Earnings tidal wave, Novartis guidance, and ARK’s Twitter stake – what’s influencing markets

Investors anticipate a busy earnings week, which will include quarterly reports from some of the largest U.S. banks. Cathie Wood’s investment management firm, ARK, has written down its Twitter stake, while the pharmaceutical colossus Novartis improves its guidance in anticipation of a spin-off of its Sandoz generics division by the end of the year.

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Bank of America and Morgan Stanley are forthcoming.

Tuesday’s corporate earnings will include a new batch of U.S. banks, with investors eager to see how they have performed since the turmoil in regional lenders struck the financial services industry this year.

Prior to the opening of U.S. trading, Bank of America (NYSE:BAC), Morgan Stanley (NYSE:MS), Bank of New York Mellon (NYSE:BK), and PNC Financial (NYSE:PNC) are scheduled to release their latest earnings reports.

Larger peers JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), and Citigroup (NYSE:C) raised their forecasts for net interest income – the difference between what a bank earns from loans and what it pays for deposits – due to higher interest rates. JPMorgan and Wells Fargo also reported a rise in net income during the second quarter, while Citigroup’s profit was impacted by a lack of dealmaking.

  1. U.S. futures muddled

Tuesday’s U.S. stock futures were generally divided as traders awaited the next earnings report.

At 04:45 ET (08:45 GMT), the Dow futures contract increased by 22 points, or 0.06%, the S&P 500 futures increased by 1 point, or 0.02%, and the Nasdaq 100 futures decreased by 6 points, or 0.04%.

In addition to a stronger-than-expected reading from the Federal Reserve Bank of New York’s manufacturing index, which suggested resilient business activity in the face of rising financing costs, the major indices ended the prior session in the black.

In conjunction with last week’s slower-than-anticipated inflation reading for June and a rise in preliminary consumer sentiment for July, the manufacturing survey bolstered expectations for sustained growth in the broader U.S. economy.

  1. Novartis raises its profit forecast and outlines the timeline for the spinoff of Sandoz

As a result of strong second-quarter sales, Novartis raised its profit and revenue projections for 2023, and the Swiss pharmaceutical company also proposed a timeline for the spin-off of its Sandoz generic medicines unit.

Constant currency sales increased by 7% to $13.7 billion, which CEO Vas Narasimhan attributed to robust performance across “core therapeutic areas and key geographies.” As a consequence, the company now expects annual group sales growth in the high single digits, an increase from its previous forecast of the mid-single digits. The annual growth rate of the group’s core operating income is now in the low double digits, up from the high single digits previously.

In the meantime, Novartis has announced that its shareholders will vote on the proposed Sandoz spin-off at an extraordinary general meeting in September. A listing on the SIX Swiss Exchange and an American Depositary Receipt program in the United States could occur as early as the beginning of the fourth quarter, if approved.

Novartis (SIX:NOVN) shares increased in early Swiss trading on Monday, while Novartis American Depositary Receipts (NYSE:NVS) edged higher in premarket activity.

  1. Wood’s ARK reduces Twitter investment – WSJ

Cathie Wood’s ARK Investment Management has written down its Twitter holdings by 47% since Elon Musk acquired the social media platform and made it private, according to Wood’s statement to the Wall Street Journal.

Wood stated in an interview that the write-down demonstrates that ARK, which possesses a small stake in Twitter through its venture fund, takes fair valuation “very seriously.” She remained optimistic about Twitter’s future, stating that she would “love” to purchase more shares at the new price.

In particular, Wood said she still thinks Musk is “serious” about his plan to turn Twitter into a so-called “everything app” that features a wide range of services like messaging, e-commerce shopping, and peer-to-peer payments.

Wood’s comments come as Twitter faces a large debt pile and dwindling advertising revenues, while Musk himself said over the weekend that the company is now cash-flow negative.

Meta’s (NASDAQ:META) proprietary short-text messaging platform Threads presents Twitter with new competition. Wood argued, however, that this rivalry could ignite a “fire” of competition within Twitter.

Oil prices remain stable as U.S. inventory data looms

On Tuesday, the focus shifted from concerns over economic instability in the world’s largest oil importer, China, to a potential tightening of U.S. crude supplies.

The American Petroleum Institute will release new data later in the session, and the Energy Information Administration will release new data on Wednesday. The data is anticipated to reveal a decline in inventories following a significantly larger-than-anticipated increase in the previous week.

But sentiment is still dampened by statistics on Monday that showed underwhelming growth in China in the second quarter. Investors are currently attempting to predict whether Beijing will implement additional stimulus measures in an effort to reinvigorate China’s faltering post-pandemic recovery.

By 08:45 ET, the U.S. crude futures traded 0.31% higher at $74.31 a barrel, while the Brent contract added 0.15% to $78.62 per barrel.