Stocks mixed as tech titans shine, oil giants stumble
The major averages are mixed at midday as tech earnings blowouts are powering the Nasdaq higher while losses from a pair of energy giants are dragging on the Dow.
ECONOMIC EVENTS: In the U.S., personal income dropped 1.1% in June. The Chicago manufacturing PMI surged 15.3 points to 51.9 in July, which was much stronger than expected. The University of Michigan consumer sentiment reading fell to 72.5 in the final July reading. That is down from the 73.2 preliminary reading for the month and down 5.6 points from June's 78.1 figure.
TOP NEWS: Shares of Amazon (AMZN) are 5% higher near noon after the company's "very impressive," "blowout" Q2 results. Among the many Wall Street analysts who raised their price targets on Amazon this morning, Goldman Sachs' Heath Terry still has the high on the street with a target on Amazon.com of $4,200. Deutsche Bank analyst Lloyd Walmsley, who raised the firm's price target on Amazon.com to $4,000 from $3,333 and reiterates a Buy rating on the shares, said the quarter highlighted how Amazon "utterly dominates across two of the biggest secular trends of our lifetimes and what can happen to margins when the business is at more steady state scale."
Apple (AAPL) also beat consensus earnings and revenue expectations and its shares are also 7% higher at midday. In addition, Apple's board approved a four-for-one stock split "to make the stock more accessible to a broader base of investors."
Facebook (FB) also beat, and its shares are also up 8% as a result. Deutsche Bank's Walmsley raised the firm's price target on Facebook to $305 from $275 and reiterates a Buy rating on the shares, stating that last night's report "cleared up a lot of nervousness around the pace of recovery and the impact of the boycotts."
Alphabet (GOOGL) topped consensus revenue and earnings expectations as well, but its report is not impressing investors in the same way as its mega cap brethren and its shares are down 4% near noon. Of note, Morgan Stanley analyst Brian Nowak said Alphabet's ad recovery is progressing largely in-line with his expectations, but pointed out that its ad recovery remains slower than Facebook's, which he attributes to Google's larger size, social commerce on Facebook, Facebook's exposure to the app install market and Google's larger exposure to travel. Meanwhile, Stifel analyst Scott Devitt downgraded Alphabet to Hold from Buy with a price target of $1,600, up from $1,550, following last night's Q2 report. He believes expected improvement in Alphabet's growth is fairly priced in at current levels and sees more upside potential in other mega cap tech names such as Amazon, Alibaba (BABA) and Facebook, Devitt tells investors.
While tech reports have further illustrated the strength in the sector, this morning's reports from Exxon Mobil (XOM) and Chevron (CVX) have underscored the weakness in energy. Exxon reported worse then expected losses and Q2 revenue that missed consensus by about $6B, while Chevron (CVX) also suffered worse than forecast losses and missed the consensus revenue forecast by over $7B. "While demand and commodity prices have shown signs of recovery, they are not back to pre-pandemic levels, and financial results may continue to be depressed into the third quarter 2020," warned Chevron's chairman and CEO Michael Wirth. Darren Woods, the chairman and CEO at Exxon, similarly said that the "global pandemic and oversupply conditions significantly impacted our second quarter financial results with lower prices, margins, and sales volumes."
In news on the search for pharmaceutical answers to COVID-19, Merck (MRK) reported results and also discussed its three programs to fight COVID-19 on its associated earnings call. The company said it expects to initiate "two large pivotal trials, one in outpatients and the second in hospitalized COVID-19 patients," beginning in September for MK-4482, its nucleocide analog that "disrupts the faithful replication of the SARS-CoV-2 viral genome." The company also said planning for large global clinical trials involving both V590 and V591, its COVID-19 vaccine candidates is "nearly complete." These trials will initiate "as soon as we have supportive data regarding immunogenicity," stated Roger Perlmutter, the President of Merck Research Laboratories.
Caterpillar (CAT) was a further drag on the Dow, dropping 3% following its own quarterly report.
MAJOR MOVERS: Among the noteworthy gainers was Allscripts (MDRX), which rose 15% after it reported quarterly results and agreed to sell EPSi to Strat Decision Technology for $365M.
Also higher after reporting quarterly results were Pinterest (PINS), Altice USA (ATUS), and Nokia (NOK), which gained a respective 32%, 7%, and 7%.
Among the notable losers was Shake Shack (SHAK), which slid 11% after it reported quarterly results and withdrew its fiscal 2020 guidance.
Also lower after reporting quarterly results were SM Energy (SM), XPO Logistics (XPO), and Expedia (EXPE), which fell 24%, 13%, and 7%, respectively.
INDEXES: Near midday, the Dow was down 167.35, or 0.64%, to 26,146.30, the Nasdaq was up 49.94, or 0.47%, to 10,637.75, and the S&P 500 was down 7.68, or 0.24%, to 3,238.54.