S&P 500 futures jump as techs rebound in countdown to Fed

Live4 updates

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  Wed, July 31, 2024 at 5:24 AM EDT

  Keep an eye on the tax discussion

  I would be paying attention to how CEOs and CFOs discuss the outlook for taxes on their earnings calls for the balance of the year.

  Taxes play an integral part in if companies undertake a project, a deal or more hiring. Best believe management teams and boards are running through scenarios if the Trump tax cuts aren’t extended in 2025.

  Here’s Procter & Gamble (PG) chair and CEO to me on Yahoo Finance yesterday on the 2017 Trump tax cuts:

  On their impact: The tax cuts have been “incredibly impactful. And you know, that element of the dialogue is going to increase as we get through the election and start talking about 2025 when some of the tax provisions that were passed in 2017 sunset. But if you just look at our investment in the US pre- and post- the 2017 act, it’s up significantly, our employment is up significantly, and, importantly, our taxes — the taxes we’re paying to the US government — are up significantly. So it’s really led to significant economic activity in this country.”

  On if the tax cuts aren’t extended: “It will certainly have an impact. Every decision that we make is based on the present value of discounted cash flow. And that’s on an after-tax basis. And so it begins favoring on a comparative basis, other locations for investment. So yes, it will have an impact.”

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  Wed, July 31, 2024 at 5:19 AM EDT

  Key post-earnings call out on AMD

  Shares of Advanced Micro Devices (AMD) are back in the good graces of Wall Street this morning after earnings last night, with the stock up 9% in the pre-market.

  I think the Street is locking in on AMD’s upwardly revised guidance on demand for its new AI chip.

  A key call-out by Citi analyst Chris Danely:

  “AMD raised its MI300 sales guidance from over $4.0 billion to over $4.5 billion in calendar year 2024 given demand strength. We continue to expect more upside throughout the year and would note Microsoft (MSFT), AMD’s largest AI customer, raised its capex forecast.”

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  Wed, July 31, 2024 at 5:16 AM EDT

  A good point on Microsoft

  Microsoft (MSFT) shares are rallying back a bit in the pre-market after initially dropping 6% last night following earnings, in part because of a surprise slowdown in Azure growth. As of this writing, shares are down about 3%.

  The company guided to another quarter of slower Azure growth, but then things improving over the next twelve months.

  Good point by Guggenheim analyst John Diffucci on this rosy Azure outlook:

  “We understand that this management team has earned investors’ (and our) respect over time, but we believe investors should ask themselves a simple question: How can they trust management to predict what will happen 6-12 months from now if they have trouble forecasting the next 0-2 months (given F4Q Azure came in at the low end of the range)?”

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  Wed, July 31, 2024 at 5:11 AM EDT

  Why Starbucks stock is rising after a dreadful quarter

  Starbucks (SBUX) shares are up 3% pre-market post a horrendous quarter last night.

  To illustrate how horrendous:

  • US same-store sales down 2%, with transactions down 6% (Citi is calling this “alarming”).

  • China same-store sales plunged 14%, and missed consensus.

  • International same-store sales fell 7%.

  So why the stock pop?

  Well, Starbucks CEO Laxman Narasimhan hopped on his earnings call and shared a bunch of obscure stats suggesting sales and margin trends would improve in a few quarters. He also teased a potential cost-savings action in China, likely through inking a joint venture deal.

  Be careful chasing any Starbucks enthusiasm. This is a management team with a credibility problem with investors, and is dealing with deeply rooted issues such as unions and poor value perception among customers. The end-game on the new battle with activist Elliott Management is also wildly unknown.