More major job cut news landed in the US yesterday, with American Airlines announcing that it plans to cut 19,000 jobs when the terms of its federal aid deal expire. The workers will be involuntarily furloughed or laid off. Although passenger numbers in the US have recovered somewhat from the depths plumbed in April, the number passing through official checkpoints has bounced around between the 500,000 and 700,000 mark in the past two months. On Monday, 727,788 travellers passed through TSA checkpoints, versus 2.4 million on the same day a year ago.
Retailer Bed Bath & Beyond also announced that it will be cutting 28,000 jobs, around 5% of its total workforce, as part of a restructure. The firm wants to focus more heavily on its online business, and expects to save $150m a year by making the cuts, which involves removing corporate management layers and repositioning field roles to better serve online shoppers.
US consumer confidence at a six year low
It was a mixed day for US stock indices on Tuesday, with the S&P 500 and Nasdaq Composite both in the green, and the Dow Jones Industrial Average closing slightly lower. A lower than expected consumer confidence reading for August was one factor that hurt sentiment, as it fell to its lowest level in six years.
In earnings news, Salesforce stock jumped double digits during after-hours trading, after delivering a major beat versus analyst expectations. The company’s earnings per share figure came in at $1.44 per share, versus the $0.67 expected, while revenue of $5.15bn was more than $200m higher than anticipated.
Best Buy faced a tougher earnings report, with its share price closing 4% lower after a surge in online sales was hamstrung by product shortages. The firm was the biggest faller in the S&P 500, along with Tiffany & Co and Exxon Mobil, which closed 4% and 3.2% lower respectively. At the top of the index was clothing retailer Gap, which added 10.4% after analysts at Citigroup doubled the target price on the company’s shares.
S&P 500: 0.4% Tuesday, 6.6% YTD
Dow Jones Industrial Average: -0.2% Tuesday, -1% YTD
Nasdaq Composite: 0.8% Tuesday, 27.8% YTD
UK tech firm Aveva makes $5bn play for US rival
The FTSE 100 fell by 1.1% on Tuesday, although no stock fell by more than 3.4%. Housebuilders, miners and oil giants were all in the red, with Anglo American down 3.3%, Taylor Wimpey down 3.1% and Royal Dutch Shell down 3%. At the top of the index, industrial software firm Aveva jumped by 7.3% after announcing that it has agreed to acquire OSIsoft, a US rival in a $5bn takeover deal. The mainly cash deal helps to solidify the company’s position, and takes competition from its Softbank-backed rival off the table. The FTSE 250 also ended Tuesday in the red, losing 0.6%, with marine engineering company James Fisher & Sons posting the worst day at -9.3%. The selling was triggered by the company reporting a weak set of earnings and slashing its dividend. At the other end of the index, Cineworld Group jumped 7.1% after reopening around 200 cinemas in the US over the weekend, with CEO Mooky Greidinger stating that audience figures were “encouraging.”
FTSE 100: -1.1% Tuesday, -20% YTD
FTSE 250: -0.6% Tuesday, -19.7% YTD
What to watch
Splunk: Big data company Splunk has jumped 36% year-to-date and 80.2% over the past 12 months, shortly after Loop Capital analyst Yun Kim placed a buy rating on the stock and said that the company’s service is becoming a “de facto” IT standard, according to Seeking Alpha. Wall Street analysts are anticipating the company will report a $0.33 loss per share for Q2, although 27 rate the stock as a buy or overweight, nine as a hold, and one as a sell. Their prediction is for the firm to return to profitability in Q3.
Polymetal International: London-listed precious metals miner Polymetal International reports earnings on Wednesday, after a 76% year-to-date share price gain on the back of the soaring gold price. Investors will be watching for how the higher price of precious metals has helped the company’s margins. Another issue likely to be discussed on the earnings call is the company’s recently announced partnership with a German firm to develop underground electric vehicles for use in its mines, which has potential cost saving implications in the long-run.
Dick’s Sporting Goods: Sporting retailer Dicks had had a middling 2020. Its share price is down 5.7%, as a demand for home workout equipment and online sales has balanced against store closures. Dick’s has surged by more than 35% over the past three months as it has begun reopening stores, and investors will be watching closely for a progress report, during the company’s Wednesday earnings call. Analyst expectations for the company’s Q2 earnings per share figure have rebounded dramatically over the past three months, from $0.26 then to $1.26 now.
Crypto corner: Crypto regulations finally proposed in Brazil
A Brazilian senator has proposed a series of new laws to regulate the country’s crypto industry, which currently suffers from a total void of any rules, according to Coindesk.
Soraya Thronicke, a senator from Brazil’s Social Liberal Party, proposed a set of regulations that would cover: custodians and issuers, consumer protections, crypto taxation, criminal enforcement, “virtual asset” businesses, and industry oversight.
Amendments to current laws proposed would also impose harsher sentences on fraudsters. Brazilian crypto firms have suffered until now, Coindesk says, because a lack of regulation or official standing has made it hard for them to demonstrate their legitimacy. This has meant more traditional financial firms are dissuaded from doing business with crypto outfits, handicapping the industry from the get go. The Brazilian banking industry in particular has until now refused to do business with any crypto services in the South American nation.
All data, figures & charts are valid as of 26/08/2020. All trading carries risk. Only risk capital you can afford to lose.