Stocks futures rise as dollar falls; IBM slumps as currency slumps, beats second-quarter results; Disney raises record $9 billion in advertising commitments; Musk and Netflix earnings takeover battles as investors track subscription streaming Twitter in trouble ahead of public hearing
Here are five things you need to know about Wednesday, July 20:
1. Stocks futures rise when the dollar falls
U.S. stocks futures rose on Tuesday, while the dollar extended recent losses and U.S. Treasury yields held steady as investors started another active session of corporate earnings on mixed news from some of the world’s biggest companies.
Apple (AAPL), the world’s most valuable company by market value, plans to cut hiring and spending in the next fiscal year, according to a late afternoon report from Bloomberg. That message was at least partially confirmed by a report from Goldman Sachs (GS), which showed that despite better-than-expected second-quarter earnings and solid global earnings for the segment, costs continued to cut into the market.
Both were enough to drag U.S. stocks lower yesterday, with the Dow down nearly 500 points to close down 0.69% as investors focused on the impact of weak corporate investment on the broader earnings season.
Overnight reports that the European Central Bank is discussing a 50-basis-point rate hike at Thursday’s meeting — expected for the first time in 11 years — weighed on the dollar and gave stock futures a modest pre-session. Ahead of the 8:30 a.m. housing start date and June Johnson & Johnson (JNJ) quarterly earnings – get the Hasbro report.
The U.S. dollar index was down 0.66% on the day at 106.649, while the yield on the benchmark 10-year bond was unchanged at 2.989%. However, the U.S. Treasury yield curve remains severely inverted, with the 2-year Treasury yielding 3.165%.
European shares fell as the single currency rebounded from a two-year low against the dollar, with the Stoxx 600 down 0.41% in morning trade in Frankfurt. In Asia, a weaker dollar helped the Nikkei edge up 0.65% overnight in Tokyo, while the broader MSCI ex-Japan index closed down 0.28%.
On Wall Street, futures contracts tied to the Dow Jones Industrial Average opened 170 points higher, while futures contracts tied to the broader S&P 500 rose 27 points. Futures related to the technology-focused Nasdaq rose 80 points at the open.
2. IBM slumps as currency beats second-quarter earnings
International Business Machines Corp (IBM) – Gets International Business Machines Report Shares tumbled in premarket trading after the tech giant reported better-than-expected second-quarter earnings, but warned of the strongest dollar in more than two decades. The impact is fading sales volumes.
Revenue for the three months through June rose 9% year over year to $15.5 billion, beating Street Consensus’ forecast of $15.19 billion, according to IBM. Adjusted EPS of $2.31 was down 0.85% year over year but also beat Street’s forecast by about 4 cents.
The group’s second-quarter revenue fell by $900 million due to a stronger U.S. dollar, which hit a 20-year high for most of the three-month period, beating previous forecasts by about $200 million.
CFO James Kavanaugh told Reuters that earnings for the full year could top $3.5 billion, but told investors on a conference call late Monday, “That’s a total change from what we said in April. about $1.5 billion.”
IBM shares fell 5.1% in premarket trading, implying an opening price of $131.13 a share, a move that will push the stock into negative territory this year.
3. Disney raises a record $9 billion in advertising commitments
Walt Disney (DIS) – Get The Walt Disney Company Report Shares rose in premarket trading after the media conglomerate announced a record $9 billion in ad spending for the upcoming fiscal year.
The ad buys, dubbed “upfront,” indicate confidence in the group’s expanding digital platforms, including ESPN and Hulu, and its plans to launch a tiered service for its Disney+ streaming platform.
Last week, Disney announced it would raise the cost of its EPSN+ streaming service by $3 to $9.99 a month to partially offset the higher cost of acquiring live sports rights.
Disney added 7.9 million subscribers in the fiscal second quarter ended April 2, bringing ESPN+ paid subscribers to 22.3 million and Hulu to 45.6 million. Total subscribers for the Disney+ streaming service hit 137.7 million, beating analyst expectations by about 2 million.
Disney stock rose 0.5% in premarket trading, opening at $96.17 a share.
4. Twitter in trouble ahead of public hearing in Musk’s takeover battle
Twitter (TWTR) – Shares in Get Twitter Inc.’s report fell in premarket trading ahead of the first hearing between its lawyers and Elon Musk’s $44 billion takeover dispute.
Delaware Chancery Court Registrar Kathalen McCormick will moderate the 90-minute session – starting at 11:00 a.m. ET via Zoom due to her recent positive Covid test –As two arguments in favor of the main time Musk tried to walk away from the agreement and basis to buy the group for $54.20 per share
Twitter said yesterday that Musk’s legal team is trying to “delay” the social media group’s lawsuit aimed at forcing him to complete the deal he unveiled in April, adding that “millions of tweets are being made every day.” Stocks are suspected to be traded under the cloud created by Musk.”
Twitter stock fell 0.95% in premarket trading, opening at $38.05 a share.
5. Netflix Earnings for Investor’s Eye Subscribers Exodus
Netflix (NFLX) – Shares of Netflix Inc. reported gains in premarket trading, before the streaming service and media conglomerate rose in the second quarter after the close
Netflix is expected to report bottom-line earnings of $2.95 per share for the three months ended June, with revenue rising 9.5% year over year to $8.04 billion.
Netflix lost 200,000 subscribers in the first three months of the year and is expected to lose another 2 million by the end of the second quarter due to factors such as higher prices, increased competition and password sharing. Earlier this week, the group addressed at least part of the problem by announcing plans to raise prices in Latin America for customers accessing Netflix from multiple households.
The group is also reportedly working on an ad-supported version of its service that will be “more integrated and less disruptive” than traditional TV.
Netflix shares rose 1.6% in premarket trading, suggesting an opening price of $193.82 a share, a move that would still send the stock down about 67.8% so far this year.
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