Dow slid back 21, advancers over decliners 4-3 & NAZ retreated 134. The MLP index held above 200 & the REIT index went up 3+ to the 421s (helped by lower interest rates). Junk bond funds inched higher & Treasuries were heavily purchased, cutting yields sharply (more below). Oil was higher in the 96s & gold rose 16 to 1730.
AMJ (Alerian MLP index tracking fund)
Spending on travel & entertainment came roaring back in Q2 & it wasn't just consumers making the purchases, according to
the latest results from American Express (AXP), a Dow stock. Consumer spending in the category topped pre-pandemic
levels for the first time in Apr. Notably, there also was a
significant uptick in corp travel. The results were good enough for AXP to raise its revenue forecast. It expects revenue to rise 23-25% this year, up from
an earlier forecast of 18-20%. Analysts were
calling for 19% revenue growth this year. Still, the earnings forecast remains the same. AXP expects EPS of
$9.25-9.65, below the $9.83 anticipated. The results are yet another example of the
conflicting headlines investors are seeing as they weigh the likelihood
of a recession. Decades-high inflation is forcing the Federal Reserve to
raise rates to cool-off the economy. At the same time, pent-up consumer
demand, particularly for experiences like travel, concerts & other
entertainment, has many spending freely. In Q2, EPS was $2.57 on revenue of $13.4B. That compared with
estimates of $2.41 EPS on revenue of $12.5B. Last year, EPS was $2.80 in Q2. Weighing
on this performance was the need to add $410M as a provision
for credit losses. Last year, it recorded a $606M benefit. The stock rose 5.99 (4%).
If you would like to learn more about AXP, click on this link:
club.ino.com/trend/analysis/stock/AXP?a_aid=CD3289&a_bid=6ae5b6f7
American Express earnings reveal a bounce back in corporate travel
Verizon (VZ), a Dow stock, fell after the company reported Q2 earnings that
fell shy of expectations & trimmed its financial forecast for the
year. “Although recent performance did not meet our expectations,
we remain confident in our long-term strategy,” CFO Matt Ellis
said. In its updated guidance, VZ said it now expects wireless service
revenue to increase 8.5- 9.5%, down from its earlier expectations
for growth of 9-10% for the full year. Service & other revenue is
now expected to be down 1% to flat. It previously said it expected that
revenue to be flat. Adjusted EPS for 2022 are now expected to
be $5.10-5.25 per share, down from the previous forecast
of $5.40-5.55. For Q2, VZ added
12K net retail phone subscribers who pay monthly bill, far below the
144K estimated. To address budget conscious consumers, the company said it launched an unlimited wireless plan last week. For the 3 months ended Jun 30, revenue was $33.8B, which was relatively flat from the year-ago period. Analysts
were anticipating $33.75B. Adjusted EPS was $1.31, a penny shy of the $1.32 expected. The stock lost 3.16 (7%).
If you would like to learn more about VZ, click on this link:
club.ino.com/trend/analysis/stock/VZ?a_aid=CD3289&a_bid=6ae5b6f7
Verizon shares fall after company cuts full-year forecast
Treasury yields retreated further as weak economic data & a significant interest rate hike from the ECB fueled concerns about an economic slowdown. The yield on the benchmark 10-year Treasury note was down sharply to 2.818%. Earlier in the session, it fell to a more-than 2-week low of 2.8105%, furthering yesterday's plunge, the worst single-day decline since Mar 2020. Meanwhile the yield on the 30-year Treasury bond dropped to 3.02%. Yields move inversely to prices. Initial jobless claims rose last week to the highest in 8 months, while a gauge of factory activity slumped in Jul, offering further indications that the US economy is slowing as rising interest rates & high inflation weigh on spending power. The yield on the 2-year Treasury note was last seen at around 3.024%, above the 10-year yields & continuing the inversion of the closely-watched 2-year/10-year curve. Yield-curve inversions — when shorter-term government bonds have higher yields than longer-term ones despite carrying lower risk — are often viewed by markets as signs that a recession is imminent.
10-year yield slides to two-week low as weak data, ECB move dampen sentiment
Dow Jones Industrials
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