Earnings Season Looms As Multi-Week Fizzle

Earnings season begins roughly two weeks after the close of the quarter. Earnings season serves as a barometer of the health of companies, and as always, offers management commentary on the state of the general economy.

Many firms, with reach global in scope, also are doubtless going to reference and spotlight the impact on the trade war between China and the United States. The stocks will gyrate, possibly trending to the downside, because the news is likely to be less than stellar.

The fizzle is likely to be long, because as spotlighted here earlier in the week, about 77 percent of the companies issuing pre-announcements have said that earnings will be worse than expected. This spate of negative pre-announcements, as reported by CNBC, is the worst seen in more than a decade. This all comes as stocks are floating around record highs.

Drilling down a bit, research databases such as FactSet state that the verticals most markedly impacted thus far include tech, where components make their way, generally, from Asia to these shores. Of course, too, there have been warnings from companies that cater to the tourism trade — think handbags and hotels, and where Chinese tourism has been hit hard by the trade wars too. Tiffany sounded the alarm bells weeks ago, in one example. In other warning bell, the U.S. consumer confidence index has slipped as of the June reading, and this may mean that caution is now running both ways. No easy road ahead, at least in terms  of earnings season.

The torpor of summer comes now, and soon, so does the earnings fizzle.

Sizzle

App Revenues: $39 billion of anything is a lot, and that’s especially true of app store spending, where sales rose 15 percent to that level, year over year, as measured in the first half of 2019. The growth comes despite geopolitical and trade war headwinds, and where growth slowed in China.

Instant Funds (Canada): The need for speed in payments gains traction, as Visa and PayPal said this week a new feature will allow consumers and small businesses to instantly access funds — helping in turn manage cash flow more efficiently.

Alexa: Skills upon skills. Skills with other skills. To streamline development, Amazon debuts Skills Connections that lets Alexa skills reuse other, existing skills, creating a seamless continuum of actions. Initial connectivity is available across taxi reservations, restaurant reservations and printing options.

Fizzle

Libra: Facebook’s Libra has a growing roster of challenges and it’s time to add a few more. Computing tax liabilities will be possibly confusing, amid worldwide, changing exchange rates. And now the House of Representative’s Committee on Financial Services has asked for a moratorium on the crypto’s development.

Apple China: Intense competition and price wars are translating to weaker demand in China for Apple. A Citi analyst has estimated that sales there could be cut in half amid a less favorable brand image.

BEC: Fraudsters are leveraging variants in business email compromise (BEC) fraud, finding new ways to siphon off money from corporates. FireEye finds that there was a 26 percent boost quarter over quarter in malicious emails that sought to bring users to phishing sites and spoofed major brands.