By Peter Bergman (MoneyAmped.com)
Considering that tech giants Alphabet and Tesla’s second-quarter earnings results have been less than stellar, Wall Street is expected to begin the day on a negative note on Wednesday. While the earnings season in Europe is in full swing, the political atmosphere in the United States continues to be unpredictably high.
1. Alphabet and Tesla Disappoint
Alphabet and Tesla have launched the process of the market-leading megacap companies submitting their reports, but investors have shown little enthusiasm for the matter.
In the aftermath of the announcement of Tesla’s second-quarter report, the company’s shares witnessed a substantial drop of seven percent during trading that took place beyond regular business hours. During this period, the maker of electric vehicles shared that their profit margin was at its lowest level in more than five years. The company’s choice to lower prices in order to increase demand while simultaneously expanding its investment in artificial intelligence programs is likely to be the cause of this reduction.
Net income for the second quarter was $1.48 billion, compared to $2.70 billion in the same period of the previous year. According to LSEG’s calculations, adjusted profits per share were 52 cents, lower than the consensus level of 62 cents.
Automobile sales dropped from $20.42 billion to $18.53 billion compared to the previous year, which negatively influenced the company’s overall financial performance. The consequences of electric car price reductions, expenditures connected to restructuring, and investments in artificial intelligence efforts all contributed to the business’s lower-than-anticipated profit margins, which was another difficulty the company faced.
Despite the fact that Google’s parent company exceeded forecasts for sales and profit during the second quarter, Alphabet stock witnessed a minor fall of around 2% during trading following a regular business day. Its cloud computing services were in high demand, contributing to this excellent growth, which was propelled by a surge in digital advertising sales.
The technological giant, on the other hand, warned that the cost of capital expenditures would remain significant throughout the year.
With a robust 11% gain, Alphabet’s advertising revenues reached $64.6 billion, making it the company’s largest source of income. In addition, the net income of the firm for the quarter increased by a significant 28.6%, reaching a total of $23.6 billion, which was higher than the generally accepted projection of $22.9 billion.
The entire revenue of the corporation increased by a sizeable amount, reaching $84.74 billion, the result of a rise of 14% overall. Furthermore, the advertising revenue generated by the YouTube segment had a significant increase of 13%, reaching a total of $8.67 billion. Cloud computing services brought in a total of $10.35 billion in revenue, which is a massive rise of 28.8% from the previous year’s total. The overall health of corporate technology investment may be gauged by this increase, which acts as a significant indication.
The enormous rise in capital spending, which increased by 91% to $12 billion during the quarter, seems to have worried investors despite the fact that all of the developments were promising. Alphabet’s rapid development in artificial intelligence (AI) led to this increase as the company moved toward the introduction of new AI service offerings.
Reporting will take place the following week for four of the five remaining Magnificent Seven mega caps, namely Apple, Microsoft, Amazon, and Meta Platforms. The financial results of Nvidia, a highly renowned business in the field of artificial intelligence, will be shared with investors in August. Investors will need to practice patience until then.
2. Futures Decline Due to Underwhelming Tech Earnings
There was a lackluster reaction to the earnings reports of tech giants Alphabet and Tesla for the second quarter, which resulted in a fall in the value of U.S. stock futures today.
A reduction of 190 points, which is comparable to a decrease of 0.5%, was suffered by the Dow futures contract at 4:00 p.m. Eastern Time (8:00 p.m. GMT). Similar to the S&P 500 futures, the Nasdaq 100 futures had a reduction of 195 points, which indicates a 1% decrease, while the S&P 500 futures experienced a drop of 38 points, which reflects a reduction of 0.7%.
On Wednesday, the market attitude was negatively affected by the disappointing results from Alphabet and Tesla [refer to the previous sentence]. The Nasdaq Composite, which is mainly concentrated on technology companies, was the sector that led the downward trend.
AT&T, General Dynamics, and Boston Scientific are among the companies that will release their recently released financial results on Thursday.
Data from FactSet indicate that at the beginning of the week, approximately one-fifth of the firms that make up the S&P 500 had already disclosed their profits for the second quarter. An astonishing four-fifths of them surpassed the standards that were set for them.
3. Harris Takes the Lead in Latest Opinion Poll
As a result of President Joe Biden’s decision to withdraw from the race, the most recent survey carried out by Reuters/Ipsos revealed that Lieutenant Governor Kamala Harris emerged with a slight edge over Republican candidate Donald Trump.
Harris emerged as the frontrunner in the most recent survey, which was carried out on July 22 and July 23, with a tiny edge over Trump: 44% to 42%.
The results of other recent national surveys, which had suggested a slight advantage for Trump prior to Biden’s statement, did, however, indicate that the Democrats have become somewhat more popular. Despite the fact that this advantage was inside the margin of uncertainty of either two or three percent, it did represent a slight improvement for our Democratic candidates.
Later on Wednesday, Trump will make a bid to recover the upper hand by staging his first campaign event since Biden’s resignation in Charlotte, North Carolina. This will be Trump’s first rally since Biden announced his leave. The forthcoming election on November 5 will take place in this state, which bears significant importance as a battlefield among the candidates.
In the same city that just hosted the Republican National Convention, Harris brought together a group of people on Tuesday in Milwaukee, Wisconsin. Later today, she will travel to Indianapolis for another engagement, which is scheduled to take place there.
4. European Banks Are at the Forefront of Earnings in the Region
In addition, earnings season has already begun in Europe, with the banking industry being the primary focus of attention.
After the German lender’s first quarterly loss in four years was revealed, shares of Deutsche Bank (NYSE:DB) declined 8%. This drop occurred at the same time as the bank was putting money away to handle an ongoing lawsuit involving its Postbank business.
In the aftermath of the publication of BNP Paribas’s financial report, the company’s shares (OTC:BNPQY) saw a 2-percent decrease. There was a considerable drop in the amount of net interest revenue that the French retail subsidiary of the largest bank in the eurozone collected. There was a substantial increase in investment banking income, which was driven by a boom in equity trading, which resulted in the bank’s quarterly profitability exceeding forecasts.
In the meanwhile, the stock of LVMH saw a loss of more than 5% after the presentation of the sales statistics for the second quarter, which did not meet the expectations projected by the market. Following the publication of their first-quarter sales report, which indicated a more dramatic fall than was anticipated, Remy Cointreau saw a decrease in the value of their stock for a period of two percent. All of the difficulties that the corporation has been experiencing in the United States have now spread to its liqueurs and spirits market. EasyJet, on the other hand, had a stunning boost in stock value of 6% as a result of the low-cost carrier’s announcement of a 17 percent increase in earnings. In addition, they forecasted that the summer season would easily surpass previous records.
5. Crude Oil Prices Received a Boost as Us Stockpiles Experienced a Decline
A fall in crude stocks in the United States bolstered hopes for stronger demand from the world’s largest consumer, and oil prices climbed on Wednesday, breaking a run of three straight days of declines.
At four o’clock Eastern Time, the price of a barrel of crude oil in the United States (WTI) increased by 0.6%, reaching $77.41, while the price of a barrel of Brent crude increased by 0.5%, reaching $81.45.
The most recent information from the American Petroleum Institute indicated that there has been a substantial fall in the amount of oil stored in the United States, with a loss of 3.9 million barrels recorded only last week. This outcome was unexpected, as experts had anticipated a rise of 0.7 million barrels, but this result was not what they expected.
If the API data is confirmed by the official inventory data, which is anticipated to be released later in the session, inventories would have declined for the fourth week in a row. This might be a result of an increase in oil demand during the travel-intensive summer season.
The two contracts have witnessed a decrease of between five and seven percent over the last three sessions, bringing them to their lowest values since the beginning of June.
