Aurelia Butler

NEW YORK (Reuters) – The U.S. stock market is reeling from its worst first half of any year since 1970, with investors girding for a series of potential flashpoints in July that may set Wall Street’s course for the coming months. Second-quarter corporate earnings, hotly anticipated U.S. inflation data and the Federal Reserve’s monetary policy meeting are among potentially pivotal events after the S&P 500 fell 20.6% in the initial six months of 2022.For now, the mood on Wall Street is grim. Bonds, which investors count on to offset stock declines, have tumbled alongside equities, with the ICE (NYSE:ICE) BofA Treasury Index on pace for its worst year in the index’s history. Some 90% of respondents in a recent Deutsche Bank (ETR:DBKGn) survey expected a U.S. recession by the end of 2023. The key factor behind the turmoil in markets is the Fed, which has been rapidly tightening monetary policy to fight the highest inflation in decades following almost two years of emergency measures that helped buoy stocks and stoke growth.“We could really use just slightly less bad news in July,” said Eric Kuby, chief investment officer at North Star Investment Management. “Hopefully, it could turn the back half of 2022 in a more favorable light.”History, however, “does not offer very encouraging news” for those hoping the bleak first half will be followed by a bounce in the latter part the year, wrote CFRA chief investment strategist Sam Stovall. Of the 10 worst starts to the year for the S&P 500 since World War Two, the index has posted gains in the second six months of the year only half the time, rising an average of 2.3%, Stovall said in a recent report.On the data front, reports on employment and inflation will give investors a snapshot of the economy after 150 basis points of rate increases already delivered by the Fed.A disappointing jobs report next Friday could exacerbate concerns of a potential recession. The following week brings data on U.S. consumer prices, after a hotter-than-expected report last month triggered a selloff in stocks and prompted the Fed to deliver a hefty 75 basis point rate increase in June.There has been recent evidence of waning growth. Data on Friday showed U.S. manufacturing activity falling to a two-year low in June, following a report earlier in the week that showed that June consumer confidence at its lowest in 16 months.“The key question is, what will roll over first: will it be inflation or growth?” said Angelo Kourkafas, an investment strategist at Edward Jones.Second-quarter earnings start arriving in force the week of July 11, indicating whether companies can keep living up to estimates despite surging inflation and growth worries. Analysts expect quarterly earnings to grow by 5.6% from a year ago, revised down slightly from early April’s estimate for 6.8% growth, according to Refinitiv IBES.If companies “can just match or maybe hurdle over lower expectations, I think that will be a positive tailwind for stock prices,” said Anthony Saglimbene, global market strategist at Ameriprise.Strategists at Goldman Sachs (NYSE:GS) are less sanguine, warning that consensus margin forecasts suggest earnings estimates are “likely too optimistic” and margins for the median S&P 500 company will likely decline next year “whether or not the economy falls into recession.” “While investors are focused on the possibility of recession, the equity market does not appear to be fully reflecting the downside risks to earnings,” Goldman said in a note this week. July’s data should factor into the Fed’s actions at its next meeting on July 26-27, when it is broadly expected to raise rates by another 75 basis points. Some investors predict slowing growth will prompt the Fed to eventually soften its stance sooner than policymakers project. But analysts at Capital Economics disagreed, writing on Friday that such a rapid reversal would be inconsistent with the central bank’s behavior in recent decades.As a result, “we don’t expect US equities and Treasuries to fare well in the second half,” they said. More

HOUSTON (Reuters) -Exxon Mobil Corp on Friday signaled that skyrocketing margins from fuel and crude sales could generate a record quarterly profit, according to a securities filing. Energy prices have shot up this year with oil selling for more than $105 per barrel and gasoline at about $5 per gallon in the United States. The enormous earnings are likely to ignite new calls for windfall profit taxes. The largest U.S. oil producer projected a sequential increase of about $7.4 billion in operating profits compared with the first quarter. In the first quarter, Exxon (NYSE:XOM) posted an $8.8 billion profit, excluding a Russia writedown. The filing indicates a potential profit of more than $16 billion for the second quarter. The company’s peak quarterly profit was $15.9 billion in 2012.The filing showed Exxon expects higher oil and gas prices will add about $2.9 billion to results. Margins from selling gasoline and diesel will add another $4.5 billion to operating profits. “High energy prices are largely a result of underinvestment by many in the energy industry over the last several years and especially during the pandemic,” Exxon said in a statement on the profit gains.Analysts tracked by IBES Refinitiv forecast a per share profit of $2.99, up from $1.10 in the same quarter a year ago. Official results for the period will be released on July 29, according to a summary of factors influencing the period disclosed late Friday. Exxon’s profits led U.S. President Joe Biden last month to say the company and other oil majors were capitalizing on a global oil supply shortage to fatten profits. Exxon, he said, was making “more money than God” after posting its biggest quarterly profit in seven years.The company reacted to the president’s comments saying it is investing more than any other producer in the United States to expand oil and natural gas production, including in the Permian, the country’s largest unconventional basin.U.S. Representative Ro Khanna on Friday said Exxon’s record-breaking profits reinforce his call for Congress to pass a windfall tax on Big Oil.”Big Oil companies should be providing relief to their customers, not pouring billions into stock buybacks to enrich their investors,” he said in a statement.Exxon’s shares closed up 2.2% at $87.55 on Friday. Exxon, which lost more than $22 billion in 2020, has been using the extra cash from higher energy prices sales to pay debt and raise distributions to shareholders. It plans to buy back up to $30 billion of its shares through 2023.Despite losses during the pandemic, Exxon continued to invest in additional production and expects to increase output in the Permian by 25% in 2022, the company’s spokesperson said. The second-quarter results will be the first quarterly earnings report since Exxon decided to report results by four business units, giving a more detailed breakout of its petrochemical operations. The snapshot showed that margins in its chemical and specialty products units were flat in the second quarter compared with the first.The company estimated the impact of exiting Russia would cut oil and gas profits by about $150 million compared with the first quarter. Exxon wrote down $3.4 billion in Russia assets earlier this year. Exxon also signaled a contribution of about $300 million from asset sales in the quarter. More

(Reuters) -Swedish payments firm Klarna Bank AB is nearing a deal to raise fresh capital at a valuation of about $6 billion from existing investors led by Sequoia Capital, according to a person familiar with the matter. The financing round is yet to be finalized, but if successfully completed would represent a stunning decline in the valuation of a once high-flying, buy-now-pay-later (BNPL) venture that at one point was Europe’s most valuable startup. In an emailed statement Klarna said, “As always, we do not comment on fundraising nor valuation speculation.” Last year, Klarna raised more than $600 million from a group of investors led by SoftBank’s Vision Fund II in a funding round that bestowed it a valuation of $46 billion — more than several of the region’s major banks.Klarna’s current fundraising woes come amid a sharp drop-off in investor interest for fast-growing tech ventures that have yet to turn a profit and are burning tens of millions of dollars in cash. Valuations have tumbled, and several major tech stocks have been battered in recent months. Major BNPL players and Klarna competitors like Affirm Holdings Inc have shed more than 80% of their value this year alone. The Wall Street Journal reported Klarna’s latest fundraising talks earlier on Friday. In May, Klarna Chief Executive Sebastian Siemiatkowski told Reuters in an interview that the firm was in talks with investors to raise more money and had no plans to go public this year.Klarna, one of the world’s most high-profile tech startups, was widely expected to go public this year, but the market for initial public offerings has collapsed dramatically after a record-breaking 2021 due to market volatility following Russian’s invasion of Ukraine and a broader sell-off in tech stocks. More