Stocks were higher at the open on Wednesday with the Dow adding 32 points, or nearly 0.1%. The S&P 500 gained 0.2%, while the Nasdaq rose by 0.7%.
The S&P 500 rose to a fresh intraday record this morning after Federal Reserve Chairman Jerome Powell said that the central bank is a ways off from changing its easy monetary policies. “At our June meeting, the committee discussed the economy’s progress toward our goals since we adopted our asset purchase guidance last December,” Powell said in remarks prepared for delivery before the House Financial Services Committee. “While reaching the standard of ‘substantial further progress’ is still a ways off, participants expect that progress will continue.” On inflation, Powell added, “Strong demand in sectors where production bottlenecks or other supply constraints have limited production has led to especially rapid price increases for some goods and services, which should partially reverse as the effects of the bottlenecks unwind. Prices for services that were hard hit by the pandemic have also jumped in recent months as demand for these services has surged with the reopening of the economy.”
Apple shares are up more than 2% at the time of writing after the company reportedly asked suppliers to ramp up production of its next-generation iPhones by 20% as the 5G “super cycle” continues to drive demand. Credit Suisse said in a note that it expects iPhone sales of 234 million units this year, 237 million units in 2022, and 249 million units in 2023. “We have seen good momentum in the iPhone 12 cycle with a richer mix along with unit growth off a lower base,” the Credit Suisse analysts said. “We remain bullish on 5G as a catalyst for iPhone upgrades over time, but believe the momentum will likely slow from here with focus shifting from early adopters skewing towards Pro models to mainstream penetration within Apple’s >1 bn iPhone user base as 5G coverage and use cases mature.”
Bank earnings marched on this morning. Citigroup delivered a beat, reporting earnings per share of $2.85 on revenue of $17.47 billion, versus estimates for earnings per share of $1.96 on revenue of $17.2 billion. “The pace of the global recovery is exceeding earlier expectations and with it, consumer and corporate confidence is rising,” CEO Jane Fraser said in a press release. “We saw this across our businesses, as reflected in our performance in investment banking and equities as well as markedly increased spending on our credit cards. While we have to be mindful of the unevenness in the recovery globally, we are optimistic about the momentum ahead.” Wells Fargo also topped expectations, posting earnings of $1.38 per share on revenue of $20.27 billion, while Wall Street expected earnings per share of $0.97 on revenue of $17.77 billion. Bank of America’s revenue fell short of analysts’ estimates, with CFO Paul Donofrio citing the “continued challenge of low interest rates.”
In other earnings news, Delta Air Lines reported its first profit since 2019 thanks to federal coronavirus aid that offset some costs. Delta reported an adjusted loss per share of $1.07 on revenue of $7.13 billion, while analysts had expected a loss of $1.38 on revenue of $6.22 billion. “Looking forward, we are harnessing the power of our differentiated brand and resilient competitive advantages to drive towards sustainable profitability in the second half of 2021 and enable long-term value creation,” CEO Ed Bastian said in an earnings release.
And Oatly shares are down more than 6% today after activist short seller Spruce Point Capital Management accused the oat milk maker of overstating revenue and misleading consumers and investors about its sustainability practices. Spruce Point said in a report that Oatly misled investors by omitting or manipulating key facts in its prospectus and a June investor presentation and argued that the company may never achieve profitability. “We don’t think any of this is in the narrative at the moment,” Spruce Point founder and Chief Investment Officer Ben Axler said. “We think this is a strong sell, and the stock price could be 70% overvalued.”
Stocks We’re Watching
scPharmaceuticals Inc (NASDAQ: SCPH): scPharmaceuticals yesterday announced positive top-line results from its FREEDOM-HF study of FUROSCIX for treating congestion in patients with chronic heart failure. “These positive results from our pharmacoeconomic study support our hypothesis that treating heart failure patients with FUROSCIX has the potential to dramatically reduce the significant costs associated with admission or readmission to the hospital,” said John Tucker, CEO of scPharmaceuticals. “As we continue to work toward the resubmission of our new drug application (NDA) later this year, this study provides powerful evidence to payers on the potential economic benefit of FUROSCIX, if approved.”