The past week saw intensified talk about President Biden’s bid to stand against Trump in November’s White House race after more befuddled rhetoric from the current Commander in Chief. But President Biden also reiterated his intention to run against Trump in the 2024 elections, dismissing calls for him to pull out amid growing concerns over his mental state after calling Ukrainian leader Zelensky, Putin, and seemingly forgetting the name of his own running mate, Kamala Harris.
Wall Street marked an unexpected reaction to softer-than-expected inflation data, with heavyweight technology stocks logging steep losses late in the week even as optimism over a September interest rate cut grew.
Consumer price index inflation read softer than expected for June, which saw investors ramp up bets that the Federal Reserve will begin cutting interest rates from September. The reading saw traders pricing in an over 85% chance the Fed will cut rates by 25 basis points in September, a sharp jump from the 65% chance seen before, according to CME Fedwatch.
But key producer price index data, and the onset of the second quarter earnings season, are set to offer more cues to markets. Star tech names to struggle included AI chip darling Nvidia (NVDA:NASDAQ) and Tesla (TSLA:NASDAQ), while ServiceNow (NOW:NYSE), Intuit (INTU:NASDAQ) and Netflix (NFLX:NASDAQ) also had a soggy week.
PEPSICO
PepsiCo’s (PEP:NASDAQ) shares failed to pop this week, despite forecast-beating second quarter earnings (11 July) from the New York-headquartered consumer staple.
Instead, the stock cheapened 2.3% to $159.9 as revenue for the quarter ended 15 June came considering Wall Street forecasts amid slowing demand for PepsiCo’s drinks and snacks in North America, where the increasingly value-conscious consumer is pushing back on price increases, buying less product or trading down to cheaper private-label alternatives.
Revenue rose 1% to $22.5 billion for the quarter, shy of the $22.57 billion analysts were expecting and forcing the Pepsi, Doritos and Mountain Dew maker to issue a more cautious full year sales outlook.
The company now expects to serve up full year organic revenue growth of roughly 4%, a downgrade on previous guidance for growth of ‘at least’ 4%, although PepsiCo expressed a ‘high degree of confidence’ in delivering earnings per share growth of at least 8%.
CORNING
Corning (GLW:NYSE) was one of the biggest gainers in the S&P 500 this week, jumping around 18% after the specialty glass maker raised core sales growth guidance for the second quarter amid strong AI-related demand.
Management said it believes the business troughed in the first quarter and raised its sales forecast for the second quarter to $3.4 billion from $3.2 billion.
The company now expects core EPS (earnings per share) at the high end or slightly above its prior guidance range of $0.42 to $0.46.
Chair and CEO Wendell Weeks said: ‘The outperformance was primarily driven by the strong adoption of our new optical connectivity products for Generative AI.
‘These results reinforce our confidence in ‘Springboard’ – Corning’s plan to add more than $3 billion in annualized sales in the next three years as cyclical factors and secular trends combine.’
Analysts at Oppenheimer raised their 2024 earnings estimates on the belief that the sales contribution from markets related to next-generation AI will occur earlier than previously expected.
DELTA AIR LINES
Delta Air Lines (DAL:NYSE) shares took a nosedive in pre-market trading this week (on 11 July) when the US airline’s third quarter earnings’ forecast fell short of analysts’ expectations. The stock fell nearly 9% to $46.86 despite the US airline forecasting record third-quarter revenue due to booming summer travel demand.
Delta dragged other US airlines lower on the news – not a particularly good start to airline earnings season.
The Atlanta-based carrier expects sales to rise no more than 4%, below the 5.8% growth analysts estimated. Forecast adjusted earnings per share of $1.70 to $2 a share, was shy of the $2.05 a share analysts estimated.
Meanwhile, for the three months ending 30 June 2024, Delta reported adjusted revenue of $15.4 billion, up 5.4% from last year and shy of Wall Street estimates. Net income dropped almost 30% from a year ago to $1.31 billion, or $2.01 a share, with operating expenses up 10% from last year.
Delta, however reiterated its full-year earnings forecast of $6 to $7 a share and said it still expects to generate free cash flow of as much as $4 billion.
