🩸 It went red

and more earnings

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Good morning investors! Stocks were in a free fall mode yesterday as investors get cautious.

Today we cover:

  • CrowdStrike explains with an apology

  • Stocks had a bad fall

  • More earnings are here

📊 Economy and News 

CrowdStrike offers explanation…and an apology

CrowdStrike says bug in quality control process led to botched update that is expected to cost Fortune 500 companies alone more than $5 billion in direct losses.

The company has found a unique way to apologize – with a $10 Uber Eats gift card. 🛒

Here's the email CrowdStrike sent to apologize to its partners for "the additional work that the July 19 incident has caused." It continues, "And for that, we send out heartfelt thanks and apologies for the inconvenience. To express our gratitude, your next cup of coffee or late-night snack is on us!"

Icing on the cake? The code didn’t work for many because Uber Eats flagged it as fraudulent due to "high usage rates." 😡

This is not the kind of response current or potential CrowdStrike stockholders want to see from management. As if the negative press around this event wasn’t enough, they just made it worse on their own.

Global hits:

Also check: G20 to back progressive taxation, without endorsing 'billionaire tax,' sources say.

📈 Stocks

S&P 500 5,427.13 (-2.31%)
DJIA 39,853.87 (-1.25%)
NASDAQ 17,342.41 (-3.64%)
BRENT CRUDE 81.09 (-0.65%)
* Prices as of Jul 25th, 12:20 AM UTC

A bad day for stocks

Stocks sold off Wednesday, weighed down by underwhelming reports from two megacap tech companies, leading to the S&P 500 and the Nasdaq Composite to post their worst session since 2022.

Shares of Google-parent company Alphabet fell 5% for their biggest one-day drop since Jan. 31 — when they dropped 7.5%. Although Alphabet reported a top- and bottom-line beat, YouTube advertising revenue came in below the consensus estimate. Meanwhile, Tesla shares declined 12.3% — their worst day since 2020 — on weaker-than-expected results and a 7% year-over-year drop in auto revenue.

Other major tech stocks fell in sympathy with Alphabet and Tesla. Nvidia and Meta Platforms respectively lost 6.8% and 5.6%, while Microsoft slid 3.6%.

Wednesday’s sell-off was caused by a perfect storm of an overbought market, high bar for earnings and a seasonally weak period for equities. That’s why this pullback hasn’t come as a total surprise to investors, according to Ross Mayfield, investment strategist at Baird.

Here are other major happenings from yesterday:

  • Deutsche Bank snapped a 15-quarter profit streak with a narrower-than-expected loss, as it made a provision for an ongoing lawsuit over its Postbank division and confirmed it would not make a second share buyback this year. Shares provisionally ended the session down more than 8%, despite analysts characterizing the results as broadly solid.

  • Shares in LVMH fell after the luxury group on Tuesday released its earnings for the first half of 2024. Sales came in at 20.98 billion euros ($22.7 billion) in the second quarter, lower than expected by analysts surveyed by LSEG. Sales in Asia, excluding Japan, fell 14% in the second quarter from the same period a year earlier, LVMH said.

  • Banco Santander posted a 20% year-on-year hike in second-quarter net profit underpinned by growth in its retail, wealth and consumer activity, after firm revenues and margin management in Europe and Brazil. The company’s net profit attributable to the parent group came in at 3.207 billion euros ($3.48 million), in line with a consensus from analysts polled by Reuters.

  • AMC Entertainment warned investors of declines in key metrics during the second quarter, sending shares down. The company blamed last year’s actors and writers strike for a slowdown in theatrical releases which ultimately led to “weakness” in the quarter ended June 30. AMC’s preliminary results revealed revenue down more than 23% during the period and a net loss, compared with a profit during the same period a year earlier.

  • Chipotle Mexican Grill said its restaurant traffic increased 8.7% in the second quarter causing the stock to gain 10%. The restaurant company beat Wall Street’s estimates for its quarterly earnings and revenue. Chipotle reiterated its full-year outlook for same-store sales growth.

  • Ford Motor came in short of Wall Street’s second-quarter earnings expectations while beating on revenue, due to warranty costs that have plagued the automaker for several years now. The automaker increased its target for free cash flow but maintained its 2024 earnings guidance, disappointing some investors who had hoped for a hike. Ford CEO Jim Farley told investors Wednesday that his Ford+ restructuring plan remains on track to make the automaker more profitable.

  • IBM’s revenue and adjusted earnings per share were higher than expected. The company is slightly more positive on full-year free cash flow. IBM said it’s seeing more business tied to generative artificial intelligence.

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💵 Personal Finance

A look at hedge funds

Said to be worth around USD 4.53 trillion, the hedge fund industry is massive and very profitable with the average equity hedge fund yielding 3% YTD, but up to 14%. That’s considered a down year.

Popular among investors, hedge funds involve using pooled money and a variety of tactics to earn returns for their investors. Money is invested directly in companies, by either purchasing private firms or buying a controlling interest in publicly traded companies.

Some of the top hedge funds include Citadel, Bridgewater Associates, and AQR Capital Management.

This investment option is said to be suitable for investors with a high net worth.

This method is known for being quick but there are risks involved. As a result, investments are primarily in highly liquid assets, enabling the fund to take profits quickly on one investment and then shift funds into another investment that is more immediately promising.

In addition, hedge fund managers typically use leverage to get more profit but this also increases the risk factor.

Most hedge funds invest in a variety of things, including individual stocks (including short selling and options), currencies, bonds, commodities, arbitrage, and derivatives.

Interested in more? Check this video:

💰 Be a Better Investor

“Don’t look for the needle in the haystack. Just buy the haystack.”

Jack Bogle

Resources:

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Nothing in this newsletter is financial advice. Always do your own research and think for yourself.