News of the day for August 2, 2024
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Investors will have another chance to gauge the resilience of the U.S. economy after Thursday’s sluggish data reports, with July unemployment figures due this morning; Intel (INTC) shares are plunging in premarket trading after the chipmaker issued a slew of bad news, including a Q2 miss, a dividend suspension, a weak outlook, and plans to slash 15% of its workforce; Amazon (AMZN) is also tumbling on the tech giant’s weak guidance and substantially higher artificial intelligence (AI) spending; Apple (AAPL) shares are up slightly after reporting a Q3 beat on higher services revenue despite struggling China sales; and ExxonMobil (XOM) beat Q2 estimates while rival Chevron (CVX) missed profit forecasts. U.S. stock futures are extending their slump after yesterday’s markets decline sparked by a chip-stocks rout and downbeat data. Here’s what investors need to know today.
1. July Jobs Data in Focus
Investors are closely watching U.S. monthly jobs data due at 8:30 a.m. ET, with a tick up in unemployment for July triggering the Sahm Rule, a usually reliable indicator of recession. The Sahm Rule theorizes that the economy is in a recession if the three-month moving average of the unemployment rate rises half a percentage point from its low point in the previous 12 months. Economists surveyed by The Wall Street Journal and Dow Jones Newswires expect unemployment levels will narrowly avoid setting off the Sahm Rule and remain at June’s figure of 4.1%. However, other recession indicators have been flashing since 2022 and there has not yet been a downturn.
2. Intel Plunges on Soft Guidance, Job Cuts
Intel (INTC) shares are plunging 21% in premarket trading after the chipmaker issued a slew of bad news, from a wider-than-expected second-quarter loss to soft current-quarter guidance, a suspension of its dividend payments, and a $10 billion cost-cutting plan that includes slashing 15% of its workforce. Intel, whose stock has tumbled more than 43% from its December 2023 high through Thursday’s close, has struggled to catch up in the AI chip business against Taiwan Semiconductor Manufacturing Company (TSM) and has been punished by investors as it ramps up its loss-making foundry business.
3. Amazon Tumbles on Underwhelming Outlook, AI Spending Concerns
Amazon (AMZN) shares are falling 8% in premarket trading after the tech titan’s third-quarter revenue outlook fell short of analysts’ estimates and ramped up spending on AI initiatives. The company projected disappointing sales of $154 billion and $158.5 billion for the current quarter, a period that includes the tech firm’s Prime Day sales event. Meanwhile, Amazon spent $17.62 billion in Q2 purchases of property and equipment, a 54% jump from a year ago. With the exception of Facebook parent Meta Platforms (META), investors have mostly punished Magnificent Seven peers like Microsoft (MSFT) and Google parent Alphabet (GOOGL) for perceived overspending on the technology.
4. Apple Beats as Services Gains Offset Struggling China Sales
Apple (AAPL) reported fiscal third-quarter results that topped analysts’ expectations as services revenue hit a record, although China sales struggled. Chief Executive Officer (CEO) Tim Cook said the company plans to roll out Apple Intelligence, the company’s AI system, to U.S. English users in the fall, and to integrate ChatGPT features into iPhones by the end of 2024 through its partnership with OpenAI. Shares of Apple, which provided developers a first look at Apple Intelligence ahead of its report through the beta version of iOS 18.1, are up less than 1% in premarket trading.
5. ExxonMobil Beats Q2 Estimates; Chevron Misses Profit Forecasts
Energy giant Chevron (CVX) posted lower-than-expected second-quarter profit on weak refining margins, while rival ExxonMobil (XOM) beat Wall Street’s top- and bottom-line projections. While Chevron’s revenue was a beat, its earnings per share (EPS) missed analysts’ projections as the sluggish refining margins dogging the industry took a toll. Chevron, whose shares are down less than 1% in premarket trading, also announced its headquarters will move to Houston from San Ramon, Calif. Meanwhile, ExxonMobil surpassed analysts’ revenue and profit estimates, and its shares are rising more than 1%. The two oil giants are locked in a dispute over Chevron’s $53 billion takeover of Hess (HES) and the smaller firm’s stake in a lucrative oil project in Guyana for which Exxon holds the right of first refusal.
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