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Oct 22, 2020

News | Business | Companies: Intel drops on weak results for its data center group

Intel CEO Robert “Bob” Swan announces the chip group’s new microprocessors called “Tiger Lake” at the technology fair CES in Las Vegas on Jan. 7, 2020.

Christoph Dernbach | picture alliance | Getty Images

Intel shares fell 10% in extended trading on Thursday after the company reported fiscal third-quarter earnings that were stronger than analysts had expected, but showed new weakness in its data center business.

Here’s how the company did:

Earnings: $1.11 per share, adjusted, vs. $1.11 per share as expected by analysts, according to Refinitiv.
Revenue: $18.33 billion, vs. $18.25 billion as expected by analysts, according to Refinitiv.

Overall, Intel’s revenue declined 4% on an annualized basis, according to a statement.

The Data Center Group came up with $5.91 billion in revenue, down 7% and less than the FactSet consensus estimate of $6.21 billion. Intel said it saw weakness in sales to enterprises and governments, after two quarters of strong growth.

Intel’s largest business, the Client Computing Group that sells PC chips, produced $9.85 billion in revenue, up 1% year over year and above the $9.09 billion consensus among analysts polled by FactSet. Earlier this month technology research company Gartner estimated that PC shipments grew 3.6% in the third quarter, as people kept buying machines to work and study from home.

Intel’s Non-Volatile Memory Solutions Group had $1.15 billion in revenue, down about 11% and lower that the $1.50 billion consensus. On Tuesday South Korean memory maker SK hynix said it would buy part of that division, Intel’s NAND memory and storage business, for $9 billion.

With respect to guidance, Intel said it expects $1.10 in adjusted earnings per share on $17.4 billion in revenue in the fiscal fourth quarter. Analysts polled by Refinitiv had been looking for $1.07 in adjusted earnings per share and $17.36 billion in revenue.

In the quarter Intel announced the departure of engineering leader Murthy Renduchintala and said McKinsey executive Safroadu Yeboah-Amankwah was joining as chief strategy officer.

During the quarter Intel did not announce progress on its goal of increasing the ranks of women and minorities in leadership positions. The company last issued statistics in December, saying that 72.6% of its global employees were male and that 61.2% of U.S. employees were White or Asian.

Excluding the after-hours move, Intel share are down about 10% since the beginning of 2020, while the S&P 500 is up 7%.

Executives will discuss the results with analysts on a conference call starting at 5 p.m. Eastern time.

This is breaking news. Please check back for updates.

WATCH: CNBC’s full interview with Intel CEO Bob Swan

Wall Street Closing Report: Stocks close higher after Pelosi points to progress on coronavirus stimulus talks, banks lead gain

Stocks rose on Thursday as traders weighed House Speaker Nancy Pelosi’s latest remarks on the U.S. fiscal stimulus negotiations.

The Dow Jones Industrial Average closed 154 points higher, or 0.6%, after falling 170 points earlier in the day. The S&P 500 was up 0.5% and the Nasdaq Composite climbed 0.2%.

Banks led the gains on Thursday as the 10-year Treasury yield hit a four-month high. JPMorgan Chase and Morgan Stanley popped 3.5% and 2.7%, respectively. Citigroup advanced 2.2%.

Pelosi said Thursday a deal on new coronavirus aid was “just about there.” She also said: “If we were not making progress, I wouldn’t spend five seconds in these conversations. … This is not anything other than I think a serious attempt. I do believe that both sides want to reach an agreement.”

To be sure, Pelosi noted that both sides have yet to reach an agreement on certain key issues, including state and local funding. She also cautioned it could take “a while” for lawmakers to actually write and vote on any aid bill.

“With no clear end to the pandemic in sight, the economy needs additional fiscal support that will last for several months,” Prajakta Bhide, a strategist at MRB Partners, said in a note. “The passing of a sizeable additional fiscal stimulus by the beginning of next year, and better control over the COVID-19 pandemic next year via the timely approval of a medical solution will be essential to ensure continued economic growth next year.”

Earnings

Companies continued to file third-quarter earnings reports on Wednesday, with electric car maker Tesla and Coca-Cola releasing their latest quarterly numbers.

Elon Musk’s Tesla reported its fifth straight quarter of profits, posting per-share earnings of 76 cents versus the consensus estimate of 57 cents expected by analysts polled by Refinitiv. The company had already reported that it delivered 139,300 vehicles during the quarter, a new record for Tesla.

CEO Musk noted on the company’s earnings call that Tesla plans to start delivering cars from new factories in Brandenburg, Germany and Austin, Texas in 2021 but that output could be slow at first. The stock was up 0.8%.

Coca-Cola rose more than 1% after the company reported a stronger-than-forecast profit for the previous quarter. CSX and AT&T also traded higher on the back of better-than-expected earnings.

Debate ahead

Traders also looked ahead to the second, and final, presidential debate between Trump and former Vice President Joe Biden, which is slated to start at 9 p.m. ET.

The U.S. election is set to take place on Nov. 3. Recent polls show Biden ahead of Trump and are also pointing toward a potential “Blue Wave” in which the Democrats would win the presidency, obtain a Senate majority and keep control of the House.

Some investors have been warming up to the idea of a Democratic sweep, noting it could make it easier to push through more fiscal stimulus in the future.

“I think that narrative around what will happen if we have that blue wave will be correct in the sense that next year you’re going to get a massive fiscal stimulus, you’re going to get a big boost to the economy. There’s no doubt that Main Street under this program is going to benefit,” said billionaire hedge fund manager Paul Tudor Jones on CNBC’s “Squawk Box.”

However, Jones warned of the potential impact from Biden’s tax overhaul on the market.

“But the other side of that is what also happens to financial assets. I think under a blue wave, and the Biden tax plan, financial assets over the long run suffer a great deal,” he said.

On the data front, the Labor Department said weekly jobless claims fell to 787,000 for the week ending Oct. 17. It was the second time since March that claims came in below 800,000. Economists polled by Dow Jones expected first-time applicants for state unemployment insurance to have totaled 875,000.

Currencies | The Dollar: Dollar edges off of 7-week lows amid stimulus uncertainty

U.S. dollar banknotes.

Liu Jie | Xinhua via Getty

The dollar index edged higher on Thursday, backing off of a seven-week low as hopes for a coronavirus relief package ahead of the Nov. 3 U.S. elections faded and COVID-19 cases surged around the world, boosting demand for safe-haven assets like the greenback.

Investors were also digesting new U.S. jobless claims data that showed a bigger-than-expected drop, but remained at extremely high levels, indicating a slowdown in the labor market and broader economic recovery from the coronavirus pandemic as the boost from previous fiscal stimulus fades.

Negotiations toward a new coronavirus aid bill were thrown into question after Republican President Donald Trump took to Twitter late on Wednesday to accuse Democrats of being unwilling to find an acceptable compromise and amid deep opposition among Senate Republicans to a large new stimulus package.

But U.S. House of Representatives Speaker Nancy Pelosi on Thursday said negotiators were making progress and that legislation could be hammered out “pretty soon.”

“All this back-and-forth between Pelosi and the White House may not actually yield anything because at the end of the day, it seems like they are running out of time,” said Kathy Lien, managing director at BK Asset Management.

“The near possibility that we’re going to get more bad news or at least no good news from now to the election is driving investors out of the greenback,” she said.

The stimulus package is likely to come up when Trump faces off against Democratic rival Joe Biden later on Thursday in their final debate ahead of the elections.

News that Europe has seen the number of coronavirus cases surge to a record high, with Spain becoming the first Western European country to exceed 1 million infections, added to the cautious tone in world markets.

This backdrop appeared to favor the dollar, which had fallen for the last three days against a basket of other major currencies.

The dollar index was last trading at 92.893, 0.18% firmer on the day and above the 92.469 low hit on Wednesday that marked the lowest level since Sept. 2.

The euro was 0.3% lower versus the dollar at $1.1862, down from Wednesday’s one-month highs of $1.18805.

“The euro has been undeservingly strong, given the significant increases in COVID-19 cases and the fact that the ECB will have no choice but to lower interest rates,” said Lien.

She said she will be closely watching PMI reports from the euro zone due out on Friday, which could trigger a more aggressive decline in the euro.

The tone in currency markets was generally subdued as investors waited for new impetus.

“The U.S. presidential elections are only 12 days away, before that nobody wants to commit too much to a particular direction in euro/dollar,” said Commerzbank FX analyst Esther Reichelt.

Having hit six-week highs on Wednesday amid Brexit optimism, sterling too pulled back against the U.S. currency. The British pound was last down 0.35% at $1.3103.

The Australian dollar was 0.1% softer versus the greenback at $0.7110, while the New Zealand dollar was 0.21% higher at $0.6670 - up from the $0.6551 low touched on Tuesday.

Elsewhere, the Chinese yuan retreated from a 27-month high hit a day earlier on signs the authorities have become increasingly wary over the recent rapid gains in the currency.

The offshore Chinese yuan was last up 0.42% at 6.6709 per dollar.

Energy | Oil Price Report: Oil advances despite U.S. gasoline build

An aerial view of a crude oil storage facility is seen on May 5, 2020 in Cushing, Oklahoma.

JOHANNES EISELE | AFP via Getty Images

Oil prices ticked up on Thursday but struggled to fully recover from the previous session’s losses when a build in U.S. gasoline inventories signaled a deteriorating outlook for fuel demand as coronavirus cases soar.

Brent crude futures were up 91 cents, or 2.18%, at $42.64 per barrel. West Texas Intermediate (WTI) crude futures settled 63 cents, or 1.4%, higher at $40.64 per barrel. Both contracts shed more than 3% on Wednesday in their steepest daily falls in three weeks.

U.S. gasoline stocks rose by 1.9 million barrels in the week to Oct. 16, the Energy Information Administration (EIA) said on Wednesday, compared with expectations for a 1.8 million-barrel drop.

Overall product supplied, a proxy for demand, averaged 18.3 million barrels per day in the four weeks to Oct. 16, the EIA said - down 13% from the same period a year earlier.

New daily COVID-19 infections hitting records in several U.S. states and in Europe, new lockdowns and China’s clamp-down on outbound travel to help stem the spread of the disease, all bode ill for fuel demand.

Worsening the outlook, hopes that U.S. lawmakers would reach an agreement with the White House on an economic stimulus package dimmed late on Wednesday after President Donald Trump accused Democrats of holding up a compromise deal.

″(A deal) might improve the demand tone for a week or two,” said Lachlan Shaw, head of commodity research at National Australia Bank.

Adding to the supply concerns, Libyan oil exports are quickly accelerating into October as loading restarts following the easing of a blockade by eastern forces.

Libya has seen production recover to about 500,000 barrels per day and the government in Tripoli expects that to double by year-end.

Goldman Sachs said it saw average Brent prices rising from $43.9 per barrel this year to $59.4 next year, and WTI from $40.1 to $55.9 per barrel.

Commodities | Gold Price Report: Gold falls 1% on resilient U.S. jobs data, dollar recovery

A gold bar is wrapped in a financial newspaper.

GSO Images | Getty Images

Gold retreated 1% to near $1,900 an ounce on Thursday on better-than-expected U.S. jobs data, with appeal of the metal further weighed down by a stronger dollar and doubts over a U.S. stimulus package before the presidential elections.

Spot gold fell 1.1% to $1,903.16 per ounce, and U.S. gold futures settled down 1.3% to $1,904.60.

“The jobless claims number, which is much better than expected,” was pressuring gold, said Edward Moya, senior market analyst at OANDA, adding that “an improving number kind of takes away some of the urgency for getting a stimulus deal done now.”

Data showed initial claims for state unemployment benefits in the U.S. dropped 55,000 to a seasonally adjusted 787,000 last week, although the overall number was still relatively high.

A Reuters survey had forecast 860,000 claims in the latest week.

The dollar , meanwhile, bounced back from a seven-week low versus major rivals, making gold more expensive for those holding other currencies, after President Donald Trump accused Democrats of being unwilling to reach a deal on a new coronavirus relief bill.

Widely viewed as a hedge against inflation and currency debasement, gold was still up 25% this year as central banks and governments globally unleash unprecedented stimulus measures to cushion the economic blow from a worsening coronavirus pandemic.

Focus now shifts to the final U.S. presidential debate between Trump and Democratic rival Joe Biden on Thursday night ahead of the Nov. 3 election.

Prices are likely to trade sideways “until we know who the next president is,” but could break above the $1,950 level post the elections, said Robin Bhar, an independent analyst.

Wall Street bank Goldman Sachs, meanwhile, forecast gold at $2,300 an ounce over a 12-month horizon and said commodities were likely headed for a bull market next year.

Elsewhere, silver fell 2.1% to $24.55 per ounce, platinum dipped 0.7% to $880.09 and palladium dropped 1.4% to $2,371.84.

News | Business | Banks | UK Regulator Penalty: Goldman Sachs in $2.9bn 1MDB settlement

2-3 minutes - Source: The Telegraph

Goldman Sachs International has been fined £96.6m by UK regulators for risk management failures connected to the 1MDB scandal.

The Financial Conduct Authority and Prudential Regulation Authority announced the penalty as part of a $2.9bn globally coordinated resolution reached with the Goldman Sachs Group and its subsidiaries.

It means the investment bank will pay a record foreign bribery penalty in the US and enter a guilty plea for the first time for its role in the downfall of Malaysia’s 1MDB investment fund.

A Goldman subsidiary in Malaysia pleaded guilty to a single charge for its role in ascheme to divert billions of dollars raised for economic development in Malaysia.

The bank will also force chief executive David Solomon and his predecessor Lloyd Blankfein to return some of their compensation, according to an insider.

The parent company avoided conviction in a deal known as a deferred prosecution agreement, according to a court proceeding in New York on Thursday.

That is a significant victory for Goldman Sachs because a conviction might have risked losing some institutional clients that are restricted from working with financial firms with criminal records.

The bank will pay a record $2.3bn in the plea deal, US prosecutor Alixandra Smith said for breaching the Foreign Corrupt Practices Act.

In all, Goldman’s penalties will exceed $5bn globally.

From about 2009 to 2014, the bank’s Malaysia unit “knowingly and willfully agreed to violate the Foreign Corrupt Practices Act by corruptly promising, and paying bribes to foreign officials in order to obtain and retain business for Goldman Sachs,” the bank’s general counsel, Karen Seymour, told US District Judge Margo Brodie in a video hearing on Thursday.

Earlier on Thursday Goldman Sachs’ Asian unit was fined $350m by Hong Kong’s financial regulator over the 1MDB scandal.

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