2024-07-16 16:47

July 16 (Reuters) - Top U.S. steelmakers are expected to post a decline in second-quarter earnings and could face additional pressure from a further retreat in steel prices heading into a slow summer season, according to analysts. Nucor (NUE.N) , opens new tab, Steel Dynamics (STLD.O) , opens new tab and U.S. Steel (X.N) , opens new tab have highlighted a fall in profitability in their steel-making operations on lower realized pricing, in June. Steel prices fell because of a supply glut fueled by domestic production and imports, prompting distributors to refrain from purchasing more material in excess of their inventory. "On the back of plentiful supply, prices have declined, but this hasn't prompted an increase in steel buying as the market's levels of demand remain subdued," said Stuart Gray, a steel market analyst at UK-based consultancy MEPS International. CONTEXT Analysts expect the decline in prices to extend into the summer period, when steel consumption usually sees a dip, before a possible restocking by distributors on bottoming of prices. They also expect steelmakers to curb supply until the inflation-hit domestic demand catches up. "U.S. steel producers in the short term will shut some of their plants until demand increases and eventually steel prices go back up," said Patrick Penfield, professor of supply chain practice at Syracuse University. FUNDAMENTALS Average North America price for hot-rolled coil — the most actively traded form of finished steel — dropped to $885 per ton in the second quarter from $1,041.7 in the preceding three months, according to MEPS data. WALL STREET SENTIMENT ** The S&P 500 steel sub-industry index (.SPLRCSTEEL) , opens new tab is flat year-to-date, compared with a 28.4% rise in 2023. ** Steel Dynamics has outperformed the steel sub-index, with an 11.7% rise year-to-date. Sign up here. https://www.reuters.com/markets/commodities/us-steelmakers-brace-tepid-quarterly-profit-further-price-declines-2024-07-16/

2024-07-16 16:32

July 16 (Reuters) - Morgan Stanley's (MS.N) , opens new tab second-quarter profit beat expectations on Tuesday, driven by a surge in investment banking and trading revenues that overcame muted results in wealth management. The bank joined other Wall Street lenders, including Bank of America (BAC.N) , opens new tab and JPMorgan (JPM.N) , opens new tab in reporting higher investment banking revenue, fueled by growing confidence in the U.S. economy that prompted companies to raise more money and strike deals. Morgan Stanley shares rose almost 2%, reversing earlier losses, as CEO Ted Pick expressed confidence in its dealmaking prospects. He said the bank is on track to reaching its goal of a 30% pre-tax margin in the wealth business, a key performance target. Institutional securities revenue grew 23% in the quarter to $7 billion, buoyed by investment banking revenue, which soared 51% to $1.62 billion. "We're in the early stages of a multi-year investment banking-led cycle," Pick told analysts on a conference call. Chief Financial Officer Sharon Yeshaya reinforced his view, saying "pipelines are healthy and diverse, dialogs are active, and markets are open." Equity underwriting revenue jumped 56% to $352 million, driven by a rebound in initial public offerings and private stock sales, while fixed income underwriting surged 71% to $675 million. Advisory revenues climbed 30% to $592 million as the company closed more deals. Pick was optimistic about Morgan Stanley's equity trading business, citing a key milestone of revenue exceeding $3 billion, growing 18% from a year earlier. The company is investing in trading in Asia and the UK, he said, adding that macroeconomic and geopolitical uncertainties are creating opportunities for clients. Revenue growth in wealth management slowed to 2% in the second quarter, compared with a 16% jump a year earlier. Net new assets came in at $36.4 billion, below last year's $89.5 billion. Net income rose to $3.1 billion, or $1.82 per share, in the three months ended June 30, from $2.2 billion, or $1.24 per share, a year earlier. Analysts on average had expected $1.65, according to LSEG. Morgan Stanley said it would raise its quarterly dividend to $0.925 per share, up 7.5 cents. Dividend payments were the bank's highest-priority use of capital, Pick said. Analysts were generally upbeat on the results, although some underscored weaker growth in wealth. “Morgan Stanley’s strong Q2 results were primarily driven by an industry-wide rebound in investment banking activity, while wealth and asset management remained steady contributors on the back of a robust equities market," said Mike Taiano, senior analyst at Moody’s Ratings. The earnings were a "tale of two segments," with impressive results in institutional securities offset by a mixed performance in wealth, UBS analyst Brennan Hawken wrote. WEALTH MANAGEMENT SLOWS Wealth management flourished under Morgan Stanley's former CEO James Gorman, generating stable revenue from fees when markets were volatile. He set a target of managing $10 trillion in client assets, which stood at $7.2 trillion in the second quarter. Morgan Stanley executives told analysts the wealth unit is growing within the bank's expected range of 5% to 7% annually, even as net asset inflows slowed. While the bank is not considering acquisitions in the short term, it could consider opportunities in two to four years, Pick said. Goldman Sachs, JPMorgan Chase and Citi (C.N) , opens new tab also reported robust investment banking revenue. Sign up here. https://www.reuters.com/business/finance/morgan-stanleys-profit-jumps-investment-banking-recovers-2024-07-16/

2024-07-16 15:47

Expects 30-cent per share higher hit from hack disruption this year Profit beats estimates, forecast maintained Shares rise 5.6%, other insurers also higher July 16 (Reuters) - UnitedHealth (UNH.N) , opens new tab forecast on Tuesday a bigger hit to annual earnings from a February hack at its tech unit, but maintained its full-year profit forecast. Shares of the Minnetonka, Minnesota-based company surged about 6% to $544.32 as it beat Wall Street estimates for second-quarter profit and signaled that it would resume share buybacks after pausing them due to the hack. The cyberattack at the healthcare conglomerate's Change Healthcare unit was one of the worst to hit the American healthcare industry and disrupted payments to doctors and healthcare facilities. Billing channels are still not back to normal for some providers, UnitedHealth CFO John Rex said on a conference call. The company said it expects a 30-cent per share higher hit to full-year adjusted profit from the disruptions caused by the hack, mainly due to a loan program to assist providers affected by the hack, and notification costs. UnitedHealth reiterated its full-year adjusted profit forecast for between $27.50 and $28.00 per share. The company has not disclosed how many people were affected but has said that hackers could have stolen data from one-third of Americans. The hack has had far-reaching effects across the industry. It also has led to higher medical costs for UnitedHealth as it suspended the prior authorization process for some insurance plans. Its medical care ratio, a measure of medical costs, was 85.1% in the second quarter, above expectations of 84.40%. COSTS ELEVATED, BUT MAGNITUDE NOT A CONCERN Insurers have grappled with elevated medical costs as a turnover in people enrolled in Medicaid plans led to a shift toward sicker patients. During the pandemic, insurers were required to keep Medicaid members enrolled. Insurers have had difficulty projecting medical use rates as states re-determine eligibility for low-income Americans following termination of that policy in 2023. This trend should stabilize through 2025 as utilization rates are updated through the year, Rex said. The company's medical costs were elevated, but not so much as to cause concern for UnitedHealth, said James Harlow, senior vice president at Novare Capital Management. Stephens analyst Scott Fidel said UnitedHealth's shares rose after the company did not identify any new trends of higher-than-expected medical care expenses. Its higher quarterly costs reflected transient events, such as the Change hack and the sale of its South America operations, he added. Shares of other health insurers such as Humana (HUM.N) , opens new tab and Elevance Health (ELV.N) , opens new tab rose 2-3% in morning trading. UnitedHealth posted adjusted quarterly profit per share of $6.80, topping analysts' expectations, helped by growth in its healthcare services unit. Analysts were expecting quarterly profit of $6.66 per share, according to LSEG data. Revenue from its Optum services unit increased about 12% to $62.9 billion in the second quarter. Sign up here. https://www.reuters.com/business/healthcare-pharmaceuticals/unitedhealth-beats-quarterly-profit-estimates-2024-07-16/

2024-07-16 15:37

July 16 (Reuters) - Argentina's dollar-denominated bonds resumed their weekly fall on Tuesday with all restructured issues down over 1 cent in price, as investor concern lingers over the government's decision to sell dollars and its effect on reserves accumulation. The 2035 maturity fell the most with a 1.7 cents decline, while the 2041 dropped 1.5 cents to trade at 37.29 cents, the lowest since mid March according to LSEG data. Bonds had weakened on Monday after the government announced over the weekend it would sell dollars to protect the peso even as the official exchange rate is tightly controlled in a crawling peg. "The government began selling dollars in an effort to boost the currency and tame inflation, prompting investor concerns that reserves will be wasted," said Jamie Fallon, economist at Tellimer Research in a note, in which he nonetheless reaffirms his positive stance on the South American country. Argentina's benchmark stock market index (.MERV) , opens new tab fell over 12% Monday and was down as much as 5.75% on Tuesday. Separately, the International Monetary Fund on Tuesday cut Argentina's 2024 GDP growth forecast sharply to a contraction of 3.5% from a 2.8% contraction in its April forecast. IMF Chief Economist Pierre-Olivier Gourinchas told a news conference the fund is projecting inflation of about 140% at year-end 2024 compared to 211% in 2023. "The government has delivered a balanced budget," Gourinchas said. "The question is whether it can continue doing so in the future and that's where engagement with the parliament and high quality measures on the fiscal side are going to be very important. And there are signs that it's moving in that direction." Sign up here. https://www.reuters.com/markets/rates-bonds/argentinas-usd-bonds-fall-investors-worry-about-reserves-buildup-2024-07-16/

2024-07-16 15:09

July 16 (Reuters) - The U.S. Federal Trade Commission has asked Amazon.com (AMZN.O) , opens new tab to provide more details on its deal to hire top executives and researchers from artificial intelligence startup Adept, a person familiar with the matter told Reuters. The request reflects the FTC's growing concern about how AI deals have been put together and follows a broader review of partnerships between Big Tech and prominent AI startups. The informal inquiry into Amazon, which has not previously been reported, centers on last month's announcement that Adept Chief Executive David Luan and others were leaving to join Amazon, which would also license some of the startup's technology. Such inquiries do not necessarily result in an official investigation or enforcement action. Amazon is trying to catch up with rivals Google (GOOGL.O) , opens new tab and Microsoft (MSFT.O) , opens new tab, which partners with OpenAI, in developing its own large language models that can respond almost instantaneously to complicated prompts or queries. Reuters previously reported on Amazon's efforts to establish a new organization called the Artificial General Intelligence (AGI) team, focused on developing large language models. Luan is now running the “AGI Autonomy” team, consisting of many former Adept employees, and reporting to Rohit Prasad, head of the AGI team. Founded in 2022, Adept made a splash by raising over $400 million from venture capital investors with the aim to train large language models to perform general tasks for enterprise clients. Once valued at over $1 billion, it released some open-source models but failed to launch successful commercial products. It's unclear whether Amazon has compensated Adept investors, or the details of the licensing fees. Amazon, Adept and the FTC declined to comment. The regulator is already investigating a similar move by Microsoft, which hired away much of another startup, Inflection AI's leadership and employees and agreed to pay a roughly $650 million licensing fee. The FTC is looking into whether the deal was a play to skirt merger disclosure requirements, a source told Reuters last month. This is not Amazon's first AI startup bet. Amazon has invested $4 billion in AI startup Anthropic since September, taking a minority stake in the San Francisco company. The FTC earlier this year launched a study of investments and partnerships in the AI space, demanding information on Microsoft's relationship with OpenAI, and Anthropic's tie ups with Google (GOOGL.O) , opens new tab and Amazon. The extensive document request, made in January, seeks details on how AI company partnerships with Big Tech influence strategy, pricing decisions, access to products and services, and personnel decisions. U.S. antitrust enforcers also expressed concern about Big Tech companies wielding their existing advantages in AI to shut out smaller competitors. The FTC and Justice Department have staked out responsibility for potential probes into Microsoft, OpenAI and chipmaker Nvidia. Sign up here. https://www.reuters.com/technology/ftc-seeking-details-amazon-deal-with-ai-startup-adept-source-says-2024-07-16/

2024-07-16 15:08

SAN FRANCISCO, July 16 (Reuters) - If Alphabet's (GOOGL.O) , opens new tab Google is successful in its effort to buy cloud security company Wiz, it would bolster its cloud security offerings for large organisations, a hotspot for hackers, and help it take on cloud rivals Amazon.com (AMZN.O) , opens new tab and Microsoft (MSFT.O) , opens new tab, experts said. Alphabet is in advanced talks to acquire Wiz, a person familiar with the matter said on Sunday, in an up to $23 billion deal that would be Google's most expensive acquisition and provide it with cybersecurity products that defend against ransomware gangs wreaking havoc on large enterprises. "There is a hot market for cloud security," said Jerome Seguera, a senior intelligence analyst at the cybersecurity firm MalwareBytes, adding that Wiz gives customers "great visibility into their assets in a straightforward way." Wiz offers tools that allow organisations to scan their entire infrastructure and specific software for threats. Google has been steadily expanding its cybersecurity offerings in recent years. Two years ago it bought the popular cyber firm Mandiant for $5.4 billion. "I think they are trying to compete with Microsoft and to a smaller extent AWS (Amazon Web Services)," said Marc Bleicher, chief technology officer of the security firm Surefire Cyber. "Wiz is one of only a few who address a big chunk of the cloud security market in one platform," Bleicher said. Wiz was founded in 2020 at the height of the coronavirus pandemic, primed to benefit from the move towards remote work and the shift by organisations to cloud environments from desktops. Most large organisations have also shifted to storing their data on the cloud over the years, but that has come with security risks - especially as companies expand and become more complex. Its founders, former Israeli army intelligence members, earlier founded another cloud security firm named Adallom that Microsoft bought for $320 million in 2015. Headquartered in New York, the company has grown rapidly since then. Only two months ago, at the RSA cybersecurity conference in San Francsico, Wiz said it was valued at $12 billion. It now expects annual organic revenue of $1 billion in 2025 and has raised nearly $2 billion in venture capital investment in total, said a person familiar with the Google deal talks, declining to be named. The Wiz buyout talks come as the pace of global dealmaking in cybersecurity has significantly picked up in 2024. There were 120 global cybersecurity deals announced in the first half of this year, accounting for $12.4 billion in deal value, compared to 137 such deals last year, or $4.8 billion in deal value, according to data from the financial information firm Dealogic. Dave Dewalt, founder of the cyber-focused venture capital firm NightDragon, said Wiz's growth is the result of strong marketing and being "at the right place, at the right time, with the right product." DeWalt, former chief executive of cybersecurity firm FireEye, said cloud security is the most important and fastest-growing part of cybersecurity, driven by increasing attacks on large organisations. "The stakes are exponentially higher in the cloud. So therefore, the security needs to be exponentially stronger, and (there's) more revenue from it," he said, adding that Palo Alto Networks (PANW.O) , opens new tab and Crowdstrike (CRWD.O) , opens new tab had also beefed up their cloud security offerings in recent years. Sign up here. https://www.reuters.com/technology/cybersecurity/google-deal-hot-market-cyber-firm-wiz-would-bolster-cloud-security-2024-07-16/