(The Street) – The coronavirus pandemic presents a challenge to a U.S. economic recovery, the Federal Reserve says; Alibaba reports earnings; Nvidia’s sales jump 50% to a record; Airbnb files for IPO.
1. — Stock Futures Slump as Fed Flags Pandemic’s Challenge to Economy
Stock futures were slumping Thursday after the Federal Reserve said the coronavirus pandemic would remain a challenge to a recovery in the U.S. economy, the world’s biggest.
Contracts linked to the Dow Jones Industrial Average declined 150 points, S&P 500 futures fell 19 points and Nasdaq futures slid 57 points.
Stocks declined Wednesday, a day after the S&P 500 closed at a record high, after the Federal Reserve said the coronavirus pandemic would weigh heavily” on U.S. economic activity and the jobs market.
In the minutes from their meeting in late July, officials at the central bank “agreed that the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term and was posing considerable risks to the economic outlook over the medium term.”
The central bank said it expected to maintain rates between a 0% and 0.25% until it’s “confident that the economy had weathered recent events and was on track to achieve the committee’s maximum employment and price stability goals.”
The Fed emphasized the need for further fiscal policy support from Congress.
Democratic and Republican leaders have been hinting they are looking for ways to bridge the wide gap in their stalled coronavirus stimulus negotiations.
2. — Alibaba Earnings, Jobless Claims Are Highlights of Thursday’s Calendar
Earnings reports are expected Thursday from Alibaba (BABA) Estee Lauder (EL) BJ’s Wholesale Club (BJ) and Ross Stores (ROST)
The economic calendar in the U.S. Thursday includes weekly Jobless Claims at 8:30 a.m. ET. Economists expect 963,000 Americans to have filed for first-time unemployment benefits in the week ended Aug. 15, unchanged from a week earlier.
The calendar also includes the Philadelphia Fed Business Outlook Survey for August at 8:30 a.m.
3. — Nvidia Sales Jump 50% to a Record $3.87 Billion
Nvidia (NVDA) – the maker of graphic chips, reported fiscal second-quarter adjusted earnings of $2.18 a share, topping analysts’ forecasts, as revenue jumped 50% to a record $3.87 billion and also beat estimates.
“Adoption of Nvidia computing is accelerating, driving record revenue and exceptional growth. Growth in GeForce gaming accelerated as gamers increasingly immerse themselves in realistic virtual worlds created by Nvidia RTX ray tracing and AI,” founder and CEO Jensen Huang said in a statement.
Gaming revenue in the second quarter rose 26% year over year to $1.65 billion. Estimates for the company’s gaming segment, which accounts for more than 40% of its overall revenue, were for an increase to $1.41 billion.
The company’s data center segment saw a 167% jump year over year to $1.75 billion thanks to Nvidia’s recent acquisition of Mellanox Technologies. Analysts were expecting an increase of 162% to $1.71 billion.
For its fiscal third quarter, Nvidia said it expects revenue of $4.4 billion, plus or minus 2%, well above a $3.97 billion consensus.
The stock was falling in premarket trading, down 1.75% to $477.03.
Jim Cramer and his Action Alerts PLUS member club, which holds Nvdia in its portfolio, noted how Nvidia shares were “priced to perfection.”
“Any way you slice it, NVDA has been one of the best stocks to own in 2020 and this massive run of outperformance brought with it lofty expectations,” said Cramer and the AAP team.
4. — Intel to Buy Back $10 Billion of Stock
Nvidia rival Intel (INTC) was rising in premarket trading after announcing plans to buy back $10 billion of its common stock.
“As the ongoing growth of data fuels demand for Intel products to process, move and store, we are confident in our multiyear plan to deliver leadership products,” said CEO Bob Swan. “While the macro-economic environment remains uncertain, Intel shares are currently trading well below our intrinsic valuation, and we believe these repurchases are prudent at this time.”
Shares of Intel have declined about 20% in 2020 amid poor macroeconomic conditions, and product missteps. In premarket trading, the stock was up 2.73% to $49.65.
Intel has been supplanted by Nvidia as the largest U.S. semiconductor company by value.
5. — Airbnb Files for Initial Public Offering
Airbnb confidentially has submitted paperwork for an initial public offering.
The home-sharing company is leaning toward listing its shares on Nasdaq, The Wall Street Journal reported, citing people familiar with the matter.
Airbnb had been expected to go public sometime this year, but the damaging effect of Covid-19 on the global travel industry delayed those plans.
As the pandemic spread in the spring, and travel restrictions went into effect, Airbnb’s bookings dropped by around 40% or more, depending on the market, and CEO Brian Chesky said in May that the company expected total revenue to drop by more than half in 2020.
Airbnb bookings began to pick up again during the summer months, with guests booking more than 1 million nights’ worth of future stays on July 8, according to the company.
“It was hard to imagine in mid-March and April that Airbnb would be going public this year,” said Tom White, an analyst with D.A. Davidson.
Founded in 2008, Airbnb was privately valued at more than $30 billion in 2017 and earned $4.8 billion in revenue last year, according to financial statements reviewed by the Journal.