US stocks tumble as Big Tech earnings disappoint

Good morning. Here's what happened overnight and what you need to know today.

---

1.

Earnings hit: US stocks fell sharply after a poor start to the megacap earnings season with disappointing earnings from Tesla and Alphabet raising concerns about the sustainability of the 2024 equity rally driven by Big Tech and AI. The S&P 500 dropped over 2% on track to its worst selloff since December 2022, according to Bloomberg. The Nasdaq 100 was down 3.47% in late trading, driven by big moves in tech stocks. Tesla, fell as much as 12.85% after reporting its lowest profit margin in over five years and missing Q2 earnings estimates. The EV maker also postponed the highly anticipated unveiling of its self-driving Robotaxi. Alphabet shares were as much as 5.46% lower despite beating expectations, as it showed slowing advertising growth and higher than expected AI expenses. Apple, Microsoft, Amazon, Meta and Nvidia were also lower. Visa fell over 4% following lower-than-expected Q3 revenue growth. Meanwhile, the S&P Global US Composite PMI Output Index indicated a 27-month high in business activity. (Reuters)(Bloomberg)

2.

Canada cuts: The Bank of Canada (BoC) trimmed its key interest rate for the second consecutive month, cutting it by 25 basis points to 4.5%. BoC Governor Tiff Macklem said further reductions are likely if inflation continues to cool, with a target to return inflation to 2% by late 2025. The central bank revised its GDP growth forecast for 2024 down to 1.2% from 1.5%, citing increased household debt repayments limiting discretionary spending. Macklem said that although the direction of rates was now looking downward, interest rate decisions would still be data dependent. "It is reasonable to expect further cuts, but the timing is going to depend on incoming data. And importantly, what that data tells us about where inflation is heading," he said. The BoC expects overall inflation at 2.6% this year, 2.1% in 2025, and 2.4% in 2026, with growth picking up in late 2024 from stronger exports and a possible recovery in household spending. The Canadian dollar fell 0.06% against the US dollar after the announcement. Money markets see a 53% chance of another cut in September, according to Bloomberg. (Capital Brief)(Reuters)(Bank of Canada)

3.

Bibi's address: Dozens of Democratic lawmakers boycotted Israeli Prime Minister Benjamin Netanyahu's speech to Congress on Wednesday, protesting Israel's Gaza campaign and the resulting humanitarian crisis. Thousands of demonstrators gathered near the Capitol amid heightened security. Netanyahu, receiving a standing ovation, defended Israel’s military campaign in his fourth address to Congress, a record for a foreign leader. "America and Israel must stand together,” he said as he called for stronger action against Iran and criticised anti-war protesters calling them “Iran’s useful idiots.” Meanwhile, US Capitol police reported some protests nearby turned violent, triggering the use of pepper spray. Democrat Senators Dick Durbin and Tim Kaine, and Representatives Ilhan Omar and Alexandria Ocasio-Cortez, were among those absent, criticising Netanyahu's policies and political motives. President Joe Biden and Vice President Kamala Harris, the likely Democratic presidential nominee, are scheduled to meet Netanyahu on Thursday to discuss a ceasefire and hostage-release deal with Hamas. Netanyahu will also meet with former President Donald Trump and with Elon Musk. (Reuters)

4.

Gunman’s steps: The gunman who attempted to assassinate Donald Trump made online searches about details of John F Kennedy’s assassination a week before the attack, FBI Director Christopher Wray told lawmakers on Wednesday. “How far away was Oswald from Kennedy?” the gunman, identified as 20-year old Thomas Crooks searched on a laptop. Wray also revealed Crooks made multiple visits to the site of the former President's rally in Butler, Pennsylvania, flew a drone near the event on the day of the shooting, and had “crude” explosives in his car that could be detonated remotely. Armed with an AR-15-style rifle on 13 July, Crooks killed one rallygoer, injured two others, and wounded Trump before being shot dead by a Secret Service sniper. The FBI has not found a motive but continues investigating. Wray said Crooks appeared to be a loner with few contacts and used encrypted messaging apps. His family had 14 firearms at home, he added. (The New York Times)

5.

Trump complains: presidential campaign filed a complaint with the Federal Election Commission accusing Vice President Kamala Harris' campaign of unlawfully attempting to take over USD96 million ($146 million) from President Joe Biden's leftover campaign funds. According to ABC News, the complaint, filed by campaign attorney David Warrington argues doing so would violate the Federal Election Campaign Act of 1971. Multiple experts cited by ABC News argue the Harris campaign has lawful access to funds, as they are shared in the same campaign depository. Trump’s campaign also sent a letter to television networks demanding equal airtime ahead of Biden’s scheduled prime-time address on Thursday. Biden's fourth address from the Oval Office will be to explain his decision to end his re-election campaign and endorse Harris. The letter, obtained by The New York Times, argues Biden’s speech will act as a campaign ad, invoking the FCC’s “equal time” rule. Trump will hold a rally in Charlotte, North Carolina, two hours before Biden’s address. Fox News proposed 17 September for a Trump-Harris debate. (The New York Times)(ABC News)

6.

Luxury lows: Paris-based Kering, the owner of Gucci, expects earnings to continue falling this year after both profit and revenue were hit in the first half. The French luxury goods group, which also owns Balenciaga and Yves Saint Laurent, said recurring operating income in the second half is anticipated to drop by around 30% compared to last year. Kering reported second-quarter revenue of €4.5 billion ($7.41 billion), down 11% from the previous year, missing consensus expectations of €4.6 billion from Visible Alpha. The decline was driven by a 25% drop in Asia Pacific, excluding Japan. It comes after French luxury giant LVMH also reported disappointing first-half results, fuelling investor concerns about declining demand in China and causing industry-wide share drops. Richemont, Burberry and Swatch also reporting sales declines in the region. Gucci's revenue fell 20% to €2.01 billion, below analysts' forecasts of €2.08 billion. Kering's profit tumbled 42% in the first half to €1.58 billion. (The Wall Street Journal)

7.

Crowdstrike bug: A software bug in CrowdStrike's quality-control system caused the global computer crash that last week disrupted services from aviation to banking, the US firm said on Wednesday. The outage was due to a flaw in its Falcon platform, designed to protect systems from malware and hackers. That caused computers running Microsoft's Windows operating system to crash and display the "Blue Screen of Death." About 8.5 million Windows devices were affected. "Due to a bug in the Content Validator, one of the two Template Instances passed validation despite containing problematic content data," the company said in a statement, explaining the bug allowed problematic data to pass through its safety checks. Insurer Parametrix estimates US Fortune 500 companies, excluding Microsoft, will incur USD5.4 billion ($8.20 billion) in losses. The US House Homeland Security Committee has requested testimony from CrowdStrike CEO George Kurtz, and lawmakers worldwide have urged CrowdStrike to compensate affected firms. CrowdStrike has added a new check to its quality control process and released a fix, though experts warn that restoring affected systems will take time. (Reuters)

8.

Gilead stuns: Twice-yearly injections of Sunlenca, made by US drugmaker Gilead, against HIV were 100% effective in preventing infections in young women, according to a study of 5,000 participants in South Africa and Uganda, published in the New England Journal of Medicine. The “stunning” results from the study, funded by biopharmaceutical company Gilead Inc, compared the injections to daily prevention pills, which saw roughly 2% of users contract HIV. Salim Abdool Karim, an AIDS researcher in Durban, called the level of protection "stunning." Gilead has not agreed on an affordable price for Sunlenca, which is already approved as an HIV treatment in several countries, the Associated Press reported. Instead, Gilead will pursue a “voluntary licensing program,” suggesting that only a select number of generic producers would be allowed to make them. (Associated Press)