The dollar resumed lower as fresh data raised doubts about the speed of recovery, while stocks struggled as investors digested earnings and wondered whether the recent gains could unravel.
The greenback was higher earlier, but news that
claims for unemployment-related benefits rose for the first time since March caused it to resume lower, which in turn saw the
EUR/USD break to a new high on the year above 1.16, while buck-denominated
gold broke out again to further
close in on its record high. Stock indices dipped.
Initial claims increased to
1.42 million in the week ended July 18, up 109,000 from the prior week. This was sharply worse than 1.3 million expected. The four-week average of claims, which strips out volatility in the week-to-week figure, fell by the least since April.
However, the stock market losses were contained, with investors happy to pick the dips knowing full well that the Fed and other major banks will be indirectly supporting the market through their quantitative easing programmes. Investors were also keen to find out how the tech sector has performed in terms of top and bottom lines and tonight, after the close, Intel and Skyworks will be among the companies publishing their results.
- Intel is due to report quarterly earnings after the close of play on Thursday. The expected EPS is $1.11 compared to an EPS of $1.06 for the same quarter last year, while expected revenues of $18.5B would represent a year-on-year increase of 12.4%. Intel has seen decreased revenues in recent years as there was a fall in semiconductor sales. However, the work-from-home initiative due to the pandemic saw PC sales rise in the last quarter. The share price has recovered from the low of $43.6 to rise above $61 and is slightly positive on the year, roughly matching the S&P 500.
- Skyworks will report earnings after the close on Thursday. The expected EPS is $1.13 with revenues expected at $690m for Q2. Profits are expected to fall from an EPS of $1.35 in Q2 2019. Skyworks manufacturers semiconductors for communications systems and is likely to see increase in demand for its products as 5G rolls out. This is likely to be very useful for the manufacturers as its likely to see more profits per chip from 5G connected devices. The stock has more than doubled since the mid-March low of $67.9, reaching repeated all-time highs in the last month.
- Twitter reported its earnings before the open on Thursday. The firm was expected to report a flat profit, but the EPS was actually -$0.16, falling sharply from an EPS of $1.58 for the same quarter in 2019. Revenues were expected to fall by 15% to $701m for Q2, but instead fell to $683m. Twitter has seen an upsurge in user growth as people have turned to social media amid the lockdown. Ad revenues declined nonetheless, as large parts of the economy were closed. The social media company’s share price has recovered from the mid-March low of $20, reaching almost $40 today with a gain of more than 6%. The stock is up 23% on the year to date, beating the S&P 500.
- American Airlines reported its earning before the markets opened on Thursday. AAL beat revenue expectations of $1.4B with actual revenue of $1.6B. However, this compared dismally to Q2 2019 revenues of $11.9B, as flights were grounded during lockdown. Earnings slightly beat expectations with an EPS of -$7.82 versus -$7.84. No one was surprised to see a loss. Airlines have suffered among the worst as the lockdowns led to a collapse in demand for air travel. However, with AAL taking steps to cut costs for Q3 and given the relaxations of restrictions, the outlook for the second half of 2020 is more positive, although it remains to be seen whether confidence has returned for people to travel with Covid-19 infections still rising globally. The company’s shares were trading slightly in the black (0.18%) at the time of writing.
Back