Finance

Here’s what they reported: Earnings of $1.82 a share vs. $1.65 a share LSEG estimate
Revenue of $15.02 billion vs. $14.3 billion estimate
Morgan Stanley shares dropped after the bank’s wealth management division missed estimates on a steep decline in interest income.

Morgan Stanley said second-quarter profit and revenue topped analysts’ estimates on stronger-than-expected trading and investment banking results.
Here’s what the company reported:

Earnings: $1.82 a share vs. $1.65 a share LSEG estimate
Revenue: $15.02 billion vs. $14.3 billion estimate

The bank said profit surged 41% from the year-earlier period to $3.08 billion, or $1.82 per share, helped by a rebound in Wall Street activity. Revenue rose 12% to $15.02 billion.
Morgan Stanley benefited from its Wall Street-centric business model in the quarter, as a rebound in trading and investment banking helped the bank’s institutional securities division earn more revenue than its wealth management division, flipping the usual dynamic.
Equity trading generated an 18% jump in revenue to $3.02 billion, exceeding the StreetAccount estimate by about $330 million. Fixed income trading revenue rose 16% to $1.99 billion, topping the estimate by $130 million.
Investment banking revenue surged 51% to $1.62 billion, exceeding the estimate by $220 million, on rising fixed income underwriting activity. Morgan Stanley said that was primarily driven by non-investment-grade companies raising debt.
But results in the bank’s wealth management underwhelmed. Revenue rose 2% to $6.79 billion, missing the $6.88 billion estimate.

While the division’s revenue rose thanks to higher stock market levels, interest income plunged 17% from a year earlier to $1.79 billion.
Morgan Stanley said that’s because its rich clients were continuing to shift cash into higher-yielding assets, thanks to the rate environment, which resulted in lower deposit levels.
Shares of the bank fell 3.4% in premarket trading.
“The firm delivered another strong quarter in an improving capital markets environment,” CEO Ted Pick said in the release. “We continue to execute on our strategy and remain well positioned to deliver growth and long-term value for our shareholders.”
Last week, JPMorgan Chase, Wells Fargo and Citigroup each topped expectations for revenue and profit, a streak continued by Goldman Sachs on Monday, helped by a rebound in Wall Street activity.
This story is developing. Please check back for updates. More

Here’s what they reported: Earnings of 83 cents a share vs. 80 cents a share estimate.
Revenue of $25.54 billion vs. $25.22 billion estimate.
The firm said net interest income would rise to about $14.5 billion later this year, giving investors confidence that a turnaround is in process.

Bank of America on Tuesday said second-quarter revenue and profit topped expectations on rising investment banking and asset management fees.
Here’s what the company reported:

Earnings: 83 cents a share vs. 80 cents a share LSEG estimate
Revenue: $25.54 billion vs. $25.22 billion estimate

The bank said profit slipped 6.9% from the year earlier period to $6.9 billion, or 83 cents a share, as the company’s net interest income declined amid higher interest rates. Revenue climbed less than 1% to $25.54 billion.
The firm was helped by a 29% increase in investment banking fees to $1.56 billion, edging out the $1.51 billion StreetAccount estimate. Asset management fees rose 14% to $3.37 billion, buoyed by higher stock market values, helping the firm’s wealth management division post a 6.3% increase in revenue to $5.57 billion, essentially matching the estimate.
Net interest income slipped 3% to $13.86 billion, also matching the StreetAccount estimate.
But new guidance on the measure, known as NII, gave investors confidence that a turnaround is in the making. NII is one of the main ways that banks earn money.
The measure, which is the difference between what a bank earns on loans and what it pays depositors for their savings, will rise to about $14.5 billion in the fourth quarter of this year, Bank of America said in a slide presentation. That confirms what executives previously told investors, which is that net interest income would probably bottom in the second quarter.

Wells Fargo shares fell on Friday when it posted disappointing NII figures, showing how much investors are fixated on the metric.
Shares of Bank of America climbed 2% in premarket trading, aided by the NII guidance.
Last week, JPMorgan Chase, Wells Fargo and Citigroup each topped expectations for revenue and profit, a streak continued by Goldman Sachs on Monday, helped by a rebound in Wall Street activity.
This story is developing. Please check back for updates. More

Traders work on the floor of the New York Stock Exchange (NYSE) on July 11, 2024 in New York City. 
Spencer Platt | Getty Images

Small-cap stocks are on a tear right now as they took the baton from megacap technology shares last week to lead the bull market on hopes interest rate cuts will broaden out the economic recovery to their benefit.
The Russell 2000 index, the benchmark for the group, hit its highest level since January 2022 on Monday. If the index rises another 1% Tuesday, it will be the fifth time since 1979 that it has had a five-day streak of gains north of 1%, according to Bespoke Investment Group.

The iShares Russell 2000 ETF, which tracks the index, was up about 1% in premarket trading Tuesday. The ETF is up 9% over the last one month, nearly triple the gains in the S&P 500.

Stock chart icon

Russell 2000

Fundstrat’s Tom Lee, who’s been correctly calling the stock market for the past few years, said the rally in small caps could last for more than two months, seeing dramatic gains for this cohort.
“We think this move could be something like 10 weeks and as much as 40%. I think it is just starting,” Lee said Monday on CNBC’s “Closing Bell: Overtime.”

Market rotation

Investors are rotating into previously unloved corners of the market as cooling inflation data last week fueled bets that the Federal Reserve could cut interest rates soon and skirt a recession. Small caps are typically more sensitive to fluctuations in the economy and market sentiment and could see outsized benefit from falling rates.
Moreover, the group is gaining traction as the “Trump trade” among investors, seen as potential beneficiary of a win by former President Donald Trump in November.

While Trump does not have detailed policy proposals for a second term, but hiking tariffs while lowering taxes and regulation could be a boost for domestic stocks, including small caps, according to Goldman Sachs chief U.S. equity strategist David Kostin.
Trump’s betting market odds of winning the election have steadily climbed in recent weeks since the debate against President Joe Biden in June and his survival of an assassination attempt over the weekend. More

Just 55% of Americans believe global warming will “hurt them a moderate amount,” according to a new study by Stanford University and Resources for the Future.
Climate change is already having a financial impact on most Americans, economists said.
Higher insurance rates for homeowners, inflation for groceries, and lost earnings due to heat are a few examples of broad economic impacts.

A delivery driver takes a break in the shade during high temperatures in Philadelphia on June 21, 2024.
Joseph Lamberti/Bloomberg via Getty Images

Many Americans think they’re insulated from the effects of global warming. But climate change is already having negative and broad impacts on household finances, according to experts.
Just to give a few examples: Insurers are raising premiums for homeowners in many states across the country, pointing to mounting losses from natural disasters as a factor. Extreme weather and flooding raise prices for everyone at the grocery store. Wildfire smoke and heat waves like the one currently blanketing large swaths of the U.S. lower job earnings for many workers.

That’s not to mention the perhaps more obvious costs like rebuilding or relocating after a hurricane, flood or wildfire — disasters that are growing in frequency and intensity.

An American born in 2024 can expect to pay about $500,000 during their lifetime as a result of climate change’s financial impacts, according to a recent study by ICF, a consulting firm.
“Climate change is already hitting home, and of course will do so much more in the future,” said Gernot Wagner, a climate economist at Columbia Business School.
“There are a bazillion pathways” to adverse financial impact, he added.
More from Personal Finance:People are moving to Miami and building there despite climate riskHow to buy renewable energy from your electric utilityYou may soon get new federal rebates for energy efficiency

Yet, in 2024, just 55% of Americans believe global warming will “hurt them at least a moderate amount,” according to a joint report published Monday by Stanford University and Resources for the Future.
That’s down 8 percentage points from an all-time-high 63% observed in 2010, the study found.
It’s likely that survey respondents were thinking more about physical than financial impact when answering the survey question, said Jon Krosnick, a report co-author and director of Stanford’s Political Psychology Research Group.
However, when it comes to financial impact, “I think you could argue the correct answer for [people] is, ‘It’s already hurting me,'” Krosnick said.

Economic effects ‘increasingly adverse’

People stand outside a bodega during a summer heat wave in the Bronx borough of New York on July 11, 2024. 
Angela Weiss | Afp | Getty Images

Weather-related disasters cause the U.S. at least $150 billion a year in “direct” damage, according to the Fifth National Climate Assessment, a report the federal government issues every four to five years that summarizes the latest knowledge on climate science. (The latest edition was published in 2023.)
The economic fallout will be “increasingly adverse” with each additional degree of warming, the report said. For example, 2°F of additional warming is expected to cause more than twice the economic harm than an increase of 1°F.
And that financial accounting is just for “direct” rather than indirect effects.

Climate change is already hitting home, and of course will do so much more in the future.

Gernot Wagner
climate economist at Columbia Business School

Extreme heat reduces worker productivity

Many of the impacts can be somewhat unpredictable, Wagner added.
For example, in addition to negative effects on human health, wildfire smoke also reduces earnings for workers in sectors like manufacturing, crop production, utilities, health care, real estate, administration and transportation, according to a 2022 study by economists at the University of Illinois at Urbana-Champaign and the University of Oregon. Some of that impact may be due to missed days of work, for example.
On average, workers’ foregone earnings amounted to a total of $125 billion a year between 2007 and 2019, the economists found.
That became relevant for workers in perhaps unexpected places like New York City last year, when Canada wildfire smoke drifted into the U.S., creating an orange haze over the city. On at least one day during that period, the city ranked as having the world’s worst air pollution.
“Nobody’s climate-effect bingo card included that particular entry five years ago,” Wagner said.

Workers in the afternoon heat in Baker, California, on July 10, 2024. A long-duration heat wave led many California cities to break all-time heat records while numerous wildfires have been sparked around the state.
Mario Tama | Getty Images News | Getty Images

Wagner’s own research shows that extreme heat causes labor productivity to plummet, triggering reduced earnings.
Workers lose about 2% of their weekly paychecks for each day over 90 degrees Fahrenheit, he found. For the average person, that’d amount to a roughly $30 pay cut for each day over 90 degrees — which can be extremely consequential for people who live in certain places like Phoenix, he said.
June 2024 was the 13th consecutive month of record-breaking global temperatures.

How global warming and inflation intersect

Climate change also exacerbates inflation, research shows — a dynamic dubbed “climate-flation.”
Warming is expected to raise global inflation by 0.3 to 1.2 percentage points per year, on average, by 2035, according to a recent study by researchers at the European Central Bank and Potsdam Institute for Climate Impact.

“That’s big,” Wagner said, noting that over half the U.S. annual inflation target (about 2% a year) may potentially be attributable just to climate impact, he said.
So-called climate-flation is due partially to effects on grocery prices: say, if extreme weather were to knock out a harvest for crops like avocados, corn, rice, maize or wheat, triggering global prices to spike, he added.

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Microsoft’s hiring of employees from artificial intelligence startup Inflection has been referred for an initial merger investigation in the U.K.
If it finds reason to investigate further, the Competition and Markets Authority can refer the case for an in-depth investigation, known as a “Phase 2” probe.

Mustafa Suleyman, co-founder and chief executive officer of Inflection AI UK Ltd., speaks at the World Economic Forum in Davos, Switzerland, on Jan. 18, 2024.
Stefan Wermuth | Bloomberg | Getty Images

Microsoft’s hiring of certain former employees from artificial intelligence startup Inflection has been referred for an initial merger investigation in the U.K.
Britain’s Competition and Markets Authority (CMA) said Tuesday that the hiring of Mustafa Suleyman, Inflection’s co-founder, along with most of the startup’s staff, should be assessed to decide whether it constitutes a merger under U.K. rules and therefore could result in less competition within the AI sector.

If it finds reason to investigate further, the CMA can refer the case for an in-depth investigation, known as a “Phase 2” probe. The CMA said it would announce a decision on whether to refer the case for a Phase 2 investigation by Sept. 11.
Microsoft announced in March it had hired Suleyman from Inflection, along with a number of other key employees at the firm.
Suleyman was appointed Microsoft’s executive vice president and CEO of Microsoft AI, a newly formed unit of the company focused on its AI products, including Copilot, the company’s AI assistant which it integrated into its Windows and Microsoft 365 software.
In addition to Suleyman’s senior executive appointment, the Washington-based tech giant selected Karen Simonyan to join the firm as its chief scientist, reporting to Suleyman.
Both Suleyman and Simonyan were former employees of DeepMind, the Google-owned AI lab.
This is a breaking news story. Please refresh for updates. More

Deutsche Bank incorrectly disclosed deferred tax assets in its 2019 financial statement, German regulator BaFin said Tuesday.
2.076 billion euros ($2.26 billion) worth of deferred tax assets had not been disclosed separately in the notes for Deutsche Bank’s U.S. business, BaFin said.
Deutsche Bank says the financial statement is still compliant with international reporting standards.

A general meeting of Deutsche Bank
Arne Dedert | picture alliance | Getty Images

Deutsche Bank incorrectly disclosed deferred tax assets in its 2019 financial statement which did not meet international accounting standards, the German regulator BaFin said on Tuesday.
“The declarations on deferred tax assets in the consolidated financial statement were not complete,” the regulator, known formally as the Federal Financial Supervisory Authority, said in a statement translated by CNBC.

It said that 2.076 billion euros ($2.26 billion) worth of deferred tax assets had not been disclosed separately in the notes for Deutsche Bank’s U.S. business. The bank should have made the disclosure because it recorded several years of losses, it said.
Additionally, the bank should have explained why it was sure that it would make sufficient profits in the future, which it also did not do, BaFin said.
The disclosure error was against rules laid out by the International Accounting Standards, BaFin said in a second statement.

The findings are the outcome of a random sampling examination, which was initially launched by Germany’s now defunct Financial Reporting Enforcement Panel, the regulator noted.
In a statement to CNBC, Deutsche Bank said the financial statement was still compliant with international reporting standards.

“There is no suggestion on BaFin’s part that there is any inaccuracy in Deutsche Bank’s 2019 accounts, and no restatement or other action is required. It is Deutsche Bank’s view today, as at the time of publication, that its 2019 financial statements and other disclosures comply fully with IFRS [International Financial Reporting Standards] requirements,” a spokesperson for the bank said in emailed comments.
Deferred tax assets are figures on a company’s financial statements that effectively reduce its taxable income in the future, for example related to a previous overpayment or advance payment of taxes.
The disclosure of them is important for transparency about expected future tax implications, BaFin noted.
Europe-traded shares of Deutsche Bank were last down by 0.9% on Tuesday morning. More

The Jingxi Hotel in Beijing is known for its home-made yogurt—and for hosting some of the most important meetings in the history of the Chinese Communist Party. They include the “third plenum” of 1978, which confirmed Deng Xiaoping’s rise to power and the opening of the Chinese economy. The country’s leaders are now gathering for another “third plenum” in this closely guarded venue from July 15th-18th. They should savour their yogurt. Because outside the hotel walls, the economy is turning sour again. More

The leaders of Wall Street’s most powerful firms are speaking out to condemn the attempted assassination of former President Donald Trump at a Pennsylvania rally over the weekend.
JPMorgan Chase CEO Jamie Dimon told employees Sunday that he and his management team were “deeply saddened by the political violence.”
Goldman Sachs CEO David Solomon addressed the matter at the start of an earnings call Monday morning, calling the attempted assassination a “horrible act of violence.”

The leaders of Wall Street’s most powerful firms are speaking out to condemn the attempted assassination of former President Donald Trump at a Pennsylvania rally over the weekend.
JPMorgan Chase CEO Jamie Dimon told employees Sunday that he and his management team were “deeply saddened by the political violence” and attempt on Trump’s life. The shooting killed one bystander and injured two more.

“We must all stand firmly together against any acts of hate, intimidation or violence that seek to undermine our democracy or inflict harm,” Dimon said in the memo. “It is only through constructive dialogue that we can tackle our nation’s toughest challenges.”
Goldman Sachs CEO David Solomon addressed the matter at the start of an earnings call Monday morning, calling the attempted assassination a “horrible act of violence.”
“We are grateful that he is safe and also want to extend my sincere condolences to the families of those who were tragically killed and severely injured,” Solomon said. “It is a sad moment for our country. There’s no place in our politics for violence.”
The shooting on Saturday shocked a nation gearing up for a contentious November election. Wall Street firms don’t officially endorse political candidates since they have to deal with both Republican and Democrat officials, though their executives and employees often donate to campaigns.

BlackRock CEO Larry Fink told CNBC’s “Squawk on the Street” on Monday that the weekend events were “a tragedy.”

“It is a statement of America today, though. We need to create hope. All of us have a responsibility, every political candidate, every leader, every pastor, minister, rabbi, we all have a responsibility of bringing our community together to bring hope,” Fink said.
BlackRock, the world’s largest asset manager, said Sunday in an email that it ran an advertisement in 2022 in which the suspected shooter, Thomas Matthew Crooks, appears briefly in the background along with other students of Bethel Park High School in Pennsylvania.
“We will make all video footage available to the appropriate authorities, and we have removed the video from circulation out of respect for the victims,” BlackRock said in a statement.
Bank of America CEO Brian Moynihan also addressed employees over the weekend.
“We are deeply saddened for the family of the rally attendee who died at the event,” Moynihan said in the staff email. “Our thoughts are with former President Donald Trump, all those injured, and their families.”
— CNBC’s Jim Forkin contributed to this report.

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