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Dow Jones Futures: Netflix Earnings Crush Views, Marijuana Stock Cronos Group Soars; IBM Dives Investor's Business Daily
Shares of Bank of America Corp. BAC, +2.02% rose 1.8% in premarket trading Wednesday, after the bank reported a third-quarter profit that fell less than expected, while revenue surprisingly increased, as consumer and global banking and wealth and investment management revenue increased to offset a slight decline in global markets revenue. Net income fell to $5.78 billion, or 56 cents a share, from $7.17 billion, or 66 cents a share, in the year-ago period. Total revenue rose to $22.81 billion from $22.72 billion, while the FactSet consensus was for a decline to $22.58 billion. Net interest income grew to $12.19 billion from $12.06 billion, above the FactSet consensus of $12.15 billion, and non-interest income slipped to $10.62 billion from $10.66 billion but topped expectations of $10.38 billion. Average loans rose 5% to $9 billion, driven by residential mortgages. Equities revenue grew 13% to $1.1 billion, helped by growth in client financing activities, while fixed income, currency and commodities revenue was flat at $2.1 billion as improvement in mortgages and municipal products was offset by weaker trading in FX and credit products. The stock has gained 2.6% over the past three months through Tuesday, while the Dow Jones Industrial Average DJIA, +0.89% has slipped 1.1%.
Broadcom Corp. signage is displayed outside of the company's headquarters in Irvine, California.
Patrick Fallon | Bloomberg | Getty Images
Broadcom has been ordered to stop applying certain exclusivity deals it has with six of its customers, amid an antitrust investigation carried out by the European Union.
The Brussels-based institution believes that part of Broadcom's business could be creating "serious and irreparable harm to competition."
The European Commission opened an in-depth investigation into the U.S. company in June. As part of this investigation, the Commission announced Wednesday that it's imposing interim measures to prevent any likely "harm" to competition, for three years. Broadcom must comply with these measures within 30 days from Wednesday.
"We have strong indications that Broadcom, the world's leading supplier of chipsets used for TV set-top boxes and modems, is engaging in anti-competitive practices," Margrethe Vestager, the EU's competition chief, said in a statement.
"We cannot let this happen, or else European customers and consumers would face higher prices and less choice and innovation. We, therefore, ordered Broadcom to immediately stop its conduct," Vestager added.
Broadcom, which is a major supplier to Apple, can choose to appeal to Wednesday's decision. Khanh Lam, spokesperson for Broadcom told CNBC via email: "Broadcom's contracts with the customers that the European Commission characterizes as exclusivity-inducing remain in force, other than the provisions at issue, and we intend to continue to support these customers going forward. We do not believe that these provisions have a meaningful effect on whether the customers choose to purchase Broadcom products."
The same spokesperson added: "We intend to appeal the Commission's decision to the European Courts and in the meantime comply with the Commission's order."
Broadcom shares closed at 290.32 on Tuesday, up by about 3% on the day. The stock is about 14% higher over the last 12 months.
Wednesday's decision marks the first time in 18 years that the European Commission has decided to implement interim measures, opening a precedent to ongoing and future competition probes.
"It is for me something special. It doesn't say that now we have all cases lined up, where interim measures will be used, but it means that the tool is on the table and if we find cases that live up to the two things that have to be fulfilled at the same time, yes we will indeed use interim measures more often," Vestager told reporters in Brussels on Wednesday.
Stock-index futures point to a slightly higher start for Wall Street Tuesday as the corporate earnings reporting season gets fully under way for the third quarter and investors weigh the implications of a partial U.S.-China trade deal
Futures on the Dow Jones Industrial Average YMZ19, +0.42% rose 78 points, or 0.3%, to 26,813, while S&P 500 futures ESZ19, +0.35% gained 9.25 points, or 0.3%, to 2,974.75. Nasdaq-100 futures NQZ19, +0.26% rose 22.5 points, or 0.3%, to 7,880.
The Dow DJIA, -0.11% edged 29.23 points lower on Monday to end at 26,787.36, a loss of 0.1%. The S&P 500 SPX, -0.14% closed 4.12 points lower, down 0.1%, at 2,966.15, while the Nasaq Composite COMP, -0.10% lost 8.39 points, or 0.1%, to finish at 8,048.65.
Read: 5 prominent U.S. companies are most at fault for the earnings recession
Third-quarter earnings season kicked off Tuesday morning with the release of a series of earnings reports from the nation’s largest banks reflecting a relatively healthy U.S. consumer and a more wary business sector.
Shares of JPMorgan Chase & Co. JPM, +0.27% were higher in premarket action after reporting revenue and earnings that rose more than expected on the back of its consumer banking division, while Wells Fargo & Co. WFC, +0.12% reported a surprise increase in revenue, though its third-quarter profits fell more than expected.
Citigroup Inc. C, +0.20% shares rose before the start of trade on better-than expected increases in third-quarter profit and sales, but Goldman Sachs Group Inc. GS, +0.56% GS, +0.56% reported a steep 26% decline in profit from the year ago period, reflecting weakness in the mergers and acquisitions market and debt and equity underwriting.
“It’s a better time to be a traditional, consumer-facing bank than more of an institutional or trading bank,” Stephen Biggar, director of financial institution research at Argus Research told MarketWatch. “Underwriting and financial advisory were weak spots [in the third quarter], but the consumer is by and large steady-as-she -goes,” he added.
However, S&P 500 index company earnings are expected to fall 4.6% in the third quarter, according to Factset. This would be the first time that index company earnings have fallen for three straight quarters since the fourth of quarter of 2015 through the second quarter 2016, Factset analyst John Butters said.
Earnings forecasts focused on headwinds from the global economic growth slowdown and international trade policy uncertainty, with profit margins seen under pressure. However, corporate buybacks are again seen supporting earnings per share.
Check out: Banks look to put earnings recession in revers, but aren’t expected to succeed
Enthusiasm over a U.S.-China trade deal boosted stocks at the end of last week, but analysts said a lack of detail around planned tariff increases and other elements damped enthusiasm, leaving stocks to drift lower on Monday.
“The latest twist in the U.S.-China trade conflict is yet another reminder to investors not to get caught up in the hype,” said Han Tan, market analyst at FXTM, in a note. “Trying to bridge the conflicting interests between the world’s two largest economies is a gargantuan task; an undertaking that has already proven to be protracted and complicated.”
Speaking with reporters in London, St. Louis Fed President James Bullard said investors might be too optimistic about how long it takes to reach trade deals. He also emphasized that data on consumption, while strong, was “backwards looking” and said that was why he has been “emphasizing these downside risks and also emphasizing pre-emptive types of action to stay out of recession.”
Bullard dissented last month from the Federal Reserve’s decision to cut interest rates by a quarter point, calling instead for half-point decrease.
In its World Economic Outlook, published Tuesday, the IMF sees global economic growth falling to 3% this year, slowest pace since 2008 financial crisis.
Shares of Dow component UnitedHealthGroup Inc. UNH, -0.67% jumped in premarket trade after earnings and revenue came in above expectations and after the health-care services company raised its full-year outlook.
Fellow Dow constituent Johnson & Johnson JNJ, -0.46% reported earnings and revenue that rose more than Wall Street estimates, while the company raised its full-year guidance. The company’s stock rose 1.9% in premarket action.
Shares of BlackRock Inc. BLK, +0.05% were on the rise before the start of trade Tuesday after reporting a smaller-than-expected fall in profit.
The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, -1.00% fell to 1.696% from 1.748% late Friday. Bond markets were closed Monday for the Columbus Day holiday.
In commodities markets the price of crude oil CLX19, -0.07% fell about 21 cents to $53.40 on the New York Mercantile Exchange and gold futures GCZ19, -0.37% ticked down 50 cents to $1497.10 on Comex.
In Asia overnight, stocks trade mixed with Japan’s Nikkei NIK, +1.87% rising 1.9%, the China CSI 300 000300, -0.43% falling 0.4% and Hong Kong’s Hang Seng index HSI, -0.07% falling 0.1%. In Europe, stocks were mostly higher, as the Stoxx Europe 600 SXXP, +0.47% added 0.4%.
Check out the companies making headlines before the bell:
JPMorgan Chase – The bank reported quarterly profit of $2.68 per share, 23 cents a share above estimates. Revenue also beat Wall Street forecasts, helped by growth in home loans, auto loans, and credit cards.
BlackRock – The asset management firm beat estimates by 19 cents a share, with quarterly profit of $7.15 per share. Revenue came in essentially in line with analyst forecasts. Profit dropped from a year ago, however, as investors shifted money to fixed-income funds and other less profitable accounts.
Johnson & Johnson – The medical device and consumer products maker earned an adjusted $2.12 per share for the third quarter, compared to a consensus estimate of $2.01. Revenue also beat estimates, helped by growth in pharmaceuticals and medical devices.
Goldman Sachs – Goldman reported quarterly profit of $4.79 per share, 2 cents a share below estimates. Revenue was essentially in line with expectations.
UnitedHealth – UnitedHealth reported adjusted quarterly profit of $3.88 per share, beating consensus by 13 cents a share. Revenue came in above forecasts, as well. The company saw higher revenue in both its core health insurance business, as well as its pharmacy benefits management unit. The company also raised its full-year forecast.
Walmart – The retailer has begun its "InHome" service that deliveries groceries directly into a customer's home refrigerator. The service, which was first announced in June, will start in 3 areas – Kansas City, Pittsburgh, and Vero Beach, Florida.
Southwest Airlines – Southwest pilots are predicting that Boeing's 737 Max jet won't return to service until February. Boeing is still targeting a fourth-quarter return, and Southwest – along with United and American – are estimating that the jet will be back in the skies in January. Southwest is the biggest domestic user of the 737 Max jet.
Hilton Grand Vacations – The stock remains on watch after surging yesterday on a Bloomberg report that Apollo Global is offering $40 per share to buy the vacation time-share company.
General Motors – GM and the United Auto Workers union continue to negotiate, with a strike in its fifth week. The UAW has called a Thursday meeting of union leaders from around the nation to update them on the status of the talks.
Deere – Deere is spending billions to ramp up its leasing program, according to The Wall Street Journal, in an effort to combat declining demand for farm tractors and construction equipment.
Bloomin' Brands – The restaurant chain operator was downgraded to "hold" from "buy" at Deutsche Bank, which is cutting its third-quarter comparable sales estimate for the Outback Steakhouse parent to a 0.6% increase from 1.1%. Deutsche Bank is also becoming more conservative on comparable sales estimates for next year, as well.
Bed Bath & Beyond – Bed Bath & Beyond was upgraded to "overweight" from "sector weight" at KeyBanc, which points to a favorable near-term outlook for the housewares retailer as well as expected improvements in merchandising and operations under a new CEO.
Lowe's – Lowe's was upgraded to "overweight" from "neutral" at Piper Jaffray, citing an expected improvement in fundamentals for the home improvement retailer even as Street expectations remain modest.
JPMorgan Chase (JPM), the largest U.S. bank by assets, reported third-quarter earnings on Tuesday that surpassed Wall Street’s expectations, boosted by broad strength in nearly all its major business lines.
Here were the key figures from the report, compared to consensus expectations compiled by Bloomberg:
Revenue: $29.3 billion vs. $28.46 billion expected
Adj. earnings: $2.68 per share, vs. $2.34 per share expected
Revenue for the quarter set a record, and was even higher on an adjusted basis at $30.06 billion.
“The consumer remains healthy with growth in wages and spending, combined with strong balance sheets and low unemployment levels. This is being offset by weakening business sentiment and capital expenditures mostly driven by increasingly complex geopolitical risks, including tensions in global trade,” said CEO Jamie Dimon.
JPMorgan maintained its No. 1 spot for global investment banking fees, with 9.3% of the wallet share this year. Dimon noted that the firm had a record quarter for investment banking fees with "particularly strong performance in [Debt Capital Markets] and [Equity Capital Markets]." Banking revenue for the quarter was $3.3 billion, up 2% from the same quarter a year ago. Investment banking revenue was $1.9%, up 8% on higher underwriting fees.
Total markets revenue came in at $5.1 billion, up 14% from last year. Fixed income revenue rebounded 25% to come in at $3.6 billion, "driven by strong client activity across products." Equity markets revenue slipped 5% to $1.5 billion "reflecting lower revenues in derivatives."
Elsewhere, in the consumer and community bank, credit card sales volume rose 10% in the quarter, while merchant processing jumped 11%.
The stock, traded on the New York Stock Exchange, jumped more than 2% from Monday’s close to trade near $119.
JPMorgan kicked earnings season off for the big financials. Goldman Sachs (GS), Wells Fargo (WFC), Citigroup (C) will report results on Tuesday, followed by Bank of America (BAC) on Wednesday and Morgan Stanley (MS) on Thursday.
This story is developing.
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Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.
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A WeWork logo is seen at a WeWork office in San Francisco, September 30, 2019.
Kate Munsch | Reuters
WeWork is expected to lay off at least 2,000 people, about 13% of its staff, as soon as this week, the Guardian newspaper reported.
WeWork staff told the Guardian that they believe the cuts will not stop there, suggesting more of the company's 15,000 person workforce could be sacked. The Information reported in September that executives and bankers have discussed cutting up to a third of those workers. The embattled start-up is attempting to turn its fortunes around with painful cost reduction measures.
Employees also told the Guardian that little to no work is getting done at the company and new projects have been put on hold.
WeWork declined to comment to the Guardian. Representatives for the company did not immediately respond to CNBC's request for additional comment.
Last month, the start-up pulled the plug on plans to go public. Its much-anticipated IPO prospectus in August revealed a massive $900 million loss in the first six months of 2019 and drew skepticism over its corporate governance. WeWork had a private market valuation of about $47 billion but its potential value in the public market had been slashed significantly.
There has also been a showdown between former CEO Adam Neumann and SoftBank chief Masayoshi Son, who has invested billions into the start-up. Neumann stepped down last month. It was also reported that SoftBank has readied a financing package to take control of the company and further sideline Neumann, who is also a co-founder.
WeWork rents out office spaces to start-ups, freelancers and enterprises by investing in real estate in some of the most expensive markets around the world. It makes money back over time as companies and individuals pay their rent or membership fees.
Read more about the Guardian's report on WeWork's plans to sack 2,000 staff here.
— CNBC's Alex Sherman and Lauren Feiner contributed to this report.
