Market Recap: July 20, 2023 - Tesla Plummets, SEC Settles Fraud Charges with DWAC, and DFS Stock Plunges Amid Scrutiny

Hi, Traders! As the day comes to an end, we are excited to have you here for an insightful recap of the noteworthy events that have influenced the financial markets today.

Housing Market Slows in June Due to Limited Supply and High Prices 🏠🔻

The housing market experienced a significant slowdown in June. Home sales were down 18.9% compared to the previous year, marking the slowest pace for June since 2009. This decrease is attributed to a critical lack of housing supply, with 1.08 million homes available for sale at the end of June, a 13.6% decrease from the same period in 2022. The median price of existing homes sold in June remained high at $410,200 due to this supply-demand imbalance. Further, mortgage rates remain a challenge, particularly for first-time buyers. However, sales of newly built homes are witnessing an increase, with the nation’s largest homebuilder, DR Horton, reporting a 37% rise in new orders from the prior year.

Indexes 📉📈

Most of the indices were down today, but the Dow Jones Industrial Average is still going strong. Now, let's explore how the market performed today...

The S&P 500 (SPX) was down -0.68% coming to a conclusion at 4,534

The Nasdaq Composite (IXIC) dropped -2.05% to settle at 14,063

The Dow Jones Industrial Average (DJI) gained +0.47% to finish at 35,225

The Russell 2000 (RUT) fell -0.89% ending the day at 1,967

The Nasdaq-100 (NDX) nosedived by -2.28% to conclude at 15,466

Tesla Stock Drops After Q3 Production Slowdown Warning and Uncertain Cybertruck Plans📉🚘

Shares of Tesla (TSLA) fell by more than 9% on Thursday, marking the worst day for the company's stock in three months. This plunge followed warnings from CEO Elon Musk and other executives during the earnings call that production would slow in Q3 due to shutdowns for factory upgrades. Investors also responded negatively to vague comments on Tesla's latest vehicle, the Cybertruck, and plans for a robotaxi-ready car. Musk hinted that while the company aims to deliver 1.8 million vehicles this year, Cybertruck production may only hit high volumes in the following year. The uncertainty caused the stock to fall, despite beating expected revenues and earnings for the quarter.

In other Tesla news, Tesla has issued a recall for up to 15,869 Model S and Model X EVs from the 2021 to 2023 model years due to potential seat belt issues. According to the National Highway Traffic Safety Administration, a seat belt may come loose during a crash, posing a safety risk. Tesla has committed to inspecting front-row seat belt connections and replacing any necessary assemblies for free.

TSLA:

262.90 ▼ -28.36 (-9.74%) Today

262.30 ▼ -0.60 (-0.23%) After Hours

Netflix Stock Plummets Following Underwhelming Quarterly Earnings Report 📉🎥

Netflix's (NFLX) stock dropped more than 8% following a quarterly earnings report that left Wall Street underwhelmed. The company showed weaknesses in its average revenue per membership in the most recent quarter, causing concerns among analysts, such as Michael Nathanson of MoffettNathanson. Despite new policies on ad-supported streaming and password sharing, which were anticipated to drive growth, these initiatives were seen as underdelivering. Wall Street analysts now struggle to project Netflix’s revenue in the next two years due to this uncertainty. Amidst this, Netflix predicts a 7% YoY increase in Q3 revenue, standing at $8.5 billion.

NFLX:

437.42 ▼ -40.17 (-8.41%) Today

435.61 ▼ -1.81 (-0.41%) After Hours

SEC Settles Fraud Charges with DWAC Over Trump Media SPAC Deal 🧾💼

The Securities and Exchange Commission (SEC) has settled fraud charges with Digital World Acquisition Corp. (DWAC), the company that aims to take former President Donald Trump’s social media venture, Trump Media and Technology Group (TMTG), public. DWAC has been ordered to pay an $18 million civil penalty fee should the final merger be executed and TMTG be taken public. If the merger does not meet the deadline of January 1, 2025, and DWAC refunds investors, the SEC has agreed to forgo the penalty. These charges originate from DWAC's "extensive SPAC merger discussions" with TMTG months before filing paperwork to go public in September 2021, contravening regulations that prohibit SPACs from soliciting specific merger targets prior to filing an initial public offering. This settlement adds to the legal complications surrounding Trump and his businesses since he left the White House in 2021.

DWAC:

13.36 ▼ -0.28 (-2.05%) today

15.84 ▲ +2.48 (+18.55%) After Hours

Discover Financial Services Stock Plunges Following Regulatory Scrutiny and Suspension of Stock Buybacks 💳📰

Discover Financial Services (DFS) experienced a very large decline following an announcement that it was under regulatory scrutiny for misclassifying some credit card accounts. As a result of these discussions with regulators, the company suspended stock buybacks and commenced an internal review of its compliance, risk management, and corporate governance practices. This issue reportedly accounts for less than 1% of the company's cumulative interchange income. Discover has also received a separate proposed consent order from the Federal Deposit Insurance Corp. for a consumer compliance issue. CEO Roger Hochschild affirmed the company's commitment to enhancing governance and oversight structures, indicating plans to compensate affected merchants by setting aside $365 million for refunds. The fallout also impacted Discover's profit, with Q2 earnings falling 18% to $901 million, compounded by a surge in loan write-offs leading to a $1.31 billion provision for bad loans.

DFS:

102.45 ▼ -19.40 (-15.92%) Today

102.51 ▲ +0.06 (+0.059%) After Hours

American and United Airlines Post Strong Q2 Results, Airline Stocks React Mixed 🛫📊

American Airlines (AAL) and United Airlines (UAL) posted better-than-expected financial results for Q2, reflecting booming profits as air travel demand recovers. American Airlines saw its profits grow more than 150%, subsequently raising its full-year earnings guidance. Meanwhile, United's EPS skyrocketed over 250%. Both airlines' performance is nearing pre-pandemic levels, with Delta's (DAL) financial report last week showing a 61% jump in international sales and an 8% increase in domestic sales. However, despite strong financials, airline stocks have seen mixed reactions, with American Airlines dropping by 6.24% and United jumping by 3.23%.

AAL:

17.44 ▼ -1.16 (-6.24%) Today

17.43 ▼ -0.011 (-0.066%) After Hours

UAL:

56.57 ▲ +1.77 (+3.23%) Today

56.53 ▼ -0.04 (-0.071%) After Hours

Cargo Revenue Declines for Airlines Despite Record Passenger Revenue 📦📉

Despite airlines reporting record revenue due to a rebound in travel demand, their cargo revenue has shown a significant decline. Delta, United, and America reported year-over-year decreases of about 40% in their Q2 cargo revenue. This downturn is partly due to airlines restoring passenger flights, which reduces the need for cargo flights. Nevertheless, cargo revenue, which was a lifeline during the pandemic, is now a smaller portion of the airlines' overall sales.

TSMC Delays Arizona Chip Plant Production to 2025 Due to Skilled Labor Shortage, Potentially Impacting Apple Chip Plans 💾🔧

The Taiwan Semiconductor Manufacturing (TSM) announced it will delay production at its new Arizona chip plant until 2025 due to a shortage of skilled labor. This development could impact tech giant Apple (AAPL), which has announced plans to use chips built at this facility. TSMC's Chairman Mark Liu said the delay results from a lack of skilled workers to install advanced equipment at the facility on its initial timeline, which was set for 2024. This delay comes amidst a major U.S. initiative to bring semiconductor manufacturing back to the country, an effort to mitigate national security risks and regain control over the supply chain.

TSM:

97.86 ▼ -5.20 (-5.04%) Today

98.51 ▲ +0.65 (+0.66%) After Hours

AAPL:

193.13 ▼ -1.97 (-1.01%) Today

192.78 ▼ -0.34 (-0.18%) After Hours

Kenvue's Shares Fall Despite Beating Q2 Revenue and Earnings Estimates 📉🩹

Shares of Kenvue (KVUE), the consumer health company that recently spun out from Johnson & Johnson, fell despite beating second-quarter revenue and adjusted earnings estimates. Kenvue's performance was buoyed by strong demand for its notable brands such as Band-Aid, Tylenol, Listerine, Neutrogena, and Aveeno. Despite the positive results and a promising sales outlook for 2023, the market remains uncertain, leading to a 2% drop in Kenvue's shares. Johnson & Johnson still holds a 90% stake in Kenvue, allowing it to control the direction of the spinoff's business. The company has announced its plan to reduce its stake through an exchange offer. Despite this, Kenvue remains profitable, with a second-quarter net income of $430 million and sales growth expected to be around 4.5% to 5.5% in 2023.

KVUE:

24.51 ▼ -0.49 (-1.96%) Today

24.40 ▼ -0.11 (-0.45%) After Hours

Johnson & Johnson Beats Expectations in Q2, Raises Full-Year Guidance Despite Legal Challenges 📈💰

Johnson & Johnson (JNJ) surpassed Wall Street’s expectations for Q2 revenue and adjusted earnings due to robust sales growth from the medtech business, resulting in an upward revision of its full-year guidance. This comes amidst investor concerns over thousands of lawsuits alleging that J&J’s talc-based baby powder and other products caused cancer. The company’s medtech division saw a significant rise in demand as a rebound from the pandemic-led deferral of nonurgent surgeries amongst older adults. The quarterly results showed earnings per share at $2.80 (adjusted), higher than the expected $2.62, and revenue at $25.53 billion, surpassing the expected $24.63 billion. The company's full-year guidance now estimates sales to range between $98.80 billion and $99.80 billion. A noteworthy element was the strong performance of J&J's medtech division, boosted by the acquisition of Abiomed, a cardiovascular medical technology company, and the release of new products. Despite this, the company still faces legal hurdles related to claims about its talc-based products cause cancer, an issue it plans to resolve in court.

JNJ:

168.40 ▲ +9.66 (+6.09%) Today

167.96 ▼ -0.42 (-0.25%) After Hours

Amazon Expanding Amazon One Palm Payment System to All Whole Foods Stores by Year End 🌐🛒

Amazon (AMZN) is set to introduce its pay-by-palm system, Amazon One, to all of its Whole Foods stores by the end of the year. The biometric technology enables users to pay for purchases by placing their palms over a scanning device, which is linked to a stored credit card. Initially launched in Amazon's Go cashier-less stores, the technology is now featured in over 200 Whole Foods locations and will soon be available in roughly 500. Amazon reported a "growing demand" for this technology, with three million recorded uses of Amazon One. Additionally, the company is marketing its technology to third parties, including airport stores, sports stadiums, and concert venues. Bakery-cafe chain Panera Bread and Coors Field baseball stadium are among the first adopters.

AMZN:

129.96 ▼ -5.40 (-3.99%) Today

130.80 ▲ +0.84 (+0.65%) After Hours

After Hour Movers 🔔🌌

Intuitive Surgical (ISRG), a global technology leader in minimally invasive care and robotic-assisted surgery, reported its financial results for the quarter ended June 30, 2023. Q2 highlights included a significant growth of approximately 22% in worldwide da Vinci procedures compared to the second quarter of 2022, and a 15% increase in revenue, reaching $1.76 billion for Q2 2023. The Company's GAAP net income attributable to Intuitive for the same period was $421 million, or $1.18 per diluted share, compared to $308 million, or $0.85 per diluted share, in Q2 2022. Furthermore, Intuitive placed 331 da Vinci surgical systems, growing its installed base to 8,042 systems as of June 30, 2023.

ISRG:

347.66 ▼ -2.04 (-0.58%) Today

331.40 ▼ -16.26 (-4.68%) After Hours

CSX Corporation (CSX), a U.S. railroad operator, reported second-quarter revenue that missed Wall Street estimates due to a decline in intermodal volumes and lower fuel prices. The railroad industry has been facing challenges with supply chain disruptions, worker shortages, and regulatory risks. Despite the intermodal activity remaining challenged, CSX's strong service performance has been attracting shippers to its network, according to CEO Joe Hinrichs. The company's operating ratio, a key profitability metric, was 59.9% for the quarter, compared to 55.4% in the same period last year. Second-quarter revenue fell approximately 3% to $3.70 billion, slightly below analysts' expectations of $3.74 billion. CSX reported net earnings of $996 million, or $0.49 per share, down from $1.18 billion, or $0.54 per share, in the second quarter of the previous year. The per-share profit was in line with analysts' estimates.

CSX:

33.71 ▼ -0.09 (-0.27%) Today

32.12 ▼ -1.59 (-4.72%) After Hours

Capital One Financial (COF) reported second-quarter earnings that decreased from the previous year. The company's bottom line amounted to $1.35 billion, or $3.52 per share, compared to $1.95 billion, or $4.96 per share, in the same quarter of the previous year. Excluding items, the company reported adjusted earnings of $1.35 billion, or $3.52 per share, for the period. Despite the decline in earnings, the company's revenue for the quarter rose by 9.5% to $9.01 billion from $8.23 billion in the same period last year.

COF:

114.95 ▼ -3.01 (-2.55%) Today

115.30 ▲ +0.31 (+0.27%) After Hours

PPG Industries (PPG) reported higher sales and profit in the second quarter, with sales reaching $4.87 billion, up from $4.69 billion in the previous year, and adjusted earnings per share at $2.25, compared to $1.81 in the same period last year. The company's net income was $490 million, exceeding the previous year's $441 million. PPG Industries raised its adjusted earnings per share outlook for the fiscal year, with earnings expected to be between $1.85 and $1.95 per share in the third quarter and between $7.28 and $7.48 per share for fiscal 2023. CEO Tim Knavish anticipates a generally consistent global macroeconomic environment, with some improvements in specific regions and stabilization of European demand. The supply chain and raw material availability have returned to pre-pandemic levels, with some instances of excess supply.

PPG:

149.72 ▼ -0.54 (-0.36%) Today

146.00 ▼ -3.72 (-2.48%) After Hours

Knight-Swift Transportation (KNX) reported second-quarter net income of $63.3 million, equivalent to 39 cents per share. After adjusting for non-recurring costs, earnings were 49 cents per share. However, the results fell short of Wall Street expectations, with analysts' average estimate at 55 cents per share. The company's revenue for the period was $1.55 billion, also missing Street forecasts. For the full year, Knight-Swift expects earnings to be in the range of $2.10 to $2.30 per share.

KNX:

55.85 ▼ -0.52 (-0.92%) Today

54.18 ▼ -1.67 (-2.99%) After Hours

W.R. Berkley Corp. (WRB) reported second-quarter net income of $356.3 million, or $1.30 per share. After adjusting for investment gains, earnings were $1.14 per share. The results surpassed Wall Street expectations, with analysts' average estimate at $1.07 per share. The insurance company posted revenue of $3 billion for the period, with adjusted revenue of $2.94 billion.

WRB:

61.70 ▲ +1.07 (+1.76%) Today

60.55 ▼ -1.09 (-1.77%) After Hours

Bank OZK (OZK) reported second-quarter earnings of $172 million, or $1.47 per share. The results fell slightly short of Wall Street expectations, with analysts' average estimate at $1.48 per share. However, the bank's revenue net of interest expense was $388.8 million, surpassing Street forecasts, which had an average estimate of $375.2 million.

OZK:

44.53 ▼ -0.14 (-0.31%) Today

43.00 ▼ -1.53 (-3.44%) After Hours

Sectors 🏗️🛍️

Out of the 11 sectors, 7 closed in positive territory today, with Utilities leading the way with a gain of +1.85%, while Consumer Discretionary saw a decline of -3.40%.

Conclusion 👋

To wrap it up, the housing market experienced a significant slowdown in June due to limited supply and high prices, with home sales down 18.9% compared to the previous year. This marked the slowest June pace since 2009, attributed to the critical lack of housing supply, with only 1.08 million homes available for sale, a 13.6% decrease from the same period in 2022. The median price of existing homes sold remained high at $410,200, driven by the supply-demand imbalance, while mortgage rates posed challenges, especially for first-time buyers. On the stock market, Tesla's stock dropped over 9% due to a Q3 production slowdown warning and uncertainty surrounding the Cybertruck plans. Netflix also saw a more than 8% decline after an underwhelming quarterly earnings report. In contrast, American and United Airlines posted strong Q2 results, reflecting the recovering air travel demand. Amazon expanded its Amazon One palm payment system to all Whole Foods stores, while Discover Financial Services faced a significant decline following regulatory scrutiny. TSMC's delay in chip plant production until 2025 due to a skilled labor shortage might impact Apple's chip plans, and Johnson & Johnson beat expectations in Q2 despite facing legal challenges.

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