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Alphabet earnings: Android antitrust fine will demolish Google profit


By Max A. Cherney


When Alphabet Inc. reports earnings Monday, the European Union’s $5.07 billion Android antitrust fine will ruin the company’s profit.


Alphabet GOOGL, -1.14% GOOG, +0.04% stock was relatively flat Wednesday, when the fine formally was announced, and Google has said it plans to appeal the fine. However, the company disclosed in an SEC filing that it will account for the fine in its second-quarter report, due Monday after the bell.


In terms of what it will cost the company in cash, the fine is not tax-deductible and worth roughly 75% of the company’s expected second-quarter net income of $6.72 billion, which will drastically lower per-share earnings as well.


The last time the EU fined Google — a $2.74 billion levy that also was the result of an antitrust ruling — the Mountain View, Calif.-based company recorded the full amount in its financial statements immediately, even as it appealed. And as is likely this year, the fine delivered a substantial blow to the company’s per-share earnings and net income for 2017’s second quarter.


On average, analysts polled by FactSet model Alphabet second-quarter earnings of $9.67 a share. Contributors to Estimize, which crowdsources estimates from analysts, fund managers and academics, predict adjusted earnings of $9.81 a share, on average. Again, these estimates do not reflect the Android antitrust fine.



The S&P 500 is now just 2% from a record and tech earnings could push it over the top


By Bob Pisani


The S&P 500 index has risen eight of the last ten trading sessions, up 3.7 percent, to the highest level since late January. It’s now only two percent from the historic high in January (2,872). The NASDAQ-100 index is already at an historic high.


Traders believe three main factors have been helping markets recently and need to continue to pass the old historic S&P historic high of January:


  1. Earnings not just beating expectations, but guidance remaining strong
  2. Keeping rates and inflation under control
  3. Trade concerns lessening



Tesla shares fall after Needham downgrades to sell, citing possible increase in Model 3 cancellations


By John Melloy


Tesla shares fell on Thursday after Needham & Co downgraded the stock to sell from hold, citing a possible pick-up in Model 3 cancellations.


Tesla shares dropped 1.1 percent Thursday after the note. The shares were down 8 percent in the last one month through Wednesday.


Gill also cited slower Model S and X sales, margin pressure, increased competition and valuation in the downgrade.


“We are downgrading Tesla to a sell from hold as we believe the stock is still overvalued despite it falling 16% from its peak set in June 2017,” the note stated.



Copper — a metal with a history of predicting economic trouble — hits 1-year low, nears bear market


By Fred Imbert


The metal’s futures for September delivery traded as low as $2.6735 per pound, their lowest since July 14, 2017.


“Demand still looked very good, [but] as the year unfolded, trade tensions started to weigh on growth,” said Suki Cooper, precious metals analyst at Standard Chartered.


Analysts at Citi, however, think that copper is setting up to be a buy for investors. “The ongoing major sell-off, driven by escalating trade frictions between the US and China, is setting up a longer term buying opportunity. Here we look beyond the potential trade war to longer term copper market fundamentals and we find that current prices … are nowhere near high enough to enable the market to clear,” they said.



Uptick in Canada Consumer Price Index (CPI) to Tame USD/CAD Strength


By David Song


Updates to Canada’s Consumer Price Index (CPI) may undermine the recent strength in USD/CAD as the headline reading for inflation is expected to uptick to 2.3% from 2.2% in May.


Signs of stronger price growth may encourage the Bank of Canada (BoC) to further normalize monetary policy in 2018 as the ‘Governing Council expects that higher interest rates will be warranted to keep inflation near target,’ and Governor Stephen Poloz & Co. may continue to strike a hawkish tone at the next meeting on September 5 as ‘CPI and the Bank’s core measures of inflation remain near 2 per cent, consistent with an economy operating close to capacity.’


In turn, a positive development may spark a bullish reaction in the Canadian dollar as it puts pressure on the central bank to implement higher borrowing-costs, but another below-forecast CPI  reading may fuel a larger advance in USD/CAD as it curbs bets for an imminent BoC rate-hike.



Walmart Stock Begins Comeback After 26% Plunge


By Michael Kramer


Walmart Inc.’s (WMT) shares have been punished by investors in 2018, plunging nearly 26% from their January highs. Now, Walmart’s stock is mounting a comeback. The shares have commenced a rebound from their lows in mid-May, and now options traders are aggressively increasing their bets that Walmart will rebound another 6.5%. In total that would amount to a gain of more than 14% from two months ago.


The rising levels of optimism come ahead of what is expected to be strong fiscal 2019 second-quarter earnings when the company reports in the middle of August.



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