Dow went up 254, advancers over decliners almost 2-1 & NAZ retreated 169. The MLP index was fractionally higher to the 237s & the REIT index fell 3+ to the 379s as interest rates rose. Junk bond funds were sold & Treasuries saw heavy selling, driving yields higher. Oil climbed higher in the 75s & gold was off 8 to 1972.
AMJ (Alerian MLP Index tracking fund)
IBM (IBM), a Dow stock, reported 2nd-qtr earnings that topped estimates as the company expanded its gross margin. Revenue missed consensus estimates. Net income for the qtr rose 13% to $1.6B from $1.4B ($1.72 per share) a year earlier. Adjusted gross margin
of 55.9% was higher than the estimate of 54.7%. Revenue
was virtually flat from a year earlier. CFO James Kavanaugh attributed the company's
expanding gross margin to a more profitable mix of products, software
was the company’s fastest-growing division, as well as “productivity
initiatives.” IBM announced 3900 job cuts in Jan as part of a broader downsizing across the tech sector. “The
productivity benefits free up spend for reinvestment and contribute to
margin expansion,” Kavanaugh added. IBM
reiterated that it expects 3-5% revenue growth
thru the end of the year in constant currency. The company forecasts
about $10.5B in free cash flow in 2023. The stock rose 3.85.
If you would like to learn more about IBM, click on this link:
club.ino.com/trend/analysis/stock/IBM_aid=CD3289&a_bid=6aeoso5b6f7
IBM reports earnings beat, but misses on revenue
Investors remained bearish about the state of the US economy in early Jul despite rising bets the Federal Reserve will successfully engineer a soft landing, according to Bank of America's global fund manager survey. Sentiment among fund managers remained "stubbornly low" this month, with the majority of investors, roughly 60%, bracing for a weaker economy over the next year. About 45% of participants in the survey identified high inflation that keeps central banks on a hawkish trajectory as the top risk to markets. That compares to about 18% who highlighted a potential credit crunch & a global recession as the biggest threat. Another 15% are worried about geopolitical situations, like the war in Ukraine or tensions between China & Taiwan, worsening, while just 10% fear a systemic credit event. The poll of 262 fund managers was conducted Jul 6-13 & is based on cash positions, equity allocation & economic growth expectations. Despite concerns about a weaker economy, a majority of investors see a soft landing as the most likely outcome for global economic growth & expect just a small contraction in earnings. Bets on a "soft landing" jumped to 68% in Jul, far higher than the 21% predicting a "hard landing" & the 4% calling for "no landing." At the same time, respondents are still projecting a mild recession will take hold within the next 12 months. 40% expect the start of a global downturn by the end of Q1-2024, while one-qtr anticipate a downturn could begin by the end of 2023. There are other signs of optimism within the survey. Expectations on EPS are now the least pessimistic since Feb 2022, the onset of the Russian war in Ukraine. "[A] large majority still expect the global profit outlook to worsen (net 50%), but that's the smallest number in almost 18 months," the survey, published by Bank of America Chief Economist Michael Gapen, said. The fund managers are also anticipating a jump in profits, thanks to the adoption of artificial intelligence. About 42% of investors said AI will increase profits over the next 2 years.
Investors still bearish on US economy amid slowdown fears
China does not want a trade war with America, but will retaliate against further curbs on tech or trade, according to the Chinese ambassador to the US. "Definitely it’s not our hope to have a tit-for-tat," Ambassador Xie Feng said. "We don’t want a trade war, technological war. We want to say goodbye to the Iron Curtain, as well as the Silicon Curtain." Xie criticized US restrictions on the sale of microchips & chipmaking equipment to China imposed last year by the Biden administration. "China does not shy away from competition, but the definition of competition by the U.S. side I think is not fair," he added. "The United States is trying to win by keeping China out," he said, referring to measures to curb U.S. technology sales to Chinese telecommunications giant Huawei due to security concerns. This is like restricting the other side to wear outdated swimwear in a swimming contest while you yourself (are) wearing a Speedo," Xie noted. Earlier this month, China imposed export curbs on 2 metals used in computer chips & solar cells, & earlier in the year, Beijing restricted the sales of products from Micron (MU), the biggest US producer of memory chips. "The United States is trying to win by keeping China out," he said, referring to measures to curb U.S. technology sales to Chinese telecommunications giant Huawei due to security concerns. Yellen warned Mon that there is a risk of contagion from the growing slowdown in the Chinese economy but maintained that a recession in the US is unlikely this year. New data released Mon revealed that GDP in China grew just 6.3% in the 3-month period Apr-Jun as a result of falling exports, weak consumer spending & a prolonged downturn in the vital property market. "Many countries do depend on strong Chinese growth to promote growth in their own economies, particularly countries in Asia, and slow growth in China can have some negative spillovers for the United States," she continued. "Growth has slowed, but our labor market continues to be quite strong," Yellen said. "I don’t expect a recession."
China doesn’t want trade war with US but will retaliate against new restrictions, ambassador warns
While Dow keeps rising, it appears to be struggling. Market breadth continues to be only so-so. Tesla (TSLA) is down a big 20 today, leading NAZ lower. The stock market needs to take a rest after its long rally.
Dow Jones Industrials
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