Good morning investors!
Today we cover:
Services sector stalls
Big names, poor earnings
Earning beats no always good
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๐ Economy and News
US Services Sector Stalls as Tariffs Weigh
The US services sector, accounting for over two-thirds of the economy, showed no growth in July, with the ISM nonmanufacturing PMI slipping to 50.1 from 50.8.
New orders declined to 50.3, and employment weakened to 46.4, impacted by tariffs, standing at 18.3% on average, the highest since 1934.
The prices paid index jumped to 69.9, signaling rising costs with some saying recession may be coming.
Global hits:
Wells Fargo downgrades US small-cap equities to โunfavourableโ.
Canadaโs trade deficit widened in June to second largest on record.
Singaporeโs stock market is soaring. And the bull run is just getting started, experts say.
Worth looking at: Trump rules out Bessent for Fed chair. Also, collectively, Americans owe $1.21 trillion on their credit cards. Also, Equifax found that many consumers are continuing to spend, despite elevated prices and high borrowing costs.
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๐ Stocks
S&P 500 6,299.19 (+%)(-0.49%)
DJIA 44,111.74 (+%)(-0.14%)
NASDAQ 20,916.55 (+%)(-0.65%)
BRENT CRUDE 67.64 (-1.83%)
* Prices as of Aug 6th, 12:20 AM UTC
Companies announce disappointing ernings
Advanced Micro Devices (AMD) reported mixed Q2 earnings with earnings of 48 cents per share missing estimates of 49 cents, though revenue of $7.69 billion surpassed expectations of $7.42 billion. The stock slid about 5% in after-hours trading. AMD, the second-largest AI GPU maker behind Nvidia, is gaining traction with major clients like Meta and OpenAI seeking alternatives to Nvidiaโs chips, particularly for AI model deployment. The company forecasted Q3 sales of $8.7 billion (ยฑ$300 million), above the $8.3 billion expected. Net income rose to $872 million from $265 million a year ago, with revenue up 32% to $7.69 billion. AMDโs Instinct MI400 AI chips, set for a 2026 release, and competitive MI350 chips are drawing interest, though Q2 faced an $800 million loss from export controls on MI308 chips to China. CEO Lisa Su highlighted strong demand across AMDโs AI and computing portfolio, with data center revenue up 14% to $3.2 billion and client and gaming revenue up 69% to $3.6 billion, driven by robust CPU and gaming GPU sales. We donโt think it was a bad report but investors didnโt like it.
Super Micro Computer's shares dropped 15% in after-hours trading after reporting disappointing fiscal Q4 results and weak guidance. The server maker posted adjusted earnings of 41 cents per share, missing the 44 cents expected, and revenue of $5.76 billion, below the $5.89 billion forecast. Revenue grew 7.5% for the quarter ending June 30. For Q1, Super Micro projected 40โ52 cents per share and $6โ7 billion in revenue, short of the 59 cents and $6.6 billion anticipated. However, its 2026 fiscal year revenue outlook of at least $33 billion exceeded the $29.94 billion consensus. Despite strong demand for its Nvidia-powered AI servers since 2023, growth has slowed, and the company narrowly avoided Nasdaq delisting after delayed filings and an auditor departure. Super Microโs stock, up 88% in 2025, outperformed the S&P 500โs 7% gain.
Lucid Group reported disappointing Q2 earnings, missing Wall Street expectations with an adjusted loss of 24 cents per share against 21 cents expected and revenue of $259 million versus $280 million forecasted. The electric vehicle maker lowered its full-year production target to 18,000โ20,000 vehicles from 20,000, citing supply chain constraints impacting its Gravity SUV ramp-up. Shares dropped over 7% in after-hours trading. Lucidโs net loss was $855 million, up from $790 million last year, with total costs rising 7.5% to $1.06 billion. Despite delivering 3,309 vehicles in Q2, a 38.2% increase from 2024, demand for EVs has been weaker than expected, with consumers favoring hybrids and looming policy changes, like the end of EV tax credits, adding pressure. Lucid ended the quarter with $4.86 billion in liquidity and secured a $300 million investment from Uber for a robotaxi partnership. The stock has declined nearly 19% in 2025.
Snapโs Q2 earnings showed a 9% sales increase but a wider net loss. ARPU was $2.87, below the $2.90 expected, due to a flawed ad platform update, Ramadan timing, and trade policy impacts. CEO Evan Spiegel noted the ad issue has been fixed, improving revenue growth. Q3 projections include 476M daily active users and adjusted EBITDA of $110Mโ$135M. Snapchat+ subscriptions grew 42% to nearly 16M, boosting Other Revenue by 64% to $171M. Operating expenses rose 10% to $654M. Engineering teams are being restructured to support business functions, and SVP of Engineering Eric Young is leaving.
Aramco reported a Q2 revenue decline, marking ten consecutive quarters of falling profits, driven by lower crude prices despite higher volumes. Capital expenditure rose to 46.2B riyal from 45.5B last year, with 2025 guidance of $52Bโ$58B. Nasser emphasized cost-cutting and efficiency in upstream and downstream operations. Aramco anticipates higher output as OPEC+ unwinds 2.2M barrels/day cuts by September, with Saudi Arabiaโs June production at 9.356M barrels/day. The company aims for a 60% gas production increase by 2030, led by the Jafurah gas field. Dividends were cut to $85.4B for 2025 from $124.2B in 2024, with a Q3 base dividend of $21.1B and a performance-linked dividend of $0.2B, yielding 5.5%.
Tesla loses again: Teslaโs new car sales in Europe plummeted in July 2025, with a nearly 60% drop in the U.K. to 987 units and a 55.1% decline in Germany to 1,110 units, according to industry data from the U.K.โs SMMT and Germanyโs KBA. This extends a downward trend for Elon Muskโs electric vehicle maker, which lost market share in Europe for the sixth consecutive month in June. Meanwhile, Chinaโs BYD saw explosive growth, quadrupling U.K. sales to 3,184 units and boosting German sales by nearly 390% year-over-year. Tesla faces intensifying competition from Chinese EV manufacturers, reputational challenges tied to Muskโs controversial rhetoric, and pressures from looming U.S. tax credit expirations.
Good to know: OpenAI releases lower-cost models to rival Meta, Mistral and DeepSeek. Elsewhere, Roku launches ad-free streaming service, Howdy, for $2.99 a month.
๐ต Personal Finance
A beat is not always good
Despite companies exceeding earnings expectations this season, investor response has been lukewarm.
The S&P 500 is set for 9% earnings growth in Q2 2025, per Goldman Sachs, doubling the 4% forecast from June. However, stocks beating estimates only outperformed the S&P 500 by 0.55 points, below the historical 1.01.
Earnings misses faced harsher penalties, with underperformance doubling historical norms. For instance, Amazon fell 9% post-earnings despite beating estimates, due to weak guidance. On Semiconductor also dropped 15% despite strong results.
Goldmanโs David Kostin noted a โpaltryโ reward for beats, driven by the โMagnificent Sevenโ stocks skewing index gains with 26% growth, while the rest of the S&P 500 grew just 4%.
Analysts set low expectations fearing tariff impacts, but earnings calls show management confidence in navigating trade policies. Still, concerns linger about tariffsโ long-term effects on inflation and demand, with RBCโs Lori Calvasina cautious about 2026 outlooks.
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