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This earnings season is showing which companies can weather the economic storm, and which ones are at risk of being swept away.
What you need to know today
- First Republic Bank's deposits fell 40.8% to $104.5 billion in the first quarter, a worse deposit tally than analysts expected — even after taking into account the $30 billion various banks deposited in First Republic. The bank beat expectations for profit and revenue, but that wasn't enough to assuage fears. Shares last sank 22.31% in overnight trading.
- U.S. markets traded mixed Monday. The Nasdaq Composite fell as investors prepared for a barrage of earnings from big technology firms this week. Europe's Stoxx 600 index was flat. Financial services rose 0.6% as Credit Suisse revealed investors pulled 61.2 billion Swiss francs ($68.6 billion) in assets in the first quarter.
- LVMH is the first European company to surpass $500 billion in market value. The luxury goods giant, which is the parent company of Louis Vuitton, Moët & Chandon, Hennessy among other brands, saw a 17% rise in first-quarter sales, beating expectations by more than two times.
- Samsung projected it would make an operating profit of 600 billion Korean won ($449 million) for the first quarter. If the numbers are accurate, that'd be the South Korean company's lowest profit in 14 years.
- PROÂ One-third of companies on the S&P 500 will report earnings this week. Here are the companies investors should pay attention to, and what CNBC will be watching in their reports.
The bottom line
This earnings season is showing which companies can ride out — or, indeed, benefit from — the economic storm, and which ones are at risk of being swept away.
Struggling regional banks like First Republic aside, there's already one prominent casualty: Bed Bath and Beyond. The home goods merchant has been struggling for years, but things took a turn for the worse in 2023. In January, the company warned investors it's running out of cash and is considering bankruptcy. On Sunday, its warning became reality as the company filed for Chapter 11 bankruptcy protection. It's a stunning reversal for the shares: A year ago, Bed Bath and Beyond shares traded around $20; yesterday, they were $0.2, one-hundredth of last year's value.
Samsung, likewise, is warning its profit for the first quarter might be its lowest in more than a decade amid a slump in the memory chip market.
Economic troubles, however, didn't put a dent in the profits of LVMH. The luxury conglomerate's first-quarter sales hit a record high of 79.2 billion euros ($87.1 billion). Its figures are set to continue smashing records, if the company's prediction that China's Covid reopening will boost its sales further comes true.
Fast-moving consumer goods didn't fare too badly either — at least for Coca-Cola, which saw net sales rise 5% to $10.98 billion, beating estimates. The company is also optimistic for the rest of the year, expecting revenue to continue growing 7% to 8%.
Despite those big pieces of news, stocks in both the U.S. and Europe were flat. The S&P barely moved, the Dow Jones Industrial Average added 0.2% and the Nasdaq slipped 0.29%.
Investors are waiting for more earnings report from major companies, particularly big tech, before making moves. Alphabet and Microsoft will be first up later tonight in the U.S., followed by Meta on Wednesday and Amazon on Thursday. Investors will want to assess those reports alongside economic data, such as first quarter's GDP growth (or lack thereof) and April's consumer sentiment, coming out this week.
"Everyone's just waiting for tech earnings," said Chris Harvey, head of equity strategy at Wells Fargo Securities. "This is a very, very busy week for earnings, so we're just treading water." But traders should brace themselves. A big wave is coming; some companies will sink, but some will ride the wave.
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