Raphael Stevens

The past couple weeks of earnings has revealed a resilient consumer, toned down remarks of a recession and a sense it’s not all doom-and-gloom for profit margins. As we look ahead, some of the biggest names in tech will report this week, including Club holdings Alphabet (GOOGL), Apple (AAPL), Microsoft (MSFT), Meta Platforms (META) and Amazon (AMZN). Here are some notable factors to watch as we review their releases. Inflation can impact Foreign exchange volatility Forward guidance 1. Inflation can impact Investors and consumers alike are concerned with rising prices as inflation continues to come in hot. The latest consumer price index reading in June rose a higher-than-expected 9.1% on an annual basis, the highest pace since 1981. Some of the challenges exacerbating inflation stem from Russia’s prolonged war in Ukraine, China’s Covid lockdowns and an aggressive Federal Reserve, all of which have impacted company earnings. But earnings reports from companies like International Business Machines (IBM) show that companies are still delivering strong sales despite macro challenges. IBM’s second quarter revenue of $15 billion was up 11% year over year and its EPS of $2.31 exceeded expectations of $2.27. Another outperformer was Investing Club holding Danaher (DHR), which reported a knockout quarter of $7.8 billion in revenues, up 7.5% year over year despite China’s lockdowns. Its EPS of $2.76 exceeded analyst expectations $2.35. A major pressure point for companies that’s linked to inflation is rising labor costs. Since labor is one of the biggest price tags, one of the first things you see companies do to manage expenses are layoffs or slowing down hiring. Throughout the first half of the year, we have seen companies like Meta, Alphabet, Apple and Microsoft announce plans to scale back on hiring. Bottom line: Inflation can be a headwind for companies, but this isn’t a reason to sell. We know the Fed needs to raise rates aggressively and slow the economy down to combat inflation, explaining why the Investing Club has added several defensive names with pricing power and limited economic sensitivity. These can be consumer staples like Club holdings Constellation Brands (STZ) and Costco (COST), or healthcare stocks like Eli Lilly (LLY), Humana (HUM) and Johnson & Johnson (JNJ). The energy sector has also benefited from inflation as prices of oil and gas have increased earlier this year. On Thursday, we’ll get a first read on U.S. economic activity in the second quarter. The gross domestic product report will show how much the monetary value of goods and services increased or decreased in the U.S. economy during the second quarter. GDP decreased 1.6% year over year in the first quarter of 2022, which means if there’s another negative reading we could technically be in a recession. 2. Foreign exchange volatility The U.S. dollar has reached a 20-year high, briefly hitting parity with the euro in July. A strong dollar can be a burden for multinational companies. A higher dollar means U.S. exports are more expensive for other countries, making U.S. products more expensive abroad. A higher price tag on goods could weaken demand and result in a drag on corporate profits. It also means profits from overseas are reduced when they are converted back into dollars. Companies with an international presence could take a hit to their bottom lines. Of the 33 companies in the Charitable Trust, a majority report sales overseas. We did a deep dive on each name last week. Several companies that have already reported in the second quarter have noted foreign exchange as a headwind. Netflix (NFLX) said in its letter to shareholders that one of the main reasons the streaming service missed on revenues was the “appreciation of the U.S. dollar.” In its second quarter press release, Johnson & Johnson also cited the “strengthening U.S. dollar” as impacting its full year adjusted profit estimate. Analysts have been cutting price targets for companies like Alphabet and Microsoft, noting foreign exchange from a strong dollar as a culprit. Bottom line: Despite the challenge of a stronger greenback, it’s one that could be short-lived. Plus, Wall Street tends to look past foreign exchange-related weakness and instead focus on the health of the underlying business. However, if it ends up impacting demand, that could result in lower analyst estimates. 3. Forward guidance Forward guidance is forward looking statements that companies provide during quarterly earnings announcements that help forecast their upcoming quarterly earnings results or for the rest of the fiscal year. In an earnings statement, the company may outline revenue estimates and other anticipated company changes. For example, in its second quarter earnings release on Thursday, Danaher provided upbeat guidance for its third quarter 2022 and full year 2022 revenue growth in the “high, single-digit percent range.” An example of a depressed forward-looking statement came from JPMorgan (JPM) last week when the bank’s CEO Jamie Dimon said, “we have temporarily suspended share buybacks, which will allow us maximum flexibility to serve our customers, clients and community through a broad range of economic environments.” Investors want to pay attention to forward guidance and the post-earnings conference calls because they can help provide insight into headwinds and tailwinds the company could face in the short-term and long-term. This guidance can also help assess consumer activity. We think knowing the strength of a consumer can help gauge how companies may perform in the future. Some of the catalysts for earnings revisions this quarter have been supply chain issues, a slowing economy, or rising input expenses. That said, the future is getting tougher to predict due to tight financial conditions, so forward guidance can help clear up some uncertainty about how companies can navigate macroeconomic challenges and be a key market driver. Bottom line: With persistent inflation, fears of recession and a hawkish Federal Reserve, we wouldn’t be surprised to see companies guide conservatively for the second half of the year. That said, come next week we are preparing for tempered forward guidance. (Jim Cramer’s Charitable Trust is long GOOGL, AAPL, MSFT AMZN, META, DHR and JNJ. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.”

Various models of the Apple Inc. iPad at the company’s Yeouido store during its opening in Seoul, South Korea, on Friday, Feb. 26, 2021.
Jean Chung | Bloomberg | Getty Images More

The company named Chief Technology Officer Alan Matula its interim chief executive, effective immediately.
The Palatine, Illinois-based company also said it is considering layoffs and other ways to reduce expenses, including by tightening its inventories.

Weber Grill accessories are offered for sale at a home improvement store on July 23, 2021 in Palatine, Ill.
Scott Olson | Getty Images News | Getty Images

Weber shares tumbled more than 20% in premarket trading Monday after the grill maker abruptly said CEO Chris Scherzinger is departing amid waning demand for its products in stores and online.
The company named its chief technology officer, Alan Matula, as interim chief executive, effective immediately, as it searches for a permanent CEO.

“We are taking decisive action to better position Weber to navigate historic macroeconomic challenges, including inflationary and supply chain pressures that are impacting consumer confidence, spending patterns, and margins,” said Kelly Rainko, non-executive chair of Weber’s board.
The company also announced preliminary results for the three-month period ended June 30, pegging net sales between $525 million and $530 million. Weber said its performance was hurt by slower retail traffic, in stores and online, in all key markets. It was also hit by continued foreign currency devaluations.
“Management believes that the slower retail traffic patterns are the result of pressured consumer shopping behaviors globally, due to rising inflation, supply chain constraints, fuel prices, and geopolitical uncertainty,” the company said in a press release.
Weber said it expects the headwinds to persist into its fiscal fourth quarter.
The Palatine, Illinois-based company said it is considering layoffs and other ways to reduce expenses, including by tightening its inventories.

Weber said it will provide additional details when it reports its fiscal third-quarter results on Aug. 15.
This story is developing. Please check back for updates.

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The NFL is launching its own streaming service for the first time, called NFL+.
The $4.99 per month service will include all out-of-market preseason games.
It will also include mobile device access to live local and prime-time regular season and postseason games.

Ja’Marr Chase #1 of the Cincinnati Bengals makes a catch over Jalen Ramsey #5 of the Los Angeles Rams during Super Bowl LVI at SoFi Stadium on February 13, 2022 in Inglewood, California.
Gregory Shamus | Getty Images

The National Football League now has its own streaming service.
Premiering Monday, the NFL is launching NFL+ for $4.99 per month or $39.99 per year.

A subscription will include all out-of-market preseason games, which was formerly only available with a subscription to NFL Game Pass for $99.99 per year. The NFL preseason kicks off Aug. 4 with the Jacksonville Jaguars facing the Las Vegas Raiders. Since that will be a nationally televised game, it won’t be featured on NFL+.
NFL+ will also include live mobile device access to local and prime-time regular season and postseason games, previously available for free on the Yahoo Sports app.
NFL+ marks the first time the NFL has operated its own streaming service, giving the league a new future platform to potentially show exclusive games. Major League Baseball and the National Basketball Association already both sell subscriptions to their own streaming services that include out-of-market games.
NFL+ won’t initially include exclusive regular-season games but could eventually depending how viewership habits evolve in the years to come, said Hans Schroeder, executive vice president and chief operating officer of NFL Media. The league has locked up its local broadcast rights for the next seven to 11 years.
“It’s another option we’ll consider with all of our other options,” Schroeder said. “We are really excited about where NFL+ can go. As quickly as media and the sports distribution business continues to change and evolve, there are lots of different factors.”

The NFL is in the process of renewing its Sunday Ticket package and will choose a streaming partner, possibly Apple or Amazon, by the fall. That package costs about $300 per month and offers access to all out-of-market games on Sundays. DirecTV has owned Sunday Ticket rights since 1994 but isn’t bidding for the rights after the current contract runs out this season. The length of its new Sunday Ticket deal is still to be determined, but the league wants to give a new partner “the right runway to be successful,” said Schroeder in an interview.

Added NFL+ benefits

In addition to games, NFL+ will include NFL Network shows on demand and archived NFL Films programming.
For $9.99 per month or $79.99 per year, the NFL is also selling NFL+ Premium. That subscription includes full and condensed game replays and access to “All-22” film, a bird’s-eye view of the game that coaches use to see how all 22 players move in a given play.
“We look forward to continuing to grow NFL+ and deepening our relationship with fans across all ages and demographics, providing them access to a tremendous amount of NFL content, including the most valuable content in the media industry: live NFL games,” NFL Commissioner Roger Goodell said in a statement.
WATCH: I believe NFL media rights will be moving to a streaming service, says NFLs Goodell

Disclosure: NBC Sports, which shares parent NBCUniversal with CNBC, broadcasts NFL games.

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The World Health Organization on Monday cautioned against complacency in the rapidly escalating monkeypox outbreak, saying there is no guarantee it will continue to spread within specific communities.
Cases have so far been concentrated primarily among gay and bisexual communities, but the U.N. agency said that the group’s early detection could be a harbinger of a wider outbreak.
The WHO activated its highest alert level for the escalating outbreak Saturday, declaring the virus a public health emergency of international concern.

The World Health Organization on Monday cautioned against complacency in the rapidly escalating monkeypox outbreak, saying there is no guarantee that the virus will continue to spread within specific communities.
The U.N. health agency said that while cases have so far been concentrated primarily within gay and bisexual communities, there is little evidence to suggest that the disease will remain confined to those groups.

Rather, their early detection could be a harbinger of a wider outbreak.
“At the moment, cases continue to be reported among men who have sex with men for the most part, but we should not expect that to remain as such,” Dr. Catherine Smallwood, senior emergency officer at the WHO, told CNBC’s “Street Signs Europe.”

“This really might be the canary in the mine that’s alerting to us a new disease threat.

Dr Catherine Smallwood
senior emergency officer at World Health Organization

It is not uncommon for a virus outbreak to start in one particular group or setting before spreading more widely in the general population, Smallwood said, noting that health authorities could take cues from the early findings.
“This really might be the canary in the mine that’s alerting to us a new disease threat that could spread to other groups,” she continued.

A global health emergency

The WHO activated its highest alert level for the escalating outbreak Saturday, declaring the virus a public health emergency of international concern.

The rare designation means the WHO now views the outbreak as a significant enough threat to global health that a coordinated international response is needed to prevent the virus from spreading further and potentially escalating into a pandemic.
“We have an outbreak that has spread around the world rapidly, through new modes of transmission, about which we understand too little. For all of these reasons, I have decided that the global monkeypox outbreak represents a public health emergency of international concern,” WHO Director General Tedros Adhanom Ghebreyesus said.

The WHO activated its highest alert level for the escalating outbreak on Jul. 23, declaring the virus a public health emergency of international concern.
Hollie Adams | Getty Images News | Getty Images

More than 16,000 cases of monkeypox have been reported across more than 70 countries so far this year, and the number of confirmed infections rose 77% from late June through early July, according to WHO data. Europe accounts for more than 80% of confirmed cases in 2022.
Men who have sex with men are currently deemed at highest risk of infection, with around 99% of cases reported outside of Africa this year among men and 98% among men who have sex with men. However, the WHO and the Centers for Disease Control and Prevention have emphasized that anyone can catch monkeypox regardless of sexual orientation.
Symptoms of the disease — which is typically endemic to Africa — are largely mild, with most patients recovering within two to four weeks. Five deaths from the virus have so far been reported in Africa this year, while no deaths have been reported outside of Africa.
Still, Smallwood warned that more severe cases could become apparent should the virus spread to more immunologically vulnerable groups. Young children, pregnant women and the immunocompromised are considered particularly vulnerable to the virus.
“If it does spread to other groups — particularly to people who are vulnerable to severe monkeypox disease, which we know there are certain groups that are more prone to severe illness — then we might see increased public health impact,” she said.

More vaccine data needed

There are a number of existing vaccines and antivirals that have proven effective at treating and preventing the disease caused by monkeypox. Indeed, countries have already stepped up vaccination programs for those deemed most at risk, with the U.S. and the U.K. among others issuing hundreds of thousands of doses.
However, such vaccines are designed primarily for treating smallpox, and Smallwood said more information is needed to determine their efficacy as the monkeypox virus continues to spread.

We don’t have full information on how effective and how efficacious these vaccines are against monkeypox.

Dr Catherine Smallwood
senior emergency officer at World Health Organization

“We don’t have full information on how effective and how efficacious these vaccines are against monkeypox,” she said.
Smallwood said that the WHO’s call to declare a global health emergency would now draw more attention to the outbreak and, as a consequence, research on vaccines and other modes of treatment.
“We need to be able to be confident that the countermeasures that are available and potentially accessible are scaled up, and that we have the knowledge that we need to be really confident in their use,” she added.
The WHO is not recommending mass vaccination at this time, and the U.S. is currently reserving the vaccines in its stockpile for people who have confirmed or presumed monkeypox exposures. 
—CNBC’s Spencer Kimball contributed to this report.

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Target is opening three more sortation centers to cut delivery costs and get online purchases to customers faster.
At the hubs, the retailer groups packages heading to similar destinations and uses contractors to deliver them locally.
The company opened the first sortation center in its hometown of Minneapolis and will soon have nine of them — with plans for more expansion across the country.

Target has a growing network of sortation centers where employees group packages bound for similar destinations. Gig workers from Target-owned Shipt load up their cars and deliver packages to customers.

MINNEAPOLIS — Each day, hundreds of drivers park at a delivery hub in Target’s hometown and load up the trunks of their personal cars with packages to deliver to customers.
Soon, the big-box retailer will have similar centers and gig workers in three more places − two in the Greater Chicago area and one near Denver − to get online orders to doors quicker and at a lower cost. The new centers are part of growing push among retailers including Walmart to make e-commerce more profitable as shoppers spend online and expect purchases to get to their doors within a day or even hours.

Since it began testing at the Minneapolis facility in late 2020, Target has added five similar hubs where ready-to-go packages are sorted and grouped together to create dense delivery routes. The three more are slated to open by the end of January.
“Our goal is meet the guest where they are, when they want, how they want,” Chief Operating Officer John Mulligan said in an interview. “And so if they do want us to ship something to their home, we want to make that as efficient as possible.”
E-commerce now drives just shy of 20% of Target’s sales, with more than half of that coming from same-day services like curbside pickup and the rest from shipping to homes. Yet because of labor and transportation costs, those sales are less profitable than when shoppers visit Target stores, grab item off shelves and take them home.
Like other retailers, Target has worked to chip away at the costs of fulfilling online orders — a goal that has taken on new urgency for retailers amid rising fuel prices.
Its delivery hubs, called sortation centers, receive boxed-up online orders from stores twice a day. Packages going to the same town or nearby neighborhoods are batched together to get more of them to customers a day after the order is placed. A growing number of the sorted packages are then delivered by contract workers who drive for Shipt, a delivery start-up Target acquired in 2017. Some also are sorted and delivered by national carrier partners such as FedEx — generally to further-away addresses like another metro area or state.

Over the past five years, Target has turned store backrooms into warehouses where employees pick and pack most orders. It acquired Deliv and Grand Junction, two companies with software that helps determine which store fulfills an online order and designs dense delivery routes. Devices also now help guide some workers to the best paths for retrieving items from store shelves.
Yet with growth came new challenges. Packages began piling up in backrooms and employees had to wait for national carriers to retrieve them each day. Carriers had to make stops across regions. For example, trucks had to collect packages from 43 stores and a fulfillment center in Minneapolis before the sortation center opened — taking more time and labor.
Target’s first sortation center in Minneapolis was built in a former Sears warehouse. Packages from the hub are delivered by more than 2,000 Shipt drivers or carrier partners. The center began delivering 600 packages per day and now has capacity to deliver 50,000 per day.
With its three new hubs, Target will have nine sortation centers — with more expected in future years, Mulligan said. Along with Minneapolis, its hubs are near Atlanta, Philadelphia, Dallas, Austin, Texas, and Houston. In the first quarter, they handled 4.5 million packages.
Mulligan said Target is still trying to pin down how much sortation centers reduce shipping costs. In March, he said Target had already brought down the average per unit digital fulfillment cost by more than 50% over the past three years.
Ultimately, he said the company wants to shorten the distance packages travel by having desired items at stores near the customer.
Target is also piloting a new concept at its Minneapolis location: Some Shipt drivers are using delivery vehicles that can hold up to eight times more packages per route.
Other retailers are also working to make e-commerce more profitable. In addition to building high-tech fulfillment centers, Walmart is using its stores as warehouses and using contract workers to deliver packages. It delivers online purchases for Home Depot, Chico’s and other companies as part of a new business called GoLocal.
Another way Target has reduced delivery costs is by encouraging customers to use Drive Up, a curbside pickup service where shoppers retrieve purchases in the parking lot. That costs the company 90% less to fulfill that if they shipped packages from a warehouse, said Mark Schindele, chief stores officer.
For Target, the move to improve profitability comes at a crucial time. The retailer slashed its forecast for operating margins twice in recent months, as it warned it would have to cancel orders and increase markdowns to get rid of unwanted merchandise it had stocked up on during the Covid pandemic.

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Check out the companies making headlines before the bell:
Newmont (NEM) – The mining company’s stock slid 3.3% in premarket trading after it reported lower-than-expected second-quarter earnings. Profit was down nearly 41% from a year ago, hurt by a drop in gold prices.

Squarespace (SQSP) – The e-commerce platform provider tumbled 14.4% in the premarket after its full-year revenue guidance fell short of Street forecasts. Squarespace reported better-than-expected results for its latest quarter but said revenue is taking a hit from currency headwinds.
Philips (PHG) – Philips tumbled 10.4% in premarket trading after the Dutch medical equipment maker’s quarterly earnings fell short of analyst forecasts. Philips was affected by lockdowns in China and supply chain issues.
Public Storage (PSA) – Public Storage added 1.5% premarket action after the operator of self-storage facilities declared a special dividend of $13.15 per share. The distribution is related to the sale of PS Business Parks to affiliates of Blackstone (BX) for $7.6 billion. Public Storage had been the largest shareholder in PS Business Parks, whose sale transaction closed last week.
JD.com (JD) – Morgan Stanley calls the Chinese e-commerce company a “catalyst driven idea”, helping its stock rise 2% in premarket trading. The firm thinks the catalyst could be better than expected revenue growth guidance when JD.com next reports earnings in August.
Tesla (TSLA) – Tesla rose 1.3% in premarket action following its latest 10-Q filing, which included an update on the value of its bitcoin holdings. Tesla said it took a $170 million impairment charge related to the carrying value of its bitcoin holdings during the first six months of 2022, but saw a $64 million gain from bitcoin sales during that period.

Ryanair (RYAAY) – Ryanair jumped 5.7% in the premarket after the airline reported better-than-expected quarterly results. Ryanair cautioned that a return to pre-Covid levels of profitability this year was not certain.
Farfetch (FTCH) – Farfetch shares gained 2.5% in premarket trading following reports that the online luxury fashion seller was close to a deal with Switzerland’s Richemont that would see it absorb Richemont-owned fashion retailer YNAP.
Uber Technologies (UBER) – The ride-hailing company admitted to not reporting a 2016 data breach that impacted 57 million drivers and passengers as part of a settlement agreement to avoid criminal prosecution. Uber added 1% in premarket trading.

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Traders on the floor of the NYSE, July 6, 2022.
Source: NYSE

U.S. stock futures were little changed on Sunday night, coming off a positive week for the major averages, as traders brace for the busiest week of corporate earnings, as well as insights into further interest rate hikes from the Federal Reserve.
Dow Jones Industrial Average futures slid 45 points, or 0.14%. S&P 500 futures dipped 0.11% and Nasdaq 100 futures dipped 0.01%, respectively.

On Friday, the major averages fell on the back of weaker-than-expected earnings from Snap that sent tech shares tumbling. The Dow lost 137.61 points, or 0.43%. The S&P 500 declined 0.93% to 3,961.63, while the Nasdaq Composite traded 1.87% lower at 11,834.11.
Still, all three benchmarks closed the week higher, with the Dow up 2%. The S&P 500 advanced about 2.6%, and the Nasdaq capped the week up 3.3%.
Investors shifted into risk assets last week after absorbing some strong corporate results that had Wall Street deliberating whether the bear market has found a bottom.
“Equities have managed to stage a rally MTD, and climb a wall of worry. The bounce has been led by cyclical and Growth stocks, helped by longer end yields stabilizing, which in turn eases the pressure on P/E’s,” Barclays’ Emmanuel Cau wrote in a Friday note.

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“This confirms to us that the market’s focus has switched from inflation worries to growth worries, with a sense that bad news is becoming good news again,” Cau added.

As of Friday, about 21% of companies in the S&P 500 reported earnings. Of those, nearly 70% beat analysts’ expectations, according to FactSet.
Investors are expecting a stacked week of earnings ahead that will include reports from major tech giants Alphabet, Amazon, Apple and Microsoft.
The Federal Reserve on Wednesday will also conclude its two-day policy meeting. Economists are widely expecting a three-quarter point hike.

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