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Midday Market Update

Stocks Fall; Earnings in Focus

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U.S. Market    
Stocks fell this morning as second-quarter earnings remained in focus.

Consumer sentiment rose again in July according to the Reuters/University of Michigan survey. The reading of 85.1 was up from 83.9 in early July and above the 84.0 expected by economists. One-year inflation expectations fell to 3.1% from 3.3%.

At midday the DowS&P 500 and Nasdaq were down 0.7%, 0.5% and 0.3% respectively.

Stocks on the Move
Shares of  Halliburton (HAL) rose 3.9% after the firm announced that it has  reached an agreement with the U.S. Department of Justice resolving its criminal investigation into Macondo. The company will plead guilty to a single misdemeanor violation for destroying evidence in the aftermath of the blowout, pay the maximum $200,000 fine, and has agreed to a three-year probation period. Halliburton has also agreed to donate $55 million to the National Fish and Wildlife Foundation. . Halliburton has yet to settle the civil claims relating to Macondo, where we expect the penalties to be much larger, and Halliburton reserved $1 billion for future Macondo liabilities. Halliburton also announced a Dutch tender buyback of up to $3.3 billion of its own stock. The purchase range will be between $42.50 and $48.50, and expires on Aug. 22.

 Starbucks' (SBUX) third-quarter update reinforced our view of the company as one of the most dynamic names in the consumer cyclical space today. The company delivered global comparable-store sales growth of 8%--including 9% gains in both the Americas and China/Asia Pacific regions--driven by a 7% increase in transactions through new beverage innovations and a revamped food platform, expanded throughput capacity during peak hours, increased store redesign and daypart expansion efforts, effective usage of digital and social media tools, and continued momentum with My Starbucks Rewards program. Shares rose 6.6% on the report. 

 Amazon's (AMZN) second-quarter update supported the firm's  compelling long-term growth story, but also served as a reminder that the company remains in investment mode, particularly in international markets. Total revenue grew 22% (25% excluding currency), well ahead of the pace of global e-commerce sales growth and comparable sales trends among most offline retailers. Gross margins grew 260 basis points to 28.6%, which we attribute to third-party sales, Amazon Prime, AWS, and lower shipping costs. Shares were up 1.5% at midday.

Foreign Markets
European markets ended the week on a mixed note. In late trading, the Paris CAC was up 0.4% while the FTSE 100 and Germany’s DAX were down 0.5% and 0.6% respectively.

Asian shares were also mixed on the day. The Nikkei 225 fell 3%, the Shanghai Composite was off 0.5% while the Hang Seng rose 0.3%.

Jeremy Glaser does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.