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JULY 20 – 2023

UPWARD TREND REGAINED

Bitcoin and Ether, along with other top non-stablecoin cryptocurrencies, increased in value, regaining important support levels. The positive momentum is attributed to institutional interest, particularly due to the growing number of Bitcoin exchange-traded fund (ETF) applications. As of 8:00 AM CST, Bitcoin price is above $30,200, while Ether is above $1,915. In addition, the total crypto market capitalization reached $1.21 trillion, and market volume increased by 95.85%. Lucas Kiely, the chief investment officer of digital asset platform Yield App, stated that institutional interest and Bitcoin’s role as a long-term investment and hedge against inflation contribute to its stability.

POSITIVE RESULTS

Netflix reported a notable increase in quarterly revenue and subscriptions for the second quarter, primarily attributed to its successful efforts in curbing password sharing. While the company slightly missed revenue expectations, it surpassed analysts’ estimates for earnings per share, reporting $3.29 compared to the expected $2.86. The crackdown on password sharing led to an impressive addition of 5.9 million customers during the quarter, but specific details on the revenue generated by the new ad-supported tier and the policy’s effect on accounts are still pending. In addition, American Airlines also had a strong second quarter, achieving a record revenue of $14.1 billion, representing a 4.7% increase year over year. The airline’s net income was $1.3 billion, and it upgraded its full-year adjusted EPS guidance to $3.00 to $3.75 per diluted share. The company has also reduced its total debt by $387 million, prioritizing strengthening its balance sheet. Moreover, Tesla reported better-than-expected second-quarter financials, with profits growing 20% to 91 cents per share and revenue increasing by 47% to $24.93 billion, however, despite the positive results, Tesla’s gross margins fell below the targeted 20% due to price cuts and discounts on vehicles.

NOT AS EXPECTED

Blackstone Inc reported a significant decline in second-quarter distributable earnings, dropping almost 40% due to a sharp decrease in asset sales, particularly in its real estate and credit businesses. The net profit from asset sales plummeted 82%, primarily attributed to higher interest rates, sticky inflation, and economic uncertainty impacting the merger-and-acquisition activity. However, the private-equity business saw a 20% growth in performance fees, and Blackstone’s total assets under management reached a milestone of $1 trillion. Moreover, Newmont, the world’s largest gold miner, missed Wall Street estimates for second-quarter profit due to lower production and increased costs, largely affected by a labor strike at its Penasquito mine in Mexico and temporary operations halt at its Eleonore mine in Quebec due to wildfires. Nonetheless, despite these results, Newmont remains optimistic about improved production and cost performance in the second half of the year.

STRONG DESPITE SLIGHT SETBACK

The number of Americans applying for unemployment benefits dropped last week, reaching the lowest level in two months. This indicates that there is still a strong demand for workers, despite a slowdown in job growth. Initial jobless claims decreased by 9,000 to 228,000, according to the Labor Department, however, continuing claims, which include those who have been receiving unemployment benefits for more than a week, increased by 33,000 to 1.75 million – the largest increase in over three months. Furthermore, the four-week moving average of initial claims also decreased to a six-week low of 237,500., and while some states like California, Georgia, and South Carolina reported an increase in applications, other states such as Michigan and Kentucky saw a decrease.

STRENGTHENING CAPITAL AND LIQUIDITY

U.S. regional banks are responding to the challenges of rising interest rates and expected tighter regulations by reducing the size of their balances. Consequently, U.S. Bancorp increased its CET1 capital ratio by 60 basis points in the second quarter and made targeted asset sales and securitized auto loans to cut risk on its balance sheet. Similarly, Citizens Financial Group Inc. earmarked around $14 billion in loans to run off its balance sheet in intensified efforts for balance sheet optimization. Additionally, Western Alliance Bancorp sold approximately $4 billion in assets, including loans tied to real estate and business lending, to improve capital and liquidity. The focus of these measures is on strengthening balance sheets to make them more profitable and to meet the challenges posed by higher funding costs and tougher regulations.

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