Fears of US recession drives mixed earnings results

US equities rallied Thursday for the second day in a row even after the latest GDP showed a second-straight contraction, as investors bet the economic downturn would soon cause the Federal Reserve to end its aggressive hiking campaign.

On the data front, Q2 GDP dropped at a 0.9 per cent annual rate – which is the second consecutive quarterly drop for GDP; and likely to spark continued discussion of recession probabilities. Most economists still don’t think the U.S. economy meets the formal definition of a recession, but the data leaves little doubt that the recovery is losing momentum amid rising interest rates, high inflation and anemic consumer spending.

News of the back-to-back contractions heightened a debate in Washington over whether a recession had begun. Treasury Secretary Janet Yellen said Thursday the U.S. economy is in a state of transition, rather than a recession, despite two consecutive quarters of negative growth – an historical measure of a recession. Recession, Yellen insisted, is a “broad-based weakening of our economy” that includes substantial layoffs, business closures, strains in household finances and a slowdown in private sector activity. Seems like definition of a recession is about to become a political football

The Dow Jones Industrial Average jumped 332.04 points, or 1 per cent, to 32,529.63. The blue-chip index added about 400 points in the previous session. The S&P 500 rose 1.2 per cent to 4,072.43, and the Nasdaq Composite added nearly 1.1 per cent to 12,162.59. All of the major averages are on pace for a winning week as well as their best month of 2022. All three major indexes have risen at least 7 per cent from their 2022 lows in mid-June.

Earnings results continue to drive a divergence across the sectors

Traders had a deluge of second-quarter company earnings to digest Thursday. Honeywell 3.7 per cent and Etsy 10 per cent both reported strong results -Ford Motor climbed 7.1 per cent after it beat profit and revenue estimates and raised its dividend.

A few notable themes in the latest batch of earnings – saw shares of Meta Platforms dipp 5.2 per cent on the back of disappointing quarterly numbers – with guidance matching concerns about multiple headwinds on digital advertising.

In other news, solar stocks soared after both sides of the political divide said they’ve reached a deal on climate spending. Residential solar installers Sunrun and Sunnova jumping nearly 30 per cent each with SunPower up about 18.2 per cent. The Invesco Solar ETF added 7.5 per cent.

After the market results are just out with mixed results:
Shares of Amazon surged 12 per cent despite the tech giant reporting a loss of 20 cents per share for the second quarter. The company’s revenue came in higher than expected, however, at $121.23 billion. This was its slowest growth rate in 2 decades.

Apple beat estimates on the top and bottom lines for the third quarter with shares of the tech giant adding more than 3 per cent Apple after market – the company reported $1.20 in earnings per share on $82.96 billion of revenue.

Intel, the chip stock, sank more than 7 per cent after Intel missed estimates on the top and bottom lines for the second quarter.

Roku, the streaming stock, dropped nearly 25 per cent after Roku missed estimates on the top and bottom lines for the second quarter, with the company citing a slowdown in advertising spending.

Commodities

Iron ore is 6.2 per cent higher at US$117.95 tonne. Iron ore futures are pointing to a 2.7 per cent gain.

Gold jumped $31.70 or 1.8 per cent to US$1769 an ounce.

Silver was up $1.27 or 6.8 per cent to US$19.87 an ounce.

Copper was up $4.45 or 1.3 per cent to US$347.45 a pound.

Oil lost $0.84 or 0.9 per cent to US$96.42 a barrel.

Currencies

One Australian dollar is flat compared to the US dollar yesterday, buying 69.95 US cents

The SPI futures are pointing to a 1 per cent gain.

Figures around the globe

Across the Atlantic, European markets closed mixed. Paris added 1.3 per cent, Frankfurt gained 0.9 per cent and London’s FTSE closed 0.04 per cent lower.

Asian markets closed mixed. Tokyo’s Nikkei added 0.4 per cent, Hong Kong’s Hang Seng lost 0.2 per cent and China’s Shanghai Composite closed 0.2 per cent higher.

Yesterday, the Australian sharemarket gained almost 1 per cent to 6,890.

Ex-dividends

There are three companies set to trade without the right to a dividend.

Metrics Income Opportunities Trust (ASX:MOT) is paying 0.98 cents unfranked
Metrics Master Income Trust (ASX:MXT) is paying 0.87 cents unfranked
Partners Group Global Income Fund (ASX:PGG) is paying 0.8782 cents unfranked

Dividends payable

There are seven companies set to pay eligible shareholders today.

James Hardie Industries (ASX:JHX)
Kelly Partners Group Holdings (ASX:KPG)
Plato Income Maximiser (ASX:PL8)
RAM Essential Services Property Fund (ASX:REP)
Rural Funds Group (ASX:RFF)
Spheria Emerging Companies (ASX:SEC)
Steamships Trading Company (ASX:SST)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.