%,
Amazon.com Inc.
AMZN,
+1.57%,
Tesla Inc.
TSLA,
+0.82%,
Meta Platforms Inc.
META,
+3.70%
and Alphabet Inc.’s Class A
GOOGL,
+1.53%
and Class C
GOOG,
+1.62%
shares — accounted for 55% of the Nasdaq 100’s market capitalization, while the top five names account for more than 45%.

According to Nasdaq’s official methodology, the goal is to keep the aggregate weighting of the biggest stocks below 40%. In fact, it’s possible that Tesla Inc. surpassing 4.5% of the index earlier this month triggered the Nasdaq’s rebalancing announcement, according to analysts from UBS Group AG
UBS,
+1.87%.

Exactly how it plans to accomplish this isn’t yet known. Nasdaq said the new weighting scheme will be unveiled on Friday, likely after the U.S. market close. But the UBS team has an educated guess.

“The quarterly reviews would dictate that the aggregate weight to securities exceeding 4.5% be set to 40%. If that’s the approach Nasdaq takes, then we’d expect the weights of Microsoft, Apple, Nvidia, Alphabet, Amazon, and Tesla to be reduced,” the team said in a note shared with MarketWatch.

For investors trying to anticipate how this might impact their portfolios, here the answers to a few key questions.

Could the rebalancing kill the U.S. stock market rally?

Not likely. Or rather: if the rally in Big Tech does falter, history suggests it won’t be because of the rebalancing.

Here’s more on that from Nicholas Colas, co-founder of DataTrek Research, who discussed the topic in commentary emailed to MarketWatch on Wednesday.

“…[T]here is the natural inclination to think that the upcoming special reweighting is a sign that large cap disruptive tech is set to roll over because a handful of names have so handily outpaced the rest of its notional peers,” Colas said.

“History suggests otherwise. The last 2 one-off reweights were in 2011 and 1998. Neither proved to be the end of a Nasdaq 100/tech stock bull market. Not even close, really.”

More immediately, ETF experts expect trading around the rebalancing will be relatively muted.

“While it sounds scary, Investors are well positioned — this has been well bantered about,” said David Lutz, head of ETF Trading at Jones Trading, in comments emailed to MarketWatch.

How could this benefit investors?

Since megacap technology stocks don’t pay much, if anything, in dividends, the rebalancing could increase the amount of dividends that ETF investors receive each year, according to a team of analysts at JPMorgan Chase & Co.

Since the largest constituents pay a dividend yield well below the index average, the redistribution of weight from them to the rest of the index will result in a “meaningful boost” to the regular payouts received by investors, which will boost the total return of Nasdaq 100-tracking ETFs and mutual funds.

Will there be any short-term costs associated with the rebalancing?

There might be. Since the new index weightings will be announced in advance, investors will have plenty of time to front-run the rebalancing trade.

Still, there are plenty of hedge funds and proprietary trading firms that run strategies explicitly designed to profit from rebalancing. These firms profits have to come from somewhere, and the logical place would be the fund managers of the Invesco QQQ exchange-traded fund
QQQ,
+1.26%

QQQM,
+1.27%.

“There are prop traders and hedge funds that run the strategy of providing liquidity to indexes with the expectation that they’ll earn profits,” said Roni Israelov, president and CIO at Wealth Manager NDVR, during a phone interview with MarketWatch.

“if they are earning profits by providing that liquidity, the expectation is those profits are being paid by investors in those funds.”

So far at least, markets appear to have taken news of the rebalancing in stride. Megacap technology names tumbled earlier this week, but they’ve since recouped those losses and then some.

The Nasdaq Composite
COMP,
+1.15%,
another Nasdaq index that isn’t quite as heavily weighted toward Big Tech, rose 1.2% to 13,918.96.

[ad_2]

Source link

July 12, 2023
EV sales stall as, aside from Tesla and BYD, there’s a ‘step back from euphoria’

[ad_1]

For the first time in recent years, sales of electric vehicles didn’t grow as fast as market observers expected, creating what Barclays analysts characterized Wednesday as a “step back from EV euphoria” for companies that are not Tesla Inc. or BYD Co.

The analysts, led by Dan Levy, said that in 2020 and 2021, Wall Street was “willing to look past EV losses,” betting that demand was “unlimited.”

“We’ve now seen a market where demand is constrained, capital has been tighter, and there is less tolerance for EV related losses,” the analysts said in a note.

“Moreover, going a layer deeper, we find that while [Tesla
TSLA,
+0.82%
] and [China’s BYD
002594,
-1.38%

BYDDY,
+0.50%
] have continued to grow, … growth for the rest of the industry has been less robust in Europe and China,” they wrote.

Don’t miss: Tesla is looking at its best sales quarter ever

Global EV penetration volumes have tracked below expectations so far this year, at 13.5% through May, up 50 basis points, or 0.5%, from 2022 and “well below” estimates from BNEF of just under 18%. It is “likely marking the first time in recent years that EV penetration has disappointed,” the Barclays analysts said.

In comparison, penetration topped 16% for several months in the second half of 2022. While the second half of this year is likely to bring some improvement, it is possible that it will still fall short of expectations.

Aside from Tesla and BYD, growth has been modest, the analysts said. For Ford Motor Co.
F,
-0.07%
and General Motors Co.
GM,
+1.09%,
there are “shades of softness in EV sales,” the Barclays analysts said.

There are concerns about weak U.S. EV sales and also reports of “sharply rising EV inventory,” the analysts said.

Citing data from Wards, Barclays pointed at EV inventory of 95,000 vehicles by the end of June, the highest ever, with the highest amount of stock for Ford’s electric Mustang Mach-E SUV, at about 16,000 vehicles in inventory, and Volkswagen’s ID.4, also an SUV, at 14,000 vehicles in inventory.

GM is not off the hook, either: Despite the company’s increase in EV sales and “robust” market-share gain, much of that came from its Chevy Bolt models, which are nearing the end of production, the analysts said.

GM announced in April it was phasing out the Bolt and the bigger Bolt EUV, underscoring the challenges in making a profit on EVs despite soaring new-vehicle prices and as several automakers throw all their weight toward a full transition to EVs.

[ad_2]

Source link

July 12, 2023