Intel's Weak Results and Guidance Shake Investor Confidence

Wall Street Breakfast: Take A Bearing

Listen on the go! A daily podcast of Wall Street Breakfast will be available by 8:00 a.m. on Seeking Alpha, iTunes, Spotify. Take a bearing August has begun with a bang, with the Dow ending the first session of the month down almost 500 points. Note that's only a 1.2% decline (the Dow crossed 40K points for the first time in May), but the selloff yesterday also hit the S&P 500 (-1.4%), Nasdaq (-2.3%) and Russell 2000 (-3%, so much for the rotation). Volatility is making an appearance as markets try to size up the economic landscape, while the 10-year Treasury yield (US10Y) slid below 4.00% for the first time since February. What happened? Things seemed to be celebratory on Wednesday after Fed Chair Jay Powell announced that a September rate cut was on the table, but that message took on a different tone as new economic data was published. Initial jobless claims advanced the most since August 2023, while the PMI and ISM manufacturing indexes signaled an economic contraction. The weak data is now triggering some worries that the Fed may fall behind the curve, with the U.S. becoming the last major central bank in the West to embark on an easing cycle. That's at least one of the narratives, which is even bringing back a word that hasn't been heard for a while - "recession." The other is that the soft landing is going according to schedule, but a healthy summer pullback or even a correction is due following stretched valuations, especially for megacaps and tech sectors like semiconductors. "The economy shows resilience with 2.8% GDP growth in the second quarter," wrote SA Investing Group Leader Lawrence Fuller. "Most importantly, consumer spending rose 2.3% and was the largest contributor to growth. Despite some signs of fatigue, the consumer is alive and well." Next up: The July nonfarm payrolls report is due out at 8:30 AM ET as Fed policymakers shift more attention to the maximum employment part of the central bank's mandate compared to inflation and wages. Economists are not expecting a huge shift in the jobs number from May (the consensus estimate is for 176K), but recently, revisions have been shifting downward. The employment rate is also expected to stay at 4.1%, but anything higher than that can trigger concerns, especially with the figure climbing from a low of 3.4% over the past year. Latest earnings It looks like tech is leading another selloff today following disappointing guidance that dragged shares of Intel (INTC) down 21% and Amazon (AMZN) 8% lower in early trading on Friday. Intel is also laying off 15% of its workforce and suspending its dividend to cut costs as the company struggles to keep up in the AI chip race. Meanwhile, Amazon warned of cautious consumer spending weighing on sales and expects to spend even more on AI, sparking concerns about the returns of those investments. A small bright spot was Apple (AAPL), which ticked up 0.6% AH as its results were not as bad as feared, even as iPhone sales continued to decline. (326 comments) Election outcome The U.S. has officially recognized Edmundo Gonzalez as the winner of Venezuela's presidential election, citing "overwhelming evidence" and rejecting the electoral authority's declaration that President Nicolas Maduro won 51% of the vote. U.S. Secretary of State Antony Blinken added that the National Electoral Council's quick declaration came without "disaggregated data or any of the vote tally sheets." Meanwhile, Venezuela's opposition said it published more than 80% of receipts received from polling stations, which it claimed showed Gonzalez (whose team has since gone into hiding) winning two-thirds of the vote. SA Sentiment There have been many headlines in recent weeks coming out of the crypto sector, like the launch of spot ether ETFs and the first major-party presidential candidate to fully embrace the industry. Seeking Alpha polled over 1,000 subscribers in the run-up to the latest cycle in early June, and again in late July, with more investors seeing crypto as a store of value. The most significant change saw a nearly 10-basis-point increase from 15% to 24% for new holders of crypto in their portfolio, bolstered by new spot ETFs that were seen as the most popular form of crypto investment. See the other results here. Today's Markets In Asia, Japan -5.8%. Hong Kong -2.1%. China -0.9%. India -1.1%. In Europe, at midday, London -0.3%. Paris -0.6%. Frankfurt -1.5%. Futures at 7:00, Dow -0.9%. S&P -1.1%. Nasdaq -1.6%. Crude flat at $76.34. Gold +1.1% to $2,508.40. Bitcoin +0.3% to $64,713. Ten-year Treasury Yield -3 bps to 3.94%. Today's Economic Calendar Motor Vehicle Sales 08:30 AM Employment Situation 10:00 AM Factory Orders 01:00 PM Baker Hughes Rig Count Companies reporting earnings today " What else is happening... NFL's $4.7B verdict in Sunday Ticket case tossed out by judge. Snap (SNAP) shares plunge 23% on light earnings guidance. Coinbase in charts: Subscription revenue continues to grow. Eli Lilly (LLY) CEO says weight loss drug shortage is ending. FTC to investigate soaring grocery prices and retailer profits. Roblox (RBLX) falls as CFO exit overshadows raised forecast. Warren Buffett's Berkshire (BRK.B) sells more BofA (BAC) stock. AB InBev (BUD) profit soars as key brands show momentum. DoorDash (DASH) rallies on double-digit gains in revenue, orders. Earnings Summary: Spirit Airlines (SAVE) results, outlook disappoint. Wall Street Breakfast, Seeking Alpha's flagship daily business news summary, is a one-page summary that gives you a rapid overview of the day's key financial news. It is designed for easy readability on the site or by email (including mobile devices), and is published before 7:30 AM ET every market day. Wall Street Breakfast's readership of over 3.4 million includes many from the investment banking and fund management industries. Sign up here to receive the Wall Street Breakfast in your inbox every business day.Check out our Podcast RSS feed

Wall Street Breakfast Podcast: Intel Dives On Weak Results

The semiconductor giant offered up a weaker-than-expected guidance for the coming quarter on top of its second-quarter results. Intel also said it would let go 15% of the company and suspend its dividend. Looking ahead, Intel expects third-quarter revenue to be between $12.5B and $13.5B, well below the $14.39B analysts were anticipating. It also anticipates losing an adjusted $0.03 per share, with adjusted gross margins of 38%. Analysts were anticipating adjusted earnings of $0.30 per share. For the period ending June 30, Intel earned an adjusted $0.02 per share as revenue fell 0.09% year-over-year to come in at $12.83B. A consensus of analysts expected Intel to earn an adjusted $0.10 per share on $12.95B in revenue during the fourth-quarter. "Second-quarter results were impacted by gross margin headwinds from the accelerated ramp of our AI PC product, higher than typical charges related to non-core businesses and the impact from unused capacity," said David Zinsner, Intel CFO. In addition to the financial results, Intel said in a company memo that it would cut its workforce by 15,000. Intel also said it would cut spending on new plants and equipment in 2024 by more than 20%, as it now expects to spend between $25B and $27B. Expenses for 2025 will be between $20B and $23B in gross capex spending. Intel also said it would suspend its dividend starting in the fourth quarter as it looks to prioritize liquidity to support its transition. The Federal Trade Commission will investigate why grocery prices remain high even as costs for retailers are lower and supply chains have improved since the pandemic. FTC Chair Lina Khan said "... many items are still too costly, and many large grocery chains are still raking in enormous profits," she said. "We want to make sure that major businesses are not exploiting their power to inflate prices for American families at the grocery store." Khan added that regulators would use all tools to "expose and crack down on any underhanded tactics that companies may be using to raise prices on basic things." The meeting was attended by representatives of the FTC, Department of Justice, USDA and other regulators, as well as Securities and Exchange Commission Chair Gary Gensler. Retail food prices have risen 25% from 2019 to 2023, according to Department of Agriculture (USDA) data. And during 2021-2022, food prices rose 11% - the largest annual increase in over 40 years. FTC staff recently noted that food and beverage retailer revenues increased to more than 6% over total costs in 2021, and rose to 7% over total costs in the first three quarters of 2023. "This casts doubt on assertions that rising prices at the grocery store are simply moving in lockstep with retailers' own rising costs." The ongoing shortage of Eli Lilly's (NYSE:LLY) highly popular weight loss drug, Zepbound, in the U.S., is expected to officially end in the days ahead. Bloomberg reported on Thursday that Eli Lilly's CEO David Ricks said during an interview in Paris that the shortage for the company's injectable GLP-1 product will end "soon". "I think actually today or tomorrow we plan to exit that process," he added. Several dosing strengths of weight loss products from LLY and its rival Novo Nordisk (NVO) have been in shortage in the U.S. for months, fueling demand for compounded versions of the drugs, which lack regulatory oversight. Hims & Hers Health (HIMS), which recently launched a business to sell compounded versions of Novo Nordisk's (NVO) popular weight loss therapy, semaglutide, dropped sharply after the news. HIMS fell 12.8% on Thursday and is down 2.5% premarket. More articles on Seeking Alpha: Snap dives 23% on narrow revenue miss, light earnings outlook Uranium stocks plummet as world's top producer hikes production outlook NFL's $4.7B verdict in Sunday Ticket case tossed out by judge Warren Buffett's Berkshire sells more Bank of America stock Now let's take a look at the markets as of 6 am. Ahead of the opening bell today, Dow, S&P and Nasdaq futures are in the red. Crude oil is up 0.3% at $76 per barrel. Bitcoin is up a small fraction at $64,000. In the world markets, the FTSE 100 is down 0.6% and the DAX is down 1.4%. The biggest movers for the day premarket: Amazon's (NASDAQ:AMZN) is down nearly 9% after the company released mixed second-quarter results and provided a disappointing outlook for the third quarter.