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Stock Market News for Jul 25, 2019

Zacks Equity Research

The broader S&P 500 and tech-heavy Nasdaq reached record highs on Wednesday, riding a rally in semiconductor stocks. Upbeat earnings results and a raised guidance by Teradyne and Texas Instruments confirm that the global slowdown in microchip demand won’t be there as long as apprehended. Chip stocks scaled north and touched record highs amid trade war fears. At the same time, investors shrugged of regulatory concerns over Big Tech. The Dow Jones, however, failed to keep up and posted moderate losses after Boeing and Caterpillar announced discouraging earnings results.

The S&P 500 closed at an all-time high of 3,019.56, after gaining 0.5% on Jul 24. The Nasdaq Composite followed suit, recording a new high of 8,321.50, having banked 0.9%. The Dow Jones Industrial Average (DJI) disappointed, shedding 0.3%to close at 27,269.97. The fear-gauge CBOE Volatility Index (VIX) decreased 2% to close at 12.36. Lastly, advancers outnumbered decliners on the NYSE by a 2.08-to-1 ratio.

Chip Stocks Rally on Strong Sectoral Earnings So Far

Jul 24 was a great day for chip-related stocks. Semiconductor companies noted record highs in their stock prices after Texas Instruments Inc. TXN and Teradyne Inc. TER announced their second-quarter earnings. In fact, The PHLX Semiconductor Index (SOX) climbed 3.1% to reach 1,622.02, registering a fresh high since April 24.

Texas Instruments reported Q2 earnings of $1.36 per share, which significantly surpassed the Zacks Consensus Estimate of $1.21.The chip maker’s revenues of $3.668 billion beat the Zacks Consensus Estimate of $3.605 billion as well. The company’s advancement in product portfolio across its Analog and Embedded Processing segments, capable manufacturing strategies and efficient capital allocation in key areas remain leading factors in its growth.

Teradyne’s Q2 earnings of 66 cents per share beat the Zacks Consensus Estimate by 4 cents as well. The company generated $564 million in revenues which easily outpaced the Zacks Consensus Estimate of $538 million. Teradyne’s impressive revenues were boosted by growing demand for the System Test business. In addition, rise in 5G infrastructure, networking and memory test spending also pushed revenues higher in the second quarter.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Antitrust Probes into Big Tech

Late on Jul 23, the Justice Department revealed that its antitrust wing was reviewing if the country’s largest technology firms (all FAANGs except Netflix) were participating in anticompetitive practices. Both Republicans and Democrats support the antitrust review.

The news, however, did not dampen investor spirit during Wednesday’s trading session, as they felt hopeful of a positive outcome from next week’s U.S.-China trade talks.

Disappointing Q2 Earnings for Boeing and Caterpillar

Lastly, Dow’ lackluster performance on Jul 24 is largely the outcome of The Boeing Company BA and Caterpillar Inc.’s CAT quarterly earnings, which failed to meet analyst expectations.

While Boeing’s earnings of $2.92 per share easily beat the Zacks Consensus Estimate of $1.85, its revenues of $15.75 billion for Q2 missed the Zacks Consensus Estimate by 12.40%. The company’s underperformance in the second quarter is largely due to a drop in its commercial airplanes deliveries and the grounding of its 737 Max aircrafts after two fatal crashes.

Caterpillar disappointed in both earnings and revenues. Its earnings per share of $2.83 fell behind the Zacks Consensus Estimate of $3.12. Secondly, Caterpillar’s revenues for Q2, reported at $14.4 billion missed the Zacks Consensus Estimate of $14.5 billion as well. The heavy machinery manufacturer suffered losses because of rise in material costs (that comprised of tariffs) and a decline in Chinese demand.

Both Boeing and Caterpillar carry a Zacks Rank #3 (Hold).

Economic Data

New home sales in the United States climbed in June, making the first move up in three months. On Jul 24, the Commerce Department noted that new home sales rebounded 7% in June to an annual rate of 646,000 units (seasonally adjusted).

Stocks That Made Headlines

Equifax Beats Q2 Earnings Estimates, Cuts '19 EPS View

Equifax Inc. EFX reported solid second-quarter 2019 results, wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate. (Read more)

Varian Earnings and Revenues Surpass Estimates in Q3

Varian Medical Systems, Inc.’s VAR third-quarter fiscal 2019 adjusted earnings per share (EPS) of $1.32 beat the Zacks Consensus Estimate of $1.14. Adjusted EPS also surged 26.9% year over year. (Read more)

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Equifax, Inc. (EFX) : Free Stock Analysis Report
The Boeing Company (BA) : Free Stock Analysis Report
Caterpillar Inc. (CAT) : Free Stock Analysis Report
Varian Medical Systems, Inc. (VAR) : Free Stock Analysis Report
Texas Instruments Incorporated (TXN) : Free Stock Analysis Report
Teradyne, Inc. (TER) : Free Stock Analysis Report
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