Daily Agenda: GOP Convention Rhetoric Starts Hot

Johnson & Johnson, Goldman Sachs beat forecasts; Yahoo! misses, IBM beats; EU fines truck makers; Brexit hits European sentiment.


U.S. politics took center stage yesterday with the kickoff of the Republican Party’s national convention in Cleveland. The first day featured protesting GOP factions, inflammatory rhetoric (the theme was “Make America Safe Again”) and the kind of mayhem that has been a hallmark of this election cycle for the Republicans, though protests outside the arena remained peaceful. With real estate developer Donald Trump as the presumptive candidate, investors have to consider the impact of protectionist policies on immigration and trade he has promoted during his campaign, if they were actually implemented. In particular, the flamboyant New Yorker’s position on trade with China, which has included calls for a 45 percent tariff on Chinese goods, has raised concerns among many investors, particularly given Trump’s other promises to drive job growth and boost middle-class incomes. With today’s convention theme of “Make America Work Again,” it is likely that rhetoric over U.S. trade policy will feature heavily.

Johnson & Johnson earnings rise on drug sales. Johnson & Johnson announced financial results today for the second quarter that exceeded consensus analyst targets as sales of prescription medications, including Remicade and Stelara, rose. Earnings for the period were $1.74 per share versus average analyst expectations of $1.68. Management also guided full-year earnings forecasts higher.

Goldman earnings rise on trading profits. Goldman Sachs Group issued financial results for the second quarter today that were higher than the average analyst estimate, with earnings per share of $3.72 and revenues of more than $7 billion. As was the case with JPMorgan Chase & Co., fixed-income trading was a major driver for the rise in the bank’s bond, currency and commodity trading revenues, up 20 percent year-over-year.

EU hands record fine to truck makers for price fixing. Regulators at the European Commission announced a settlement with major truck manufacturers today to settle charged of price collusion. Daimler, Iveco, DAF Trucks and Volvo-Renault agreed to pay more than $3 billion in fines. Scania, a subsidiary of Volkswagen, was alone in rejecting the settlement.

Yahoo! misses, IBM beats. Second-quarter results issued by Yahoo! yesterday included earnings of $0.09 per share versus consensus analyst’s forecasts of $0.10, although revenues were stronger than expected by Wall Street. Management did not include any information on the status of finding a buyer for core business assets in the release. Separately, both earnings and sales exceeded average targets at IBM in large part because of recent successes in cloud computing. Despite the beat, Big Blue continued a 17 consecutive quarter streak of declining revenues.

European sentiment rattled by Brexit. German sentiment data for July issued today by the Zentrum für Europäische Wirtschaftsforschung indicated the mood among investors has soured since the U.K. voted to leave the EU. The ZEW current-situation index slid to 49.8 versus a prior 54.5, while the economic sentiment index fell to a reading of –6.8. A broader index for the full common currency zone contracted to -14.7 versus a prior level of 20.2.

U.K. consumer prices higher than forecast. June inflation data released today by the U.K. National Statistics Office indicated that prices rose at the cash register by more than anticipated by economists. The headline consumer price index rose by 0.5 percent year-over-year versus a prior 0.3 percent.