Most of the main indexes in New York Stock Exchange ended the trading session with growth amid rising optimism about the likelihood of a more aggressive loosening of monetary policy by the US Federal Reserve.
The blue-chip index Dow Jones Industrial Average dropped by 0.02% to 27,215.16 points, while the broader S&P 500 advanced by 0.30% to 2,993.31 points and the technology Nasdaq Composite rose by 0.18% to 8,199.66 points.
The CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was down 3.15% to 13.53.
The number of jobless claims in the United States rose last week against a background of an otherwise stable labor market despite some signals that economic activity is slowing down. The initial unemployment claims increased by 8,000 to seasonally adjusted 216,000 in the week ending July 13.
Data from the previous week were revised downwards by 1,000 applications compared to those previously announced. At the same time, the increase in the number of applications last week is in line with analysts’ expectations.
Shortly thereafter, the governor of Fed New York John Williams said the US Central Bank should “react quickly” when the economy slows down and interest rates are low. “Better take preventive measures instead of waiting for the crash”, said John Williams.
In the world of currencies, comments from Treasury Secretary Steven Mnuchin were in focus. At the G7 finance ministers meeting in Chantilly, France, Mnuchin said that the United States’ dollar policy wouldn’t change for now, which had market participants wondering whether currency intervention is on the horizon.
On the bond markets, yields on 10-year and 30-year US government bonds fell to 2.029% and 2.564%, respectively.
Corporate stocks performance
The stocks of Netflix collapsed by 10.2% after the video streaming platform reported a serious drop in its paid subscribers.
IBM’s stock rose by more than 4% after the technology giant succeeded to reduce costs more than expected.
Technology stocks were performing relatively strong during the trading session with Apple adding 1.14% and Intel gaining 1.11%.
UnitedHealth Group Inc fell by 2.27% following comments that the insurer would continue with its point-of-sale rebates, a week after the Trump administration pulled back an ambitious proposal to ban drug rebates.
Railroad operator Union Pacific Corp jumped 5.9% after it reported a profit beat, while tobacco company Philip Morris gained 8.1% on raising its full-year profit outlook.
Morgan Stanley rose after reporting a better-than-expected quarterly profit.
The shares of KLA-Tencor Corporation rose to all-time highs, gaining 6.31%.
The top performers on the S&P 500 were Philip Morris International Inc (+8.12%), KLA-Tencor Corporation (+6.31%) and Union Pacific Corporation (+5.82%), while on the flipside were Netflix Inc (-10.27%), United Rentals Inc (-7.82%) and Chesapeake Energy Corporation (-7.65%).
Corporate earnings reports
So far, more than 12% of the S&P 500 companies have submitted their second-quarter financial reports, with 84% of them surpassing market expectations.
The earnings report of Netflix last night shook the technology markets. The company registered a serious drop in its subscribers – by 130,000 on the domestic market during the period under review, while the internationally attracted new customers are only 2.7 million instead of the projected 5 million. Earnings per share barely surpassed analysts’ forecasts of 0.59 USD and reported 0.60 USD. At sales revenue of 4.92 billion USD, it is just at the level of expectations and 26% higher than in the previous year. Recent price rises seem to have reflected the company well.
IBM reported a second-quarter earnings decline of 4.2% to 19.2 billion USD. This is the fourth consecutive quarter of revenue decline for the company. However, IBM has been able to increase profits, among other things, thanks to lower costs – 4% to 2.5 billion USD, and thus stronger than expected by financial experts. Revenues from the Americas decreased by 3% on cc basis and came in at 8.8 billion USD. The same from Europe, Middle-East and Africa increased 1% year over year to 6.1 billion USD, while Asia-Pacific revenues declined 2% on a year-over-year basis and came in at 4.2 billion USD.
Morgan Stanley reports second-quarter earnings of 2.2 billion USD, or 1.23 USD per share, exceeding the 1.14 USD estimate of the analysts. The revenue of 10.24 billion USD exceeded the consensus estimate by almost 250 million USD on better-than-expected results in the firm’s wealth management and investment management divisions. Morgan Stanley’s wealth management division, one of the biggest in the world, posted a record 4.41 billion USD in revenue, exceeding analyst’s estimate by 60 million USD. Its investment management division, an asset manager that creates mutual funds, posted 839 million USD in revenue, exceeding estimates by about 130 million USD. The business benefited from “higher assets under management” across asset classes, according to the firm.
Philip Morris International beat second-quarter earnings and revenue estimates and hiked its full-year forecast Thursday as its new tobacco products gained momentum. The tobacco giant is trying to pivot away from cigarettes and toward new products, namely iQOS, which heats tobacco instead of burning it. The product drove the company’s performance in the quarter. Cigarette volume fell 3.6% in the quarter, while volume for heated tobacco spiked6 37% in the quarter. The results — and Wall Street’s reaction — are a stark contrast from a little over a year ago when PMI’s stock had its worst day in a decade after revealing growth had slowed in Japan, a key market for iQOS. Philip Morris International reported second-quarter net income of 2.31 billion USD, or 1.49 USD per share, up from the 2.19 billion USD, or 1.41 USD per share the company reported in the year-earlier quarter. With litigation expenses related to Canadian lawsuits, asset impairment and exit costs, among other items, Philip Morris International earned 1.46 USD per share, above the 1.32 USD per share Wall Street expected.