Microsoft Dips, Chip Stocks Rise

Author

Adam Garcia
July 31, 2024

Good morning. It’s July 31st, and today we take a look at Microsoft’s disappointing earnings, positive movement in chip stocks, DuPont’s strong quarterly results, and a major win for Lumen technologies.

Previous Close 📈

It was a mixed bag on Tuesday as rotation out of large tech stocks continued, causing the Nasdaq composite and the S&P 500 to fall. The Dow Jones, however, was up by 0.5%.

Futures

Stock futures are trading flat today as investors wait for the Federal Reserve’s monetary policy decision due later in the day.

What to Watch

Be ready for lots of action during the day. T-Mobile, Boeing, KKR & Co, ADP, Altria Group, and Trane Technologies will share their quarterly results before the opening bell.

ADP employment data will be released at 8:15 a.m., followed by the Employment Cost Index at 8:30 a.m., the Chicago Business Barometer at 9:45 a.m., and Pending Home Sales data at 10:00 a.m.

The U.S. Federal Open Market Committee (FOMC) will share its decision on interest rates at 2:00 p.m., followed shortly by a press conference by Federal Reserve Chairman Jerome Powell at 2:30 p.m.

Meta Platforms, Qualcomm, Arm Holdings, and Lam Research will share their earnings performance after the market closes for the day.

Technology

Microsoft Shares Drop Amid Cloud Revenue Miss and AI Disappointment

Microsoft reported its fiscal fourth-quarter earnings, surpassing expectations on earnings per share (EPS) and total revenue but falling short on cloud revenue. The company announced an EPS of $2.95 on revenue of $64.7 billion, slightly beating Wall Street's forecasts.

However, its Intelligent Cloud revenue, including Azure, missed expectations at $28.5 billion. This shortfall is causing Microsoft shares to drop by about 2% in pre-market trading.

Despite the miss, overall revenue rose by 21% year over year, with AI services contributing significantly to cloud growth. Other AI-focused companies like Meta also saw stock declines following the news.

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Technology

Lumen Technologies Soars 37% on Corning Fiber Deal

Lumen Technologies saw a significant stock surge, climbing as much as 77.3% mid-day before closing up 38% on Tuesday. This boost followed Corning's announcement of selling 10% of its fiber capacity to Lumen over the next two years.

Additionally, Lumen's recent partnership with Microsoft aims to enhance digital infrastructure, including access to Lumen's fiber network and new routes. These developments are seen as positioning Lumen advantageously in the AI resources battle.

Electronics

DuPont Ups 2024 Earnings Outlook Amid Electronics Sector Growth

DuPont de Nemours (DD) has raised its full-year forecasts, driven by strong demand for electronics and AI-based technology, which boosted its second-quarter results.

The company's electronics and industrial unit, its largest sales division, saw a 7.1% rise in net sales due to high demand for semiconductors and consumer tech products.

CEO Lori Koch highlighted progress in separating the electronics and water businesses, expected to be completed within 18-24 months. DuPont now forecasts adjusted earnings of $3.70 to $3.80 per share for 2024, up from the previous $3.45 to $3.75 range.

Semiconductors

AMD Leads Chip Sector Rally With 9% Pre-Market Jump After Earnings Beat

AMD shares have risen by over 9% in pre-market trading, driven by a strong second-quarter financial report showing significant growth in its data center business. This rally extended to other semiconductor firms, with Nvidia and Qualcomm also seeing pre-market gains.

Samsung, the world’s largest memory chipmaker, reported a remarkable 1,458.2% year-on-year rise in Q2 operating profit, boosting its shares by 3.58%.

Additionally, the potential easing of U.S. export restrictions on allies like Japan, the Netherlands, and South Korea further bolstered the sector. Shares of ASML and Tokyo Electron also saw substantial gains.

Movers and Shakers

Bionomics Limited [BINA] - Last Close: $0.83

Bionomics Limited is up by 17% in pre-market trade today, continuing momentum from yesterday when it rose by nearly 24%.

The company announced that its successful End-of-Phase 2 (EoP2) meeting with the U.S. Food and Drug Administration (FDA) provides a potential path to a New Drug Application (NDA) submission for its drug BNC210 for PTSD.

Investors are looking forward to the company's conference call today to explain the meeting's outcomes, which might cause further movement in the stock during the day.

My Take: The stock has seen positive movement throughout the year. This is certainly one to keep an eye out for.

Powell Industries [POWL] - Last Close: $133.25

Powell Industries has rallied by more than 25% in pre-market trading.

The manufacturer of integrated packaged solutions declared positive earnings results yesterday.

Revenue rose by 50% to $288 million due to strong growth in the Oil and Gas and Petrochemical sectors.

The company’s Electric Utility sector also saw a 30% increase, while revenues within Commercial and Other Industrial sectors grew by 18%.

My Take: The company has been doing well this year, and the latest quarterly results are evidence of sustained positive performance. Its definitely a stock to watch out for in the future.

Faraday Future Intelligent Electric [FFIE] - Last Close: $0.32

Faraday Future’s shares have already jumped by nearly 36% in pre-market trade.

The stock started rising after the company announced a positive Q1 update, which saw operating expenses decline to $22.9 million from $95.8 million, while loss from operations declined to $43.6 million.

The company also regained compliance with Nasdaq’s timely reporting requirements with the latest quarterly release.

My Take: FFIE has been in trouble this year, losing more than 99% of its value. It might be best to adopt a wait-and-watch policy with this one.

Everything Else

  • ASML and Tokyo Electron shares soar amid U.S. export policy news.

  • Eurozone inflation rises to 2.6%, challenging the ECB's rate decision.

  • Telefonica is selling its Colombian unit and forming a joint venture with Vodafone Spain.

  • Singapore Airlines’ Q1 profit dropped 38% amid rising fuel costs.

  • Spirit Airlines is adding a business class option to attract more passengers.

  • StubHub is facing a lawsuit for inflating ticket prices with hidden fees.

  • Citi's intercompany transactions breached federal rules, leading to reporting errors.

That’s all for today. Thank you for reading. If you have any feedback, please reply to this email.

Best Regards,

— Adam Garcia
Elite Trade Club

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