Stocks end the week lower amid rising tensions in the Middle East

  • US stocks finished the week lower amid rising tensions in the Middle East as Iran reportedly seized two British tankers.
  • That took some of the luster away from Microsoft’s strong earnings report, which sent the company’s shares to an intraday record high.

Major US indexes fell on Friday amid rising tensions in the Middle East. The major headline was Iran reportedly seizing two British tankers, a development seen as a major escalation against the US and UK.

Meanwhile, Microsoft maintained its spot as the world’s most valuable company after reporting better than expected revenue and earnings per share in the second quarter.

The American technology company posted a 19% increase in cloud revenue with Microsoft Azure up by 64% since last year. Shares of Microsoft rose as much as 3% and pushed its market value to $1.05 trillion. 

Beyond that, President Donald Trump accused the Fed of having a “faulty thought process” on Friday in his last attempt to pressure the central bank into cutting rates. 

“We are in a World competition, & winning big, but it is no thanks to the Federal Reserve,” Trump said on Twitter. “Had they not acted so fast and ‘so much,’ we would be doing even better than we are doing right now. This is our chance to build unparalleled wealth and success for the U.S., GROWTH, which would greatly reduce % debt. Don’t blow it!”

The fed is widely expected to lower borrowing costs during its July meeting, which has put downward pressure on US bank’s margins on deposit accounts. 

Here’s a look at today’s closing numbers: 

  • The S&P 500 fell 0.62% to 2,976.61.
  • The Dow Jones Industrial Average rose by 0.25% to 27,154.20.
  • The Nasdaq composite rose by 0.74% to 8,146.49.

Chewy, the online pet-food store, fell by 7.5% on Friday after the company posted its first quarterly report as a public company. Despite mostly positive results, Wall Street appears to wonder whether the company is too expensive, as the stock was up 48% through Thursday’s close. 

Within the S&P 500, these were the largest gainers:

  • State Street: 6.73%
  • Citizens Financial Group: 6.38%
  • Kansas City Southern: 4.61%.

And the largest decliners: 

  • Alliance Data System: (-4.08%)
  • Gilead Sciences (-3.23%)
  • Symantec (-3.17%).

The real-estate and utilities sectors took the biggest losses in the S&P 500, dropping 1.69% and 1.45%, respectively. Energy and industrial indexes rose by 0.5%.

Stocks To Watch

Goldman Sachs Group Inc. (GS) reported better-than-expected Q2 results.

The company’s Q2 net income applicable to common shareholders declined to $2.20 billion or $5.81 per share from the prior year’s $2.35 billion or $5.98 per share.

Analysts polled by Thomson Reuters expected earnings of $4.89 per share for the quarter. Analysts’ estimates typically exclude certain special items.

Net revenues for the second quarter decreased 2% to $9.46 billion from $9.64 billion generated last year, reflecting lower revenues in Investment Management and Investment Banking, partially offset by higher revenues in Investing & Lending. Analysts expected revenue of $8.83 billion for the quarter.

Goldman Sachs received a non-objection from the Federal Reserve Board related to its CCAR 2019 capital plan, which includes up to $7.00 billion in common share repurchases and $1.80 billion in total common stock dividends.

The company increased its quarterly dividend to $1.25 per share from $0.85 per share. The dividend will be paid on September 27, 2019 to common shareholders of record on August 30, 2019.

The Charles Schwab Corp. (SCHW) reported upbeat Q2 results.

Net income for the second quarter of 2019 was $937 million, up 8% from $866 million for the second quarter of 2018. On a per share basis, earnings rose 10% to $0.66 from $0.60 earned a year ago.

Analysts polled by Thomson Reuters expected earnings of $0.65 per share for the quarter. Analysts’ estimates typically exclude certain special items.

Net revenues increased 8% to $2.68 billion from the previous year’s revenue of $2.49 billion. Fourteen Wall Street analysts had a consensus revenue estimate of $2.67 billion for the quarter.

Wall Street’s most sophisticated, high-speed traders are growing hot on fintech investing

The ax that was hanging over Deutsche Bank finally fell. On Sunday, the bank said it was firing 18,000 people in a massive restructuring that would see it dump equities trading entirely. The next day we were on the ground to report what was going on outside the bank’s 60 Wall St. office.

Insiders around Wall Street struggled to understand Deutsche Bank’s move, and many said the businesses that survived the cuts, like research and equity capital markets, didn’t add up to a compelling future for the bank. Deutsche Bank didn’t say much about its plans publicly, but we learned it told a hedge-fund client details about who would be spared in research departments around the world.

As for those who were laid off, insiders told us prospects to land a new gig may not be great and that most of the top talent had already been poached out of the bank before Sunday.

Deutsche Bank’s week from hell didn’t end with job cuts. In fact, the bank’s list of regulatory headaches is growing. The Department of Justice, which had investigated Goldman Sachs’ dealings with the Malaysian fund 1MDB, is also now delving deeper into an ex-Goldman exec who later went on to Deutsche Bank, reports said. Also on Thursday, another report said senior managers had overruled compliance-staff concerns about the bank’s dealings with Jeffrey Epstein, who is facing charges of sex trafficking. 

It’s hard to imagine that we had time to write about anything other than Deutsche Bank, but as you can tell from the list below, the team also churned out excellent reads on CBD, chatbots, and more. 

And for those of you interested in the cannabis business, our star reporter Jeremy Berke has a new newsletter called Cultivated, which will give you an inside look at the deals, trends, and personalities driving the multibillion-dollar global cannabis boom.

‘Some of the conversations we had in 2006 we are having again’: Bain and Carlyle are teaming up in rare deal that private equity has been reluctant to do since the financial crisis

Bain Capital and The Carlyle Group have teamed up to buy the German light-bulb maker Osram Licht for $3.8 billion in a rare instance of private-equity giants coinvesting.

In the first half of 2019, there were 107 deals with more than one private-equity investor, down 57% from the same period last year.

The deal, which will give Osram a capital injection after it issued warnings to investors about a weak light market, comes at a time when private-equity firms have been reticent to team up with rivals for large transactions, instead looking to their own clients for capital, including pension funds and sovereign wealth funds.

Morgan Stanley is rolling out an AI chatbot to research clients early next year. Wall Street thinks the tech could save $8 billion annually.

Morgan Stanley has developed an artificial-intelligence-powered chatbot to help its workers sift through the bank’s research.

AskResearch was originally created for internal use by analysts and sales employees, but the bank plans to offer it to clients in early 2020 via a mobile app.

The chatbot is the latest effort by Wall Street to create AI-powered virtual assistants to cut down on menial work for employees and clients.

Wall Street’s most sophisticated, high-speed traders are growing hot on fintech investing. Execs from 5 firms explain how they find their best investments.

Electronic trading firms, known for their ability to quickly move between positions, have shown an increasing interest toward financial-technology investing.

Some firms have gone as far as setting up completely separate funds to make deals.

Business Insider spoke with executives from five electronic trading firms about their strategies toward fintech investing.

The hedge-fund industry has a problem with managers cherry-picking performance. One group wants to stop that.

Hedge-fund performance has been underwhelming. An influential professional organization has overhauled its reporting standards in order to bring more funds into the fold, but adoption would force portfolio managers to give up tactics to make returns look better.

The notoriously opaque hedge-fund industry has never widely adopted any broad guidelines for calculating performance figures. Managers can overstate returns by selective reporting, observers say, and many are supportive of centralized, transparent rules.

It’s another example of the transformation the once niche industry has made into a more institutional business.

Quote of the week:

“It was a s— show on Monday, it’s a s— show today” — a uBiome employee this week after the troubled startup laid off half its staff in the wake of an FBI raid as part of an investigation into the company’s billing practices. 

In markets:

  • Ray Dalio revealed to us the one key investing strategy he’s used to build his $18 billion fortune
  • BlackRock’s global research chief explains why the stock market’s principal driver just changed — and breaks down how investors should adjust to the big shift

In tech news:

  • The 100-hour weeks, intense culture, and divisive hires that made Deliveroo a $2 billion business with backing from Amazon
  • Trillion-dollar Microsoft is gearing up for another potentially ‘unprecedented’ growth spurt
  • As its CEO prepares to step down, $1.4 billion Cloudera says it will start giving away all its software for free in a big change to its business

Other good stories from around the newsroom:

  • CBD and hemp startups are using creative loopholes to skirt Facebook’s ad ban. Here’s how they’re doing it.
  • Airbnb’s former CMO left his high-profile job to help tech brands like Pinterest and Uber find their purpose — and his consultancy is on track to make $8 million in revenue in its first year