Plus, gold traded above $1,900 an ounce for the first time since 2011, Goldman Sachs is one step closer to resolving the 1MDB scandal in a settlement with Malaysia, and Intel shares are down sharply after its earnings beat was overshadowed by production delays.
Stocks were lower to start Friday with the Dow falling 69 points, or 0.3%. The S&P 500 slipped 0.4%, while the Nasdaq dropped 1.1%.
China’s Foreign Ministry announced today that it is revoking the license for the U.S. consulate general in Chengdu in retaliation for the U.S.’s forced closure of China’s consulate in Houston earlier this week. The Foreign Ministry said that the U.S. consulate’s closure was a “legitimate and necessary response to the unjustified act by the U.S.,” with the order coming just hours before the deadline for China’s diplomats to vacate the Houston facility. “They wanted to make it hurt a little bit more so they picked Chengdu,” said James Green, a former State Department official and current senior adviser for geopolitical consulting firm McLarty Associates. “What the Chinese care about more—and what we care about more—is what we do out of Chengdu, which is follow Tibet. And shutting that down kind of cuts our link to Tibet, which is a political blow to us.”
On the COVID-19 front, Florida reported a record number of hospitalization for the coronavirus though fatalities dropped from a high set the earlier on Wednesday. California surpassed New York for the most known coronavirus cases with more than 425,000 confirmed cases. Texas governor Greg Abbott said this morning that it’s “going to take a little while” to eliminate the coronavirus outbreak there. “We are turning the situation in the state of Texas,” Abbott said. “I feel like we have reached a plateau where we’ve contained the exponential growth of COVID at this particular time, but we have a lot more work to do in the coming weeks. We don’t have COVID conquered right now.” And Dr. Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases said he is “cautiously optimistic that we’ll have a vaccine by the end of this calendar year or the first month or two of 2021,” while also warning that he wouldn’t recommend dining inside a restaurant or getting on a plane right now.
Gold traded above $1,900 an ounce for the first time since 2011 as the coronavirus rages on stalling an economic recovery, and amid flaring geopolitical tensions. Gold is on track for its seventh weekly gain, its longest stretch since 2011, while silver is poised for its biggest weekly advance in roughly four decades. “When interest rates are zero or near zero, then gold is an attractive medium to have because you don’t have to worry about not getting interest on your gold and you see the gold price will rise as uncertainty in the markets are rising,” said Mark Mobius, co-founder at Mobius Capital Partners. “I would be buying now and continue to buy.”
Goldman Sachs said this morning that it has settled a key part of the criminal probe into the 1MDB scandal by agreeing to a $3.9 billion deal with Malaysia. “This settlement by Goldman Sachs represents its acknowledgment of the misconduct of two of its former employees in the broader 1MDB fraudulent and corruption scheme,” Malaysia’s finance minister said in a statement. The pact doesn’t resolve other pending governmental and regulatory probes related to 1MDB, including one from the U.S. Department of Justice, though Goldman is nearing a deal with the DOJ that could be announced next month. Wells Fargo banking analyst Mike Mayo now estimates that a total settlement for Goldman, including the deal with the DOJ, could total around $4.5 billion, coming in below “the worst investor estimates of $10 billion.” Mayo added, “We’re buyers of GS now that its legal tail risk is almost gone after four years of dealing with the 1MDB situation.”
And on the earnings front, Intel shares are down sharply even after an earnings beat as the chipmaker said it is seeing substantial delays on its development of cutting-edge 7-nanometer production technology. Intel reported earnings per share of $1.23 on revenue of $19.73 billion, compared to expectations of earnings per share of $1.11 on revenue of $18.55 billion. “The company’s 7nm-based CPU product timing is shifting approximately six months relative to prior expectations,” the company said in a statement. “The primary driver is the yield of Intel’s 7nm process, which based on recent data, is now trending approximately 12 months behind the company’s internal target.” Verizon reported second-quarter results came in above estimates, with earnings per share of $1.18 on revenue of $30.4 billion. And Honeywell delivered an earnings beat reporting earnings per share of $1.53, and $1.5 billion of operating cash flow. “The second quarter was a challenging one, but we executed on the three things that will enable us to weather this downturn: aggressively managing cost, driving sales growth where demand is strong, and investing in exciting new technologies that, through careful attention to customer and end-user needs, will help keep people safe when they get back to the workplace, back to play, back to travel, and back to life,” said Darius Adamczyk, chairman and chief executive officer of Honeywell.
Stocks We’re Watching
RigNet Inc (NASDAQ: RNET): RigNet shares gained 57% yesterday after it announced a collaboration with CACI International on its Steelbox Secure Voice and Text App for government users. “RigNet has been providing highly secure, highly reliable telecommunications to customers for four decades,” said retired rear admiral Jamie Barnett, RigNet’s Senior Vice President for Government Services. “This is another strategic venture into the government sector, and we are delighted to be working with CACI and Blackberry on SteelBox™ connectivity.”