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Monday July 13, 2020



Citigroup Reports Earnings

Citigroup, Inc. (C) released its latest earnings report on Monday, July 15. The financial institution posted increased revenue and earnings for the quarter.

The company reported revenue of $18.76 billion during the second quarter. This was up from $18.47 billion at the same time last year.

"We navigated an uncertain environment successfully by executing our strategy, and by showing disciplined expense, credit and risk management," said Citi CEO Michael Corbat. "We increased our Return on Assets year-over-year to 97 basis points; and generated a Return on Tangible Common Equity of 11.9%, over 100 basis points better than last year."

Net income for the quarter was $4.80 billion. During the same quarter last year, the company reported net income of $4.49 billion.

The New York City-based financial institution's Global Consumer Banking segment brought in $8.51 billion in revenue during the quarter, up 3% year-over-year. North American banking accounted for $5.16 billion of the total revenue amount. The company's Institutional Clients Group earned revenue of $9.72 billion during the quarter, a modest 1% increase.

Citigroup, Inc. (C) shares ended the week at $70.94, down 1.1% for the week.

United Airlines' Revenues Soar

United Airlines (UAL) posted quarterly earnings on Tuesday, July 16. The company reported strong revenue growth for the quarter.

The air travel company reported revenue of $11.40 billion for the quarter. This was a 5.8% increase from $10.78 billion in revenue last year at this time.

"Thanks to the outstanding and sustained efforts of 95,000 United team members, United is now consistently delivering results for our customers as well as investors as we raise the mid-point of our full-year 2019 adjusted diluted EPS guidance with a new range of $10.50 to $12.00," said United Airlines CEO Oscar Munoz. "By once again delivering strong EPS over the last three months, top-tier results are now the expectation, not the exception for United."

The company's net income for the quarter was $1.05 billion. This was a 54% increase from $683 million in net income during the prior year's quarter.

Stock in United Airlines rose 0.6% following the company's earnings release on Tuesday. The company has posted two consecutive quarters of growth. United's second quarter pre-tax net income of $1.35 billion was the highest level in the airline's history, dating back to its 2010 merger with Continental Airlines.

United Airlines (UAL) shares ended the week at $93.83, up 2.4% for the week.

Domino's Pizza Serves Tepid Earnings

Domino's Pizza, Inc. (DPZ) reported its latest quarterly earnings on Tuesday, July 16. The pizza giant's sales and earnings increased, but the numbers failed to satisfy analysts' and investors' expectations.

Revenue for the quarter came in at $811.65 million, up from $779.40 million during the same quarter last year. Despite the uptick, the company's revenue fell short of analysts' expectation of $836.59 million.

"It was a good second quarter, particularly for global unit growth, as we continue to seek balanced retail sales growth through the blend of same store sales and store growth," said Ritch Allison, Domino's CEO. "As a work-in-progress brand, we are constantly striving to improve in needed areas, execute our long-term strategy and build toward Dominant #1 — a goal I continue to feel we are built to achieve."

Domino's reported net income of $92.4 million during the second quarter. This was up from $77.4 million during the same time last year.

The Michigan-based restaurant chain reported lower-than-expected same-store sales for the quarter. The company posted a 3% increase in same-store sales, while analysts expected growth of 4.6% in the company's U.S. locations. Internationally, Domino's reported a 2.4% increase in same-store sales, short of the expected 2.6% growth.

Domino's Pizza, Inc. (DPZ) shares ended the week at $257.93, down 9.0% for the week.

The Dow started the week at 27,365 and closed at 27,154 on 7/19. The S&P 500 started the week at 3,018 and closed at 2,977. The NASDAQ started the week at 8,263 and closed at 8,146.

Fed Rate Cut Anticipation Pushes Yields Higher

Yields on U.S. Treasurys increased as the week came to a close. While yields were down overall from Monday's opening numbers, growing anticipation of a rate cut by the Federal Reserve reversed the downward trend.

On Thursday, John Williams, President of the Federal Reserve Bank of New York delivered a speech to the Central Bank Research Association. During the speech, Williams discussed potential strategies for the Fed when rates are at or near their lower limit, known as the "zero lower bound" or ZLB.

"When the ZLB is nowhere in view, one can afford to move slowly and take a 'wait and see' approach to gain additional clarity about potentially adverse economic developments," Williams said. "But not when interest rates are in the vicinity of the ZLB. In that case, you want to do the opposite and vaccinate against further ills. When you only have so much stimulus at your disposal, it pays to act quickly to lower rates at the first sign of economic distress."

Many analysts interpreted Williams' remarks as an indication that the Fed will lower the target federal funds rate at the upcoming meeting of the Federal Open Market Committee (FOMC). However, the New York Federal Reserve Bank clarified Williams' comments later in the day.

"This was an academic speech on 20 years of research," said a New York Fed spokesperson. "It was not about the potential policy actions at the upcoming FOMC meeting."

The 10-year Treasury note yield closed at 2.05% on 7/19, while the 30-year Treasury bond yield was 2.58%.

Mortgage Rates Increase

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, July 18. Following a three-week near-standstill, mortgage rates moved higher this week.

The 30-year fixed rate mortgage averaged 3.81% this week, up from last week's average of 3.75%. Last year at this time, the 30-year fixed rate mortgage averaged 4.52%.

This week, the 15-year fixed rate mortgage averaged 3.23%, up from 3.22% last week. The 15-year fixed rate mortgage averaged 4.0% at this time last year.

"Mortgage rates moved higher after remaining at around the same level for about three weeks." said Sam Khater, Freddie Mac's Chief Economist. "The rise in rates was driven by continued improvement in consumer spending and partly due to optimism around a forthcoming cut in short term interest rates, which should provide support for business and investor sentiment."

Based on published national averages, the money market account closed at 1.22% on 7/19. The one-year CD finished at 2.57%.

Published July 19, 2019
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