This downturn is not like the 2000s: Legendary investor's outlook for big tech
Like usual, the mood of the market has flipped after sleeping on the U.S. Federal Reserve’s policy decision and commentary by Chair Jerome Powell. Futures are pointing to a lower open in New York after yesterday’s gains that accelerated as Powell spoke and stated the blatantly obvious: At some point, it will make sense to slow the pace of rate increases. The Fed will be guided by data. Decisions will be made meeting-by-meeting, etcetera, etcetera. He also said “it doesn’t make sense that the economy would be in a recession” right now, based on how tight the labour market is. And now the recession talk will go into overdrive after today’s advanced read on second-quarter U.S. GDP came in at -0.9 per cent, marking a second consecutive quarter of contraction, which meets the threshold for a technical recession (albeit with today’s data subject to revision).
SWIMMING IN CASH
Tourmaline Oil has done it again. Yet another special dividend was announced late yesterday; this one is being set at $2 per share, and it’s being made possible by free cash flow that hit a record $1.1 billion in the second quarter. It’s the third special dividend announced this year, and Tourmaline said it’s expecting to continue with special quarterly payments through next year. The natural gas and oil producer also nudged up its spending plans for this year, forecasted an even larger budget for exploration and production next year, and announced a small acquisition. Meanwhile, Cenovus Energy’s second-quarter free funds flow surged 24 per cent to $2.2 billion, its net debt fall 10 per cent year-over-year to $7.5 billion, and it added $400 million to its 2022 capex forecast. A fly in the ointment: Cenovus said it booked a $664-million “risk management” loss. That strategy of winding down hedges was announced in April, and Cenovus said the process was closed out as of June 30. The cup runneth over at Whitecap Resources, too: its second-quarter funds flow surged 35 per cent to a record $677 million.
BREAKTHROUGH IN PIPELINE DISPUTE
TC Energy announced this morning that it has resolved a longstanding dispute with LNG Canada over the Coastal GasLink pipeline that will feed the massive liquefied natural gas project on Canada’s west coast. TC said the new agreement comes with a revised cost estimate of $11.2 billion for the pipeline. Up until now, $6.6 billion was the working estimate. TC added that the pipeline is 70 per cent complete and that it ought to be in service by the end of next year.
ROGERS OUTAGE STIRS FEAR FOR THE FUTURE
As bad as Rogers’ network failure was for Canadians, the fallout could have been even worse if tomorrow’s technology was available today. Paige spoke with experts in the automotive and medical industries about the high-stakes scenario planning that’s now happening to consider how a similar outage would disorient autonomous vehicles and potentially paralyze operating rooms where remote surgeries are happening.
COST WATCH FOR MINERS
After Newmont shares were punished earlier this week as costs swelled, there’s a trifecta of its peers to keep tabs on today. Agnico Eagle’s second-quarter all-in sustaining costs slipped a few dollars to US$1,026 per ounce and its gold production hit a record in the second quarter; however, it’s warning full-year costs will be near the high end of its forecast range — we’ll speak with its chief executive shortly after 9 a.m. ET. Kinross Gold also reported after yesterday’s closing bell, and posted a nearly 17 per cent jump in second-quarter AISC and nudged up its cost guidance for the year. And I see Alamos Gold is being lauded by an analyst at National Bank after that miner bucked a trend by maintaining its cost forecast for the year and posting a sequential dip in AISC.
OTHER NOTABLE STORIES
- Spin Master announced its first ever dividend after markets closed yesterday, alongside second-quarter revenue that surged 29.6 per cent and an adjusted profit that trounced expectations.
- The advertising woes that Alphabet managed to dodge ravaged Meta Platforms in the second quarter. The parent company of Facebook and Instagram saw total revenue fall for the first time ever amid a 14 per cent plunge in average price paid per ad. Meta is warning of more ad pain in the third quarter, and it's joining the trend of curbing growth in the face of so much uncertainty, with CFO David Wehner (who is transitioning to chief strategy officer) trimming this year's expense forecast and saying hiring has been scaled back.
- Business is booming at Ford Motor Company, as total revenue surged 50 per cent year-over-year and adjusted profit per share quintupled in the second quarter. Shareholders are being rewarded with the quarterly dividend rising 50 per cent to US$0.15 per share. On the topic of headcount, which was top of mind after Bloomberg News recently reported Ford might be planning to cut up to 8,000 jobs, Ford's chief financial officer said on a conference call that cost-cutting is underway, but didn't say how many jobs are affected.
- Best Buy will be a stock to watch today after it joined the list of retailers warning about cash-strapped consumers. It’s now expecting a 13 per cent drop in second-quarter same store sales, and an 11 per cent full-year plunge in sales at stores that have been open for at least a year.
- Notable data: Canadian payroll employment, earnings and hours, and job vacancies, U.S. GDP (Q2) and initial jobless claims
- Notable earnings: Canadian Pacific Railway, TMX Group, Intact Financial, Cenovus Energy, TC Energy, Arc Resources, Meg Energy, Whitecap Resources, Calfrac Well Services, Fortis, Yamana Gold, Canfor, Tilray Brands, Sleep Country Canada, TFI International, Fairfax Financial, Shell, Apple, Amazon.com Inc., Intel, Pfizer, Merck, Mastercard
- 900: Parliamentary Budget Officer releases “Fiscal Sustainability Report 2022”
- 1415: U.S. President Joe Biden delivers remarks on the economy and meets with CEOs to discuss economic conditions; Treasury Secretary Janet Yellen attends