MARKET WRAPS
STOCKS: Stocks finished mixed as a selloff in chip stocks was offset by a drop in oil prices that boosted the consumer sector.
TREASURYS: Treasury yields fell ahead of the Federal Reserve's rate decision on Wednesday.
FOREX: The U.S. dollar ticked down ahead of the Fed's policy move.
COMMODITIES: Oil futures fell amid hopes Oman could broker a deal with Iran to reopen the Strait of Hormuz.
HEADLINES
Ford Posts Earnings Beat. Its Outlook Is Improving.
Ford Motor reported better-than-expected adjusted second-quarter operating profit and raised its full-year financial guidance. Those are both good things for investors.
Tuesday evening, the Detroit car maker announced an operating profit of $2.5 billion from sales of $48.3 billion. Wall Street was looking for second-quarter operating profit of $2.1 billion from sales of $47.2 billion. A year ago, Ford reported an operating profit of $2.1 billion from sales of $50.2 billion.
Operating profit improved, but there was a GAAP net loss of $1.3 billion.
Visa Is Slashing 2,600 Jobs as It Adapts to Changing Payments Industry
Visa is cutting 2,600 jobs, or about 7% of its workforce, as it works to adapt to the rapidly changing payments industry.
Chief Executive Ryan McInerney said in a memo to employees that most of the roles affected would be in technology and product teams, but that there would be cuts across the organization. He said technology trends are creating "a once-in-lifetime inflection point in payments" that is changing how money moves around the world.
"To capture the opportunities ahead and best position Visa to lead this transformation, we must continue evolving how we work," he wrote in a memo viewed by The Wall Street Journal.
Trump Administration to End Medicare Drug Plan Subsidy
The Trump administration plans to end a subsidy program that helped hold down premiums for Medicare drug plans, a move that could leave many seniors facing higher rates for their prescription coverage next year.
The move will eliminate a program that is giving insurance companies an estimated $3.6 billion in subsidies this year to blunt increases in premiums for the Medicare prescription plans, known as Part D. The program will end after 2026, according to administration officials.
High drug costs are a perennial issue-especially for seniors on fixed incomes-and healthcare affordability is expected to be a focus in the midterm elections. Roughly 25 million people have Part D plans, and they will learn about their 2027 rates in the fall.
Boeing Spends Big to Meet Deadline for New Air Force One
Boeing spent another quarter in the red as it poured more resources into developing new presidential jets and accelerating production of commercial planes.
The U.S. manufacturer said fast-tracking work on the modified 747-8 jets that will some day serve as Air Force One will cost an additional $280 million, the latest in a series of cost overruns on the more than $4 billion project.
Boeing's commercial airplane division also posted an operating loss, albeit a smaller one than in the same quarter last year. The business absorbed costs from ramping up its manufacturing operations in a bid to chip away at its multibillion-dollar backlog of undelivered planes.
U.S. Consumer Sentiment Edged Down in July, Conference Board Says
Consumer confidence declined in July as consumers' assessment of current business and labor-market conditions softened for a third straight month, a monthly survey from The Conference Board said.
The research group said Tuesday its consumer confidence index fell to 90.8 in July from an upwardly revised 92.2 in June. Economists polled by The Wall Street Journal had expected a higher reading of 92.0.
Consumers' assessment of current business and labor-market conditions fell by 3.6 points to 114.9. Meanwhile, the expectations index, based on short-term outlook for income, business and labor market conditions, remained unchanged at 74.7.
JetBlue Eyes More Aircraft Financing If High Fuel Costs Persist
JetBlue Airways said Tuesday that the airline might seek incremental secured debt financing if fuel prices remain elevated.
Executives, speaking on a quarterly earnings call, said the company has room to raise additional capital on the $500 million aircraft-backed loan it obtained in April. The credit agreement governing that loan would provide for up to $250 million of additional financing, they said.
If the airline needs liquidity beyond that, it would look to do another round of aircraft financing, executives said. They added that the airline is "on path" to generate positive cash flow next year.
Johnson & Johnson Agrees to Pay $5.5 Billion to Settle Talc Lawsuits
Johnson & Johnson agreed to pay $5.5 billion to resolve remaining lawsuits that alleged the company's talc products caused ovarian cancer, with the goal of putting an end to litigation that has been going on for more than a decade.
The company said Monday that it had reached this agreement with firms representing plaintiffs in the outstanding talc cases. The agreement is conditioned on 95% of remaining claimants participating, the drugmaker said.
If it goes through, the deal would put an end to a long-running source of trouble for J&J, one of the biggest healthcare companies in the world. For years, the litigation has hung over the company, damaging its reputation with consumers and dimming the value of its shares.
TALKING POINT Big Tech Stocks Are Pricing In a Miracle on Costs
Wall Street's forecasts for Big Tech require a major leap of faith: that the biggest AI hyperscalers can boost revenue much faster than the costs of running their businesses. Some of the numbers look too good to be true.
Investors are already on edge about these companies' soaring capital expenditures related to artificial intelligence. S&P this month cut Oracle's credit rating to one notch above junk. Alphabet shares slipped last week after the Google parent boosted its capex estimates. Microsoft and Meta Platforms report earnings Wednesday, while Amazon.com's results are due Thursday.
The bullish earnings narrative requires these companies to achieve newfound operating efficiency even as they spend trillions of dollars in capex over the next few years. The premise is evident in the consensus estimates for the five hyperscalers when combined as a group.
Analysts project that operating margins will improve to about 31% in calendar 2029 from 27% last year, according to data compiled by Visible Alpha. This would be the highest for the group collectively since Meta went public in 2012. Half of that improvement hinges on sales, general and administrative expenses declining to about 8% of revenue from 10% over the same period, while revenue almost doubles. The analysts' projections show each company's SG&A falling as a percentage of revenue, helping sustain or expand operating margins.
This scenario leaves little room for error. Depreciation expenses will soar in the next few years because of all the new buildings and equipment. Those are part of operating income under generally accepted accounting principles. And if those costs land higher than projected, relying on overhead to shrink as a share of revenue won't be enough to bridge the gap.
A two-percentage-point drop in SG&A might seem modest. But with combined annual revenue expected to top $3 trillion in three years, it compounds rapidly. The shift means the five hyperscalers would spend $77 billion less on corporate operations in 2029 than if overhead remained at its 2025 share of revenue. That efficiency squeeze is one of the crucial engines driving the margin forecasts.
--Jonathan Weil, The Wall Street Journal
Expected Major Events for Wednesday
06:00/GER: Jun Foreign trade price indices
08:00/ITA: May Industrial turnover
08:30/UK: Jun Money and Credit - Lending to Individuals, Lending to Businesses, Broad Money and Credit
08:30/UK: Jun Monetary & Financial Statistics
08:30/UK: Jun Bank of England effective interest rates
08:59/JPN: Jul Monthly Economic Report
11:00/US: 07/24 MBA Weekly Mortgage Applications Survey
14:00/US: Jun Metropolitan Area Employment and Unemployment
14:30/US: 07/24 EIA Weekly Petroleum Status Report
18:00/US: U.S. interest rate decision
23:01/UK: Jun UK monthly automotive manufacturing figures
23:01/UK: Jun Zoopla House Price Index
23:50/JPN: Jul Provisional Trade Statistics for 1st 10 days of Month
All times in GMT. Powered by Onclusive and Dow Jones.
Expected Earnings for Wednesday
Amphenol Corp $(APH)$ is expected to report $1.21 for 2Q.
Ares Capital Corp $(ARCC)$ is expected to report $0.48 for 2Q.
Bandwidth Inc $(BAND)$ is expected to report $-0.02 for 2Q.
Blackbaud Inc $(BLKB)$ is expected to report $0.71 for 2Q.
Boston Scientific Corp $(BSX)$ is expected to report $0.62 for 2Q.
Bunge Global SA $(BG)$ is expected to report $1.96 for 2Q.
CBRE Group Inc - Class A $(CBRE)$ is expected to report $1.32 for 2Q.
Capital Power Corp (CPX.T) is expected to report $0.51 for 2Q.
Capitol Federal Financial Inc (CFFN) is expected to report $0.17 for 3Q.
Eagle Materials Inc (EXP) is expected to report $3.38 for 1Q.
Evercore Inc - Class A (EVR) is expected to report $2.64 for 2Q.
Fannie Mae (FNMA) is expected to report $0.31 for 2Q.
Fortive Corp $(FTV)$ is expected to report $0.45 for 2Q.
Garrett Motion Inc (GTX) is expected to report $0.47 for 2Q.
General Dynamics Corp (GD) is expected to report $3.94 for 2Q.
Greene County Bancorp Inc $(GCBC)$ is expected to report for 4Q.
Hayward Holdings Inc $(HAYW)$ is expected to report $0.19 for 2Q.
Humana Inc $(HUM)$ is expected to report $6.81 for 2Q.
IDEX Corp (IEX) is expected to report $1.75 for 2Q.
Lennox International Inc $(LII)$ is expected to report $7.66 for 2Q.
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