Here are five things you must know for Tuesday, August 2:
1. — Stock Futures Lower as Taiwan Tensions Stoke Renewed Geopolitical Concerns
U.S. stock-index futures were lower on Tuesday as investors moved to reduce risk ahead of House Speaker Nanci Pelosi’s pending visit to Taiwan, the first visit by a high-ranking U.S. government official in more than 25 years, stoking concern of increased tensions between the U.S. and China.
Futures tied to the Dow Jones Industrial Average were 144 points lower, or 0.5%. S&P 500 futures slid 0.7%, and Nasdaq 100 futures dropped 0.8%.
U.S. government debt prices traded higher Tuesday morning as investors awaited Pelosi’s trip to Asia and looked ahead to Friday’s jobs report.
The yield on the benchmark 10-year Treasury note dropped to 2.554% and the yield on the 30-year Treasury bond also fell to 2.891%. Yields move inversely to prices.
The after-hours moves came as stocks slipped during the first regular trading day of August after all the major averages finished their best month since 2020. The S&P 500 shed 0.28% to end at 4,118.63 while the Nasdaq Composite inched 0.18% lower and closed at 12,368.98. The Dow Jones Industrial Average slipped 46.73 points, or 0.14%, to end at 32,798.40.
Pelosi is scheduled to arrive in Taiwan on Tuesday evening local time and meet with Taiwanese government officials, in what would be the first visit by a House speaker to the democratically governed island since 1997.
Beijing, which claims Taiwan as part of its territory, has warned Pelosi and the U.S. administration not to set foot there. Chinese officials have threatened unspecified military countermeasures should her visit proceed.
Taiwan is a democratic self-ruled island that China sees as a runaway province, and Beijing has been vocal about its opposition to Pelosi’s trip.
“Whatever actions Beijing takes, it could trigger additional sanctions on China and sharply increase the risk of a direct military skirmish between the U.S. and China,” said Chen Zhao, Chief Strategist with global economic research firm Alpine Macro. “It is prudent for investors to think ahead and find ways to hedge their portfolios against the risk of a full-blown military confrontation between China and the U.S.”
European markets pulled back slightly on Tuesday, tracking risk-off sentiment globally as investors assess whether last month’s rally has further to run, and as Pelosi’s visit to Taiwan neared.
In Europe, the pan-European Stoxx 600 dropped 0.6% by mid-morning in London, with tech stocks shedding 2.1% to lead losses as almost all sectors and major bourses slid into the red. Telecoms gained 0.6%.
2. — Pinterest Shares Jump On Strong User Growth
Pinterest (PINS) – Get Pinterest Inc. Class A Report shares jumped on better-than-expected user numbers, even as earnings and revenue missed estimates and the company gave weak guidance for the third quarter.
Pinterest shares were up more than 18% at $23.68 in premarket trading after the online visual inspiration board company reported weak second-quarter results, which it said were impacted by a downturn in advertising revenue as well as increased costs.
The company saw weakness from advertisers in the consumer packaged goods category, big-box retailers and mid-market advertisers, finance chief Todd Morgenfeld said, adding that the digital advertising environment will continue to be challenging.
The company said it expects mid-single-digit year-over-year percentage growth in the current quarter, below analysts’ projections for sales growth of 12.7%, crimped by the impact of a stronger dollar.
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Activist investor Elliott Management confirmed separately that it is Pinterest’s top investor and said it has “conviction in the value-creation opportunity” at the company.
Elliott did not disclose its stake in Pinterest. However, the Wall Street Journal reported in July that the investment firm had amassed a more than 9% stake.
3. — Estée Lauder In Talks to Buy Tom Ford, Report
Estée Lauder (EL) – Get Estee Lauder Companies Inc. (The) Report is in talks to buy luxury fashion brand Tom Ford in what could be a $3 billion or more deal representing the cosmetics giant’s largest-ever acquisition, the Wall Street Journal reported on Tuesday.
New York-based Estée Lauder primarily sells skin-care products, cosmetics and perfume. Its brands include MAC, Clinique, La Mer and Aveda. With a market value of nearly $100 billion, it has the wherewithal to do such a deal.
There are no guarantees the two sides will reach an agreement. Estée Lauder isn’t the only suitor for Tom Ford, one of the people told the Journal. Bloomberg reported in early July that Tom Ford was for sale.
Closely held Tom Ford is best-known for its menswear, though it also sells womenswear and accessories as well as a fast-growing, high-end line of cosmetics and fragrances. Estée Lauder is especially interested in the beauty business, with which it already has a longstanding licensing deal, and could potentially look to license the clothing lines elsewhere, the people familiar with the matter told the Journal.
Estée Lauder shares were down 0.32% at $272.65 in premarket trading.
4. — BP Profit Surges Amid High Energy Prices
The British energy major posted second-quarter underlying replacement cost profit, used as a proxy for net profit, of $8.5 billion.
That compared with a profit of $6.2 billion in the first three months of the year and $2.8 billion for the second quarter of 2021, the company said. Analysts had expected BP to report first-quarter profit of $6.3 billion, according to Refinitiv.
BP also announced a 10% increase in its quarterly dividend payout to shareholders, raising it to 6.006 cents per ordinary share.
Shares of BP rose 4% in London, trading near the top of the pan-European Stoxx 600. The stock price is up over 23% year-to-date.
5. — SEC Lays Charges In $300 million Crypto Pyramid Scheme
Eleven people have been charged with creating and promoting a cryptocurrency-based pyramid scheme that authorities said drew more than $300 million from retail investors worldwide.
The U.S. Securities and Exchange Commission said in an Aug. 1 statement that it charged the four founders of Forsage and three U.S.-based people whom the founders employed to promote the pyramid scheme on its website and social media.
Also named in the complaint, filed in U.S. District Court for the Northern District of Illinois, were several members of the Crypto Crusaders, which the agency called “the largest promotional group for the scheme.”
The four founders, according to the SEC’s complaint, are Vladimir Okhotnikov, last thought to be residing in Tbilisi, Republic of Georgia; Jane Doe a/k/a Lola Ferrari, Bali, Indonesia; and Mikhail Sergeev and Sergey Maslakov, Russia.
Forsage.io, the SEC alleged, was a website through which millions of retail investors could enter transactions via smart contracts that operated on the ethereum, tron and Binance blockchains.
Bitcoin was down 2.6% Tuesday, extending declines from Monday, amid ongoing concern over geopolitical and other lower-than-average volume. The cryptocurrency is down 51% year to date.
The coin’s dominance, a metric that measures the market cap of BTC relative to the rest of the cryptocurrency market, sits at 42%, compared with 40% on Jan. 1 and 41.8% on April 1.