18/07/2023
EARNINGS WAVE, NOVARTIS GUIDANCE, ARK's TWITTER STAKE - WHAT'S MOVING MARKETS
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Investors look ahead to a busy week of earnings, including quarterly results from some of the largest U.S. banks. Meanwhile, drug-making giant Novartis improves its guidance as it eyes a spin-off of its Sandoz generics division later this year, and Cathie Wood says her ARK investment management firm has written down its stake in Twitter.
1. Bank of America, Morgan Stanley on deck
Corporate earnings Tuesday will include a fresh batch of U.S. banks, with investors keen to see how they have fared since the turmoil in regional lenders hit the financial services sector earlier this year.
Bank of America (NYSE:BAC) and Morgan Stanley (NYSE:MS) are set to report their latest results before the start of U.S. trading, as well as smaller players Bank of New York Mellon (NYSE:BK) and PNC Financial (NYSE:PNC).
Last week, higher interest rates helped underpin improved targets for net interest income – the difference between what a bank makes from loans and pays for deposits – at larger peers JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC) and Citigroup (NYSE:C). Second quarter net income also jumped at JPMorgan and Wells Fargo, although a dearth of dealmaking weighed on profit at Citigroup.
2. U.S. futures mixed
U.S. stock futures were largely mixed on Tuesday as traders awaited the next round of earnings.
At 04:45 ET (08:45 GMT), the Dow futures contract gained 22 points or 0.06%, S&P 500 futures edged up by 1 point or 0.02%, and Nasdaq 100 futures lost 6 points or 0.04%.
The main indices closed in the green in the prior session, boosted in part by a stronger-than-anticipated reading from the Federal Reserve Bank of New York's manufacturing index that hinted at resilient business activity in the face of elevated borrowing costs.
Coupled with last week's June inflation reading that was slower than expected and a jump in preliminary consumer sentiment for July, the manufacturing survey bolstered hopes for continued strength in the broader U.S. economy.
3. Novartis lifts profit guidance, lays out timeline for Sandoz spin-off
Novartis raised its profit and revenue outlook for 2023 following solid second quarter sales, while the Swiss drugmaker also proposed a timeline for the spin-off of its Sandoz generic medicines unit.
Sales increased by 7% to $13.7 billion at constant currencies, which chief executive Vas Narasimhan said was linked to strong performance across "core therapeutic areas and key geographies." As a result, the company said it now estimates that annual group sales will grow in the high single digit, an improvement from the prior guidance of mid-single-digit. Yearly group core operating income expansion is now seen in the low double digits, up from the high-single-digit previously.
Meanwhile, Novartis said its shareholders will vote on the planned Sandoz spin-off at an extraordinary general meeting in September. If approved, a listing on the SIX Swiss Exchange, as well as an American Depositary Receipt program in the U.S., could come as soon as early in the fourth quarter.
Shares in Novartis (SIX:NOVN) rose in early trading in Switzerland on Monday, while Novartis ADRs (NYSE:NVS) in the U.S. also ticked higher in premarket dealmaking.
4. Wood's ARK writes down Twitter stake - WSJ
Cathie Wood's ARK Investment Management has written down its stake in Twitter by 47% since Elon Musk bought the social media platform and took it private last year, Wood told the Wall Street Journal.
In an interview with the paper, Wood noted that the write-down reflects how ARK, which owns a small stake in Twitter through its venture fund, takes fair valuation "very seriously." But she remained upbeat about the prospects for Twitter, saying she would "love" to snap up more shares at the new value.
In particular, Wood said she still thinks Musk is "serious" about his plan to turn Twitter into a so-called "everything app" that features a wide range of services like messaging, e-commerce shopping, and peer-to-peer payments.
Wood's comments come as Twitter faces a large debt pile and dwindling advertising revenues, while Musk himself said over the weekend that the company is now cash-flow negative.
At the same time, Twitter must contend with fresh competition from Meta's (NASDAQ:META) own short-text messaging platform Threads. Wood, however, argued that this rivalry could light a competitive "fire" under Twitter.
5. Oil steadies as U.S. inventory data looms
Crude prices edged up on Tuesday, with the focus turning from concerns over economic weakness in top oil importer China towards a potential tightening of U.S. crude supplies.
Traders are awaiting new figures from the American Petroleum Institute later in the session, as well as numbers from the Energy Information Administration on Wednesday. The data is expected to show a decline in stockpiles after a substantially bigger-than-anticipated build in the prior week.
But sentiment is still dampened by statistics on Monday that showed underwhelming growth in China in the second quarter. Investors are now trying to gauge if Beijing will roll out further stimulus measures in an attempt to refuel the country's sputtering post-pandemic recovery.
By 08:45 ET, the U.S. crude futures traded 0.31% higher at $74.31 a barrel, while the Brent contract added 0.15% to $78.62 per barrel.
