Wall Street closed with small losses. Aircraft maker Boeing was the biggest climber in the S&P500 thanks to double good news. Royal Caribbean was hit by a directed issue. Oil stocks lost ground due to lower oil prices.
Inflation of 2 percent is still a long way off.
Why should investors be cautious? This may be related to last week’s optimism about a potentially less strict US central bank (Fed). But in recent days, several leading economists have played down the comfortable outlook for a less restrictive inflation policy.
There was also positive news as US factory-gate inflation appears to have eased sharply in July, according to the PMI, a measure of business confidence. The stock indicator fell 18.5 points to 60 percent, the lowest level since August 2020.
The biggest climber in the broad-track S&P 500 was the aircraft manufacturer Boeing
, with a gain of more than 6 per cent. Employees in the company will vote on Wednesday in favor of a new proposal for a collective agreement. This appears to have prevented a strike.
We are producing at a very slow pace until deliveries resume.
In addition, sources told Reuters on Friday that the US aviation watchdog, the FAA, has accepted policy changes regarding the 787 Dreamliner. This would allow Boeing to continue the delivery of this aircraft model. On July 17, Boeing said it was “very close” to resuming deliveries.
The plane maker has experienced production problems with the 787 for more than two years. In September 2020, the FAA said it was investigating design flaws in some models. In the wake of the two fatal 737 MAX crashes, the FAA has promised to monitor Boeing more closely.
Chief Financial Officer Brian West said in an analyst call last week that Boeing has 120 787 planes in inventory and is now preparing them for delivery. “We are producing at a slow pace and will continue to do so until supplies resume,” he said. Ultimately, production of the model will be reduced to five aircraft per month.
Another solid climber was diagnostics and imaging specialist PerkinElmer
, because that share rose 5 percent after better-than-expected results. In addition, it reports on the sale of the branch Applied, Food and Enterprise Services (AFES), which, among other things, provides food safety testing to companies.
We start with the numbers. Revenue remained roughly flat at $1.23 billion, but was ahead of analysts’ forecast of $1.2 billion. Earnings per stock also went above the bar at $1.45, when consensus had expected $1.40. The company increased its revenue forecast to $4.56 to $4.63 billion in 2022, 135 million more than in the previous forecast. Earnings per share would land between $7.15 and $7.45.
With the sale of the AFES division for $2.45 billion, PerkinElmer takes the next step in its transformation to become a faster-growing, higher-margin company. It aims to achieve organic expansion of 10 percent annually between 2024 and 2026 and an increase in earnings per share of 13 to 15 percent annually.
That PerkinElmer is making a big effort to become a growth company was evident last year when it put $5.25 billion on the table to acquire BioLegend, a player in the development of antibodies.
The big flop in the broad index is the cruise stock Royal Caribbean
which, with a drop of almost 10 percent, suffers significant damage. Royal Caribbean announces the issuance of $900 million convertible bonds. In mid-July, cruise investors were already spooked by an issue of new shares by competitor Carnival
This private placement does not lead to dilution.
Royal Caribbean has little choice. Redburn analyst Alex Brignall said after Carnival’s offer that Royal Caribbean would have “the greatest need” for capital increases if it was no longer able to raise debt.
Finance manager Naftali Holtz says the company will only buy back other bonds with the money collected. According to him, replacing shorter bonds with longer debt is not dilutive. Investors clearly think otherwise, probably because it’s a convertible bond. The holder can convert this into shares, which means there appears to be a chance of dilution.
Other cruise stocks also share the misery. Norwegian
makes water by almost 1.7 percent and Carnival has to give up more than 2 percent.
As a reminder: during the corona pandemic, a lot of money flowed out of the cruise lines due to the many restrictions around corona. That trauma doesn’t just go away and continues to weigh on these companies.
Oil shares fall