US stocks slip as weak Amazon sales outlook highlights growth challenges for tech giants

Stock Market Traders

US stocks closed lower on the last trading day of the month, as a weak sales forecast from Amazon clouds the outlook for technology stocks.

After the close on Thursday, Amazon reported quarterly earnings that fell short of expectations, with the company missing quarterly sales estimates for the first time since 2018. Its sales and profit forecasts were below expectations, stoking concern among investors.

Shares of the e-commerce giant took their biggest tumble since May 2020, falling by as much as 8%. This translated to a loss of around $148 billion to Amazon’s market value.

Tech giants have been some of the pandemic’s biggest winners. However, Amazon’s latest report underscores the challenge of keeping the strong pace of sales as the economy reopens.

“While outlook was disappointing, and bears could argue Amazon is investing in 1-Day fulfillment out of competitive necessity, we think Amazon remains in a solid position, with US retail growth likely above industry growth rates,” Bank of America analysts Justin Post and Michael McGovern said in a Friday note.

Here’s where US indexes stood shortly after the 4:00 p.m. ET close on Friday:

Pinterest shares tumbled by 19% to a two-month low after the company reported a quarterly loss in active users on the social media site as easing of COVID-19 restrictions led more people to engage in other activities.

US stocks in recent weeks have climbed mostly higher as investors cheered robust corporate earnings and the accelerating pace of global economic recovery. The COVID-19 Delta variant, along with inflationary concerns, has dampened positive sentiment.

The S&P 500 still managed to close out its sixth straight month of gains.

The yield on the 10-year Treasury note was 1.231%, down by 3.8 basis points.

The Personal Consumption Expenditures price index – a closely monitored measure of nationwide inflation – gained 0.5% last month, suggesting that prices continued to climb amid supply chain issues across the US.

The reading exceeded the median estimate of a 0.4% increase from economists surveyed by Bloomberg. It also matched the May print of 0.5% growth.

Oil prices were up. West Texas Intermediate crude rose 0.41%, to $73.92 per barrel. Brent crude, oil’s international benchmark, increased 0.37%, to $76.33 per barrel.

Gold slipped 0.93% to $1,813.49 per ounce.

Read the original article on Business Insider

Twitter could rise another 30% as ad spending is set to soar, Bank of America says

Jack Dorsey
Twitter CEO Jack Dorsey.

  • Twitter stock could rise by almost 30% to $90 per share, according to Bank of America analysts.
  • BofA sees Twitter expanding in its advertising growth which took a hit during the COVID-19 pandemic.
  • BofA reiterated its buy rating on the stock.
  • See more stories on Insider’s business page.

Twitter stock could rise by about 30% as the social media platform stands to see further growth in advertising sales which have been recovering after the onset of the coronavirus pandemic, Bank of America said Friday.

Twitter’s own outlook for the third quarter points to optimism about its business prospects, the investment bank said in a research note in which it raised its price objective and reiterated its buy rating on the stock.

The bank’s new price objective of $90 follows Thursday’s closing price of $69.57, implying a 29% increase. BofA increased its price objective from $82 after Twitter late Thursday posted a 74% jump in second-quarter revenue, to $1.19 billion. That beat expectations of $1.07 billion in a Refinitiv poll of analysts. It also marked the fastest rate of top-line growth since 2014.

Shares of Twitter were up 4.2% on Friday after rising as much as 5.4% to $73.34 during the session.

Twitter’s outlook “suggests more optimism,” for the third quarter and revenue looks quite strong, BofA analyst Justin Post said in the note. Twitter projected revenue of $1.22 billion to $1.3 billion, higher than the $1.07 billion expected in a FactSet poll of analysts.

The social media site posted an 87% spike in advertising revenue year over year to $1.05 billion, citing a broad increase in demand and improvements in its brand and direct response ad products.

“We reiterate our positive view on Twitter for 2H based on increased brand advertising rebound,” and, among other things, continued traction in its offerings for Mobile Application Promotion, said BofA. MAP is a technology that aids advertisers in promoting their mobile apps. Twitter said Thursday it had launched its playable ad pilot that’s designed to help mobile gaming advertisers gain new customers by allowing them to experience gameplay before installing an app.

“[We] are optimistic that the MAP product ramp can drive solid 23% q/q 4Q growth, better than Twitter’s historical pre-pandemic average,” said the analyst.

Twitter’s advertising dropped 23% to $562 million in the second quarter of 2020 on a year-over-year basis as the COVID-19 pandemic drove down global demand in the face of widespread economic recession.

“While user growth will remain a question, we maintain our optimistic view that Twitter can increase its still (very) limited reach as a differentiated news and content platform, with strong distribution on other media,” said BofA’s Post.

Read the original article on Business Insider

The Delta variant could make the American shopper go back into lockdown, BofA says

People shopping
Bolstered by three rounds of stimulus checks, US consumers have been spending more.

  • The Delta variant could hurt the American shopper, and the economy, BofA Research says.
  • As the variant surges, economists predict a pullback in spending given concerns of catching it.
  • They cited Michigan, where spending declined after February’s Covid wave, despite no change in restrictions.
  • See more stories on Insider’s business page.

Something may be changing in the American economy for the worse, and it’s because of the Delta Covid variant. At least that’s what Bank of America research thinks.

The stock market had a major wobble on Monday, July 19, as data on the variant – and how many Americans it’s rapidly infecting – challenged economic thinking around the reopening boom, led by consumer spending. In a signal of how seriously the mood changed, previously vaccine-skeptical Republican politicians and Fox News hosts reversed themselves, urging more Americans to get vaccinated.

The American shopper emerged from lockdown to lead the recovery, but that’s now at stake.

BofA economists Stephen Juneau and Anna Zhou wrote in a Friday note that the variant is likely to lead to a shift in consumer behavior going forward, citing a 351% surge in the moving average of daily cases since July 21. Accompanied by slowing vaccination rates, they said they “believe the current surge in cases could lead to a sharp pullback in services spending.”

Daily new COVID-19 cases compared to consumer spending.
BofA compares daily new COVID-19 cases to consumer spending.

Juneau and Zhou wrote that the most vulnerable part of the economy from another COVID-19 wave would be the leisure and hospitality sector, which notably added 343,000 payrolls in June – 40% of the total 850,000 jobs gain.

Another factor they are concerned about with the Delta variant is the lack of government aid. When the pandemic first hit, Americans received stimulus checks and other benefits from President Donald Trump’s CARES Act, then another Trump stimulus in late 2020, and finally President Joe Biden’s American Rescue Plan, but another isn’t being discussed. The $4 trillion infrastructure proposal Biden wants to further stimulate the economy is at risk of being watered down in bipartisan negotiations.

Since governments seem unlikely to implement fresh restrictions as cases rise, the economists predict that most states will likely respond to the surge in infections by pushing people to get vaccinated, meaning that “shi sts in consumer behavior will determine how Delta affects economic activity and experiences during prior waves may not offer the best guide.”

They used the example of Michigan to back up their prediction. The state made no changes to restrictions during the Covid wave in late February, but consumer spending still decreased afterward, with services industries taking a major hit as less people dined out, and employment declined.

From a global perspective, BofA’s Ethan Harris wrote that several countries are experimenting with permitting or not permitting high-risk activities, and overall, he sees Delta as a “moderate headwind to global growth.”

To date, as Juneau and Zhou wrote, there has been little evidence of the variant significantly affecting the economy or spending on services, but with increased hesitancy of being in physical locations, the impact could become more prominent.

And given that Biden officials are considering adopting stricter mask guidance as the variant continues to spike, the consumer-led American boom coming out of lockdown could go back into some form of it.

Read the original article on Business Insider

Bank of America is offering crypto exchange-traded products for some of its clients, report says

Bank of America
Bank of America

  • Bank of America clears and settles crypto exchange traded products for selected clients, according to a report by Coindesk.
  • Last week, the company said in an internal memo it plans to add a crypto research team.
  • A Coindesk report on Tuesday said the bank was offering ETPs to some of its hedge fund clients.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Bank of America is now offering crypto exchange-traded products for some of its global clients, as it seeks to tap into investor demand for digital assets, according to a report by Coindesk.

Coindesk said on Tuesday the bank was offering ETPs to some of its hedge fund clients, according to three sources with knowledge of the matter.

The bank, the largest in the US by assets, follows competitors JPMorgan, Goldman Sachs and UBS in offering crypto-linked ETPs to some of its customers.

The bank occasionally clears and settles crypto-related ETP trades to some of its global clients and has done so for some time, according to a source familiar with the matter that spoke with Insider on condition of anonymity.

Bank of America declined to comment when contacted by Insider.

To bolster its trading and investment options in digital currencies, the bank also plans to create a crypto research team, according to an internal memo earlier this month.

A number of major banks and fund managers have added crypto-related products and services to tap into demand from anyone from institutional investors to individual traders, largely thanks to the kind of returns that volatile cryptocurrencies can bring.

Bitcoin, the largest cryptocurrency by market value, is up by more than 200% year on year, trading at around $31,800. But it swung from lows of just $8,905 to highs of almost $65,000 in that period of time.

This story has been updated to include Bank of America’s official response and to add that it offers these services to clients globally.

Read the original article on Business Insider

Bank of America is joining the growing number of banks that will allow clients to use various crypto exchange-traded products, report says

Bank of America
Bank of America

  • Bank of America will allow its clients access to a number of crypto exchange-traded products, according to a Coindesk report Tuesday.
  • Last week, the company said it would allow some clients to trade bitcoin futures and plans to add a crypto research team.
  • The company has joined JP Morgan, Goldman Sachs and UBS in creating crypto products and services in response to client demand.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Bank of America is going to offer its clients access to a number of cryptocurrency products, joining a growing number of its peers that are rapidly tapping into investor demand for digital assets, according to a report on Tuesday by Coindesk.

The bank will allow its clients to use various crypto exchange traded products (ETP’s) according, to three knowledgeable sources, Coindesk reported on Tuesday. These ETPs will be aimed at European hedge funds, the report said.

Bank of America was not immediately available for comment when contacted by Insider.

Bank of America, the largest US investment bank by assets, follows competitors JPMorgan, Goldman Sachs and UBS in offering crypto-linked ETPs.

This is the bank’s second big step to expand its cryptocurrency products. Last week, it allowed some customers the option to trade bitcoin futures.

To bolster its trading and investment options in digital currencies, Bank of America also plans to create a crypto research team, according to an internal memo earlier this month.

A number of major banks and fund managers have added crypto-related products and services to tap into demand from anyone from institutional investors to individual traders, largely thanks to the kind of returns that volatile cryptocurrencies can bring.

Bitcoin, the largest cryptocurrency by market value, is up by more than 200% year on year, trading at around $31,800. But it’s swung from lows of just $8,905 to highs of almost $65,000 in that period of time.

This story has been updated to include Bank of America’s response, with no further changes to the text.

Read the original article on Business Insider

Warren Buffett likely took a $6 billion hit on just 4 stocks during Monday’s painful sell-off

warren buffett
Warren Buffett.

  • Warren Buffett probably took a $6-billion hit on four stocks during Monday’s sell-off.
  • The investor’s Apple, Bank of America, Coca-Cola, and American Express stakes fell in value.
  • Buffett’s Berkshire Hathaway has made over $150 billion in total gains on those positions.
  • See more stories on Insider’s business page.

Warren Buffett likely suffered a $6 billion blow to his stock portfolio on Monday, as four of his biggest holdings slumped in value during the painful market sell-off.

The investor’s Berkshire Hathaway conglomerate counts Apple, Bank of America, American Express, and Coca-Cola among its largest positions. Those four stocks fell between 1% and 4% on Monday, wiping about $5.9 billion off the combined value of Buffett’s stakes in those companies.

Berkshire boasted 887 million Apple shares at the last count. Assuming he hasn’t touched that holding, it slid in value by $3.5 billion on Monday. The conglomerate also took a $1 billion hit on Bank of America, a $2.7 billion hit on Coca-Cola, and a $1.1 billion hit on American Express.

Buffett won’t be too bothered, as he famously focuses on long-term performance, and has already made a fortune on those stocks. For example, Berkshire spent $36 billion to build an Apple stake worth $126 billion today, more than tripling its money on paper.

The investor’s company also spent $1.3 billion for Coca-Cola stock worth $22 billion today – a roughly 17-fold gain. Moreover, its $25 billion stake in American Express has a cost base of $1.3 billion, and it spent about $15 billion to amass a Bank of America position worth $37 billion today.

Overall, Buffett’s total unrealized gains on those four stocks exceed $150 billion – more than the market capitalizations of Starbucks ($136 billion), IBM ($123 billion), or Goldman Sachs ($120 billion).

Buffett concentrates his money in a few key investments instead of spreading it across hundreds of them, boosting his returns when his bets pay off, but also exposing him to sharper declines. Apple has made up 45% of the total value of Berkshire’s stock portfolio in recent weeks, and the conglomerate’s top five holdings have accounted for 75%.

Read the original article on Business Insider

Bank of America is allowing some clients to trade bitcoin futures, report says

BofA logo
Bank of America is reportedly addressing demand for bitcoin access by clients.

  • Bank of America has approved access to bitcoin futures to some clients, CoinDesk reported Friday.
  • The bank gave the green light due to the large amount of margin required to trade the futures, the report said.
  • Bitcoin is trading at less than half its all time high of near $65,000 achieved earlier this year.
  • See more stories on Insider’s business page.

Bank of America is allowing some of its clients to trade bitcoin futures, according to a CoinDesk report, a move that highlights the growing push by institutions into the cryptocurrency market.

The second-largest bank by assets in the US has been conservative in dealing with cryptos but it has approved giving some clients access to the market due to the large amount of margin required to trade the futures, CoinDesk reported Friday, citing an unnamed source. Another source told the site some of BofA’s clients are setting up to trade bitcoin futures and that one or two may have already started trading.

To address institutional interest in digital currencies, Bank of America recently launched a cryptocurrency research team, according to a memo obtained by Insider.

“Cryptocurrencies and digital assets constitute one of the fastest growing emerging technology ecosystems,” said Candace Browning, head of global research, in a July 8 memo addressed to Merrill Lynch Wealth Management employees and partners.

Goldman Sachs has expanded its presence in the bitcoin market by offering non-deliverable forwards, a derivative tied to bitcoin’s price that pays out in cash, Bloomberg reported in May.

The news of BofA’s bitcoin move comes as the market value of the global cryptocurrencies has dropped to $1.3 trillion from a high of more than $2.4 trillion in May, led largely by a selloff in bitcoin. Bitcoin traded below $32,000 on Friday and was headed toward its worst weekly performance in more than a month.

The crypto market has been struggling in part on the back of regulatory headwinds from China and the US. This week, Federal Reserve Chairman Jerome Powell said the US won’t need stablecoins and cryptocurrencies if the central bank were to issue its own digital currency.

Read the original article on Business Insider

Virgin Galactic is on track to begin commercial operations next year, but future growth is already priced into the stock, Bank of America says

Virgin galactic whiteknighttwo
A Virgin Galactic spacecraft attached to its carrier vehicle, WhiteKnightTwo.

  • In a note published Monday, Bank of America stuck to its “underperform” rating for Virgin Galactic.
  • Also on Monday, Virgin Galactic announced that it would issue $500 million in fresh shares.
  • BofA analysts expect that Virgin Galactic is unlikely to generate positive cash flow before 2025.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Virgin Galactic founder Sir Richard Branson has gone spacefaring, but don’t confuse spectacle for substance, Bank of America analysts wrote in a note on Monday morning.

BofA stuck to its “underperform” rating for Virgin Galactic, arguing that the stock’s current valuation “more than reflects fundamentals and potential growth.”

The note was published as Virgin Galactic’s stock price hovered around $49. The analysts set a long-term price target of $41. Shortly after publication, the company announced that it would issue $500 million in fresh shares, briefly sending the stock sliding to $41.70 before a small rebound.

BofA analysts expect that Virgin Galactic is on track to commence commercial space flights as early as the first half of 2022. Yet that should not be mistaken for a buy signal. The space-travel firm is unlikely to generate positive cash flow before 2025, according to BofA projections. The stock is also already richly valued as is, they wrote.

The bearish call comes a week after UBS issued a similar forecast, arguing that Virgin Galactic’s stellar 200% run-up meant it had little upside potential left. The average analyst price target for the stock was $37.90, according to the Wall Street Journal, implying a 12% drop from Monday levels.

Virgin Galactic was trading at $42.88 as of 11:45 a.m. ET, down 12.8% so far on Monday.

Read the original article on Business Insider

The S&P 500 could drop sharply in the 3rd quarter as the ‘5 P’s’ pressure markets, Bank of America says

Bull Market
  • The first half of the year has brought good news for many assets, but the rally could use a “breather,” BofA analyst write.
  • The five P’s – pandemic, price, positioning, policy, and profits – are set to weigh on markets in the third quarter.
  • Stocks may also fall preemptively, as investor jitters make lower Q4 profits show up in Q3 share prices.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Bank of America is anticipating a preemptive slowdown in the third quarter as investors fearing the “five P’s” pull back across asset classes, analysts wrote in a note.

The first half of the year has brought good news for many assets, but the “Wall St boom/bubble” could use a “breather,” BofA’s analysts wrote.

In their view, the five P’s – pandemic, price, positioning, policy, and profits – look set to weigh on credit, stock, and commodity returns in Q3, partially in expectation of weaker company earnings relative to growth in the fourth quarter.

Pandemic

With Covid cases around the world ticking up due in part to the Delta variant, BofA expects growth and earnings expectations for this year and next to fall. That could lead to downward pressure on asset prices.

Price

The latest Covid wave comes as asset pricing is already robust, with the S&P 500 price-to-earnings ratio at dot-com bubble levels. Commodities and housing are also at or nearing historic valuations. US spreads between risk-free and junk bonds are exceptionally tight, as junk bond yields fell below inflation on Friday. (Prices rise when yields fall.)

Positioning

The analysts pointed to survey data showing fund managers pouring money into “late cycle” assets – those best suited for inflation and weak growth. In Q3, they see the S&P 500 falling below 4,000, a drop of roughly 8% from current levels, led by flagging tech stocks, which many investors (wrongly, in their view) see as a good defensive option.

Policy

Inflation across the developed world will force monetary and fiscal authorities to ease up on stimulus measures in the coming quarter. Moreover, prospects for Joe Biden’s proposed $1.7 trillion infrastructure package have dimmed as the administration now pursues a slimmed down bipartisan deal.

China is still a “wild card” in terms of policy, the BofA analysts wrote, but the central bank seems wary of overheating the country’s fragile financial sector.

Profits

Between potential future Covid restrictions, supply shortages, and likely growth deceleration, corporate profits are poised to feel the pinch in the second half of the year. Stocks may also fall preemptively, as investor jitters make lower Q4 profits show up in Q3 share prices.

Read the original article on Business Insider

Bank of America is launching a crypto research team as institutional interest in digital assets rises

Bank of America bank branch on Park Avenue in New York City.
  • The new operation will be run by Alkesh Shah, who previously led the firm’s Global Technology Specialist team, according to a memo obtained by Insider. Bloomberg was first to report.
  • “Cryptocurrencies and digital assets constitute one of the fastest growing emerging technology ecosystems,” the memo said.
  • Joining Shah’s team are Mamta Jain and Andrew Moss.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Bank of America is launching a cryptocurrency research team as institutional interest in the digital asset space continues to rise.

The new operation will be run by Alkesh Shah, who previously led the firm’s global technology specialist team, according to a memo obtained by Insider. Bloomberg was first to report. Shah will report to Michael Maras, the head of global fixed-income, currency, and commodity research for BofA.

The memo, dated July 8, was written by Candace Browning, head of global research, and addressed to Merrill Lynch Wealth Management employees and partners.

“Cryptocurrencies and digital assets constitute one of the fastest growing emerging technology ecosystems,” Browning said, adding that the sector is currently valued at about $2 trillion.

She continued: “We are uniquely positioned to provide thought leadership due to our strong industry research analysis, market-leading global payments platform and our blockchain expertise.”

Shah, who has 20 years of experience in technology and research, will cover global cryptocurrency, digital assets, and the related ecosystem, Browning said. He joined the bank in 2013 from Morgan Stanley and Lehman Brothers. He holds a BA from Cornell University and an MBA from Columbia Business School.

Joining his team are Mamta Jain – who has past experience in mobile and digital strategy for global banking and markets – and Andrew Moss, a vice president in the BofA’s data and innovation group.

The latest move by Bank of America comes after Goldman Sachs has already offered services related to cryptocurrency.

Read more: A crypto evangelist shares 5 altcoins that could explode in value, including one with 100-times potential – and breaks down his 3-part strategy for betting on speculative but potentially rewarding tokens

Read the original article on Business Insider