ASX 200 futures flat, Amazon's massive earnings beat + Apple's sales slump

S&P 500 DAILY CHART

MARKETS

• S&P 500 -0.26%, Nasdaq -0.10%, Dow -0.19%, Russell 2000 -0.28%
• S&P 500 finished lower for a third straight session but off worst levels
• Treasury yields continued to push higher, with the 10-year up 10 bps to 4.18% – the highest level since November 2022
• Pullback and risk-off sentiment driven by the resurgence in bond yields, overbought market conditions and Fed pivot scepticism
• Oil prices rally 2% as Saudi Arabia extends its voluntary oil output cut of one million barrels per day for another month to include September (Reuters)
• Investors bet on tech rally momentum but more sceptical of AI (Bloomberg)
• Bill Ackman shorting 30-year Treasuries on concerns about supply ramp (Bloomberg)
• Foreign investors remain cautious on Chinese stocks (Bloomberg)

CENTRAL BANKS

• BoE hikes rates by 25 bps as expected, marks 14th consecutive raise and brings rates to levels not seen in 15 years (Reuters)
• PBOC expected to cut RRR in August to address liquidity gap (Bloomberg)

EARNINGS

Amazon (+0.55%, after hours +7.8%): Double beat, EPS of $0.65 almost doubled analyst expectations of $0.34, operating margin was 5.7% vs. 3.46% expected.

• "Our AWS growth stabilised as customers started shifting from cost optimization to new workload deployment, and AWS has continued to add to its meaningful leadership position in the cloud with a slew of generative AI releases.” – CEO Andy Jassy
• "What we're seeing in the quarter is that those cost optimizations, while still going on are moderating and may be behind us and some of our large customers and now we're seeing more progression into new workloads new business.” – CFO Brian T. Olsavsky

Apple (-0.7%, after hours -2.9%): Revenue and earnings slightly ahead of expectations, quarterly revenue was down 1% to US$81.8bn, marks its third consecutive quarter of negative year-on-year growth. In terms of segment performance (year-on-year):

• iPhone: -2.4% to US$38.7bn
• Mac: -7.3% to US$6.8bn
• iPad: -19.8% to US$5.7bn
• Wearables, Home & Accessories: +2.5% to US$8.2bn
• Services: +8.2% to US$21.2bn

Booking Holdings (-1.6%, after hours +11.2%): Double beat, earnings per share of $34.89 well-above analyst expectations of $28.87, quarterly gross bookings up 15% to $39.7bn, total revenues up 27% to US$5.5bn.

• “In the second quarter, we continued to see robust leisure travel demand, which helped drive stronger than expected room nights and gross bookings in the quarter.” – CEO Glenn Fogel
• “We have seen these strong trends continue in July, and we are currently preparing for what we expect to be a record summer travel season in the third quarter.”

Airbnb (-2.6%): Double beat, quarterly revenue rose 18% year-on-year to US$2.5bn, adjusted EBITDA up 15% to US$819m, the company had US$10.4bn in cash plus an additional US$9.1bn funds held on behalf of guests.

• "During Q2 2023, we had 115.1M Nights and Experiences Booked—our highest second quarter ever. While we saw strong growth across all regions compared to Q2 2022, Asia Pacific once again saw the strongest growth.”

Qualcomm (-8.2%): Earnings beat but revenue miss, next quarter guidance was weaker-than-expected (US$8.5bn midpoint vs. US$8.8bn expected), management said handset sales will be down high single-digit percentage points amid weak macro and a slower China recovery.

• “Handset remains difficult to predict the timing of a sustained recovery and customers remain cautious with purchases.” – CFO Akash Palkhiwala

Expedia (-16.4%): Revenue miss, quarterly gross bookings came in at US$27.3bn vs. US$28.9bn expected, management flagged a slowdown in domestic travel demand (not international).

ECONOMY

• US services sector slows in July while prices pick up (Reuters)
• US productivity surges in the second quarter, labour costs growth slows (Reuters)
• Fitch's downgrade revives concerns about US debt trajectory but the economy is on a much stronger footing vs. 2011 downgrade (Bloomberg)
• China's Caixin services activity expands at a slightly faster pace in July (Reuters)
• Japan's service sector activity expands at slightly slower pace in July (Reuters)
• Eurozone business activity in July contracts due to manufacturing weakness (Reuters)
• UK services sector growth slows to six month lows in July as new order growth continues to ease (Reuters)
  
  

DEEPER DIVE

Charts of the Week

This segment of the morning wrap brings you technical commentary on the ASX 200 and interesting charts in the market. These are not meant as recommendations. They are for illustrative purposes only. Any discussion of past performance is for educational purposes only. Past performance is not a reliable indicator of future return. Always do your own research.

ASX 200: A Choppy Pullback

There isn’t a lot to add to what was discussed last week. The XJO remains in a broad range, with the price action backing away from the 7400 level more recently. With reporting season having started (although still in its infancy), there isn’t likely to be any major moves outside of the range in the coming weeks.

Bellevue Gold (ASX: BGL) - Bullish Vue

One for the gold bugs, there are some nice bullish elements on the BGL chart above. Long-term uptrend support, a series of higher lows and higher highs, and a flag pattern out of which the bulls broke the price action yesterday. Volumes have been solid all the way through, and the RSI is not overcooked.

The Lottery Corp (ASX: TLC) - Big Jackpots a Key Driver

The $100m went off last night in Powerball with 2 people (out of the millions who played) jagging division one. Big jackpots are a boon for TLC. This one needs a catalyst to break above resistance in the $5.35 region. Volumes have been rising and it is looking likely, but wait for a break first. One for the watchlist.

Big Shorts on the ASX 200

One of the most accessible ways to short the ASX 200 is via the Australian Equities Strong Bear Hedge Fund (ASX: BBOZ).

For those that have never heard of BBOZ: It generates a magnified positive return when the ASX 200 Accumulation Index falls on a given day. Holders can expect a 2% to 2.75% increase in value for every 1% fall.

Wednesday marked the largest volumes for BBOZ since its inception in April 2015, with 41 million in volume, valued at approximately $130 million.

The interesting thing about BBOZ is that this is a product that you cannot hold for a prolonged period of time due to rebalancing affects. For example, the ASX 200 is currently ~2% off its August 2021 high. Under the BBOZ return logic, it should be up around 5% but it's actually down 18.5%. The bet suggests that someone is either hedging or betting big on a near-term selloff.