US
The US market recovered some of its losses from its 4-day slump, rising +0.9% overnight, as the recent sell-off viewed as profit taking given the strong run recently as we enter the tailend of the US earnings season.
Berkshire Hathaway jumped +3.6% to a record high after its Saturday earnings report showed an operating profit for the second quarter that exceeded Wall Street expectations.
The firm’s results showed a jump in insurance underwriting earnings, which included a benefit from its acquisition of Alleghany Corp. The Federal Reserve’s campaign of interest rate rises also helped, by boosting Berkshire’s investment income from the cash it stockpiles in short-dated US Treasuries. Operating company earnings of about $US9 billion were better than we expected as strength in insurance, including favourable reserve development at Geico and higher fixed investment income, offset a drop in railroad earnings.
Of the 85% of companies in the S&P 500 that have posted their quarterly results, about 80% have exceeded Wall Street forecasts. Later in the week, investors will focus on the release of July consumer and producer price index data. Both are closely watched given their connection to the path of inflation and the economy’s healthy, and important data points for the Fed’s next interest rate decision in September.
Restaurant Brands (NZ)
Restaurant Brands shares slumped -12.3% yesterday after downgrading its net profit guidance to $12m to $16m, which on the top end represents half of the profit made in 2022 ($32.08m), and $51.88m in 2021. The company stated it is struggling with inflationary pressures on food costs and wages, and price increases on passed onto customers aren’t enough. Restaurant Brands reported a +7.1% increase in second-quarter sales to $331.6m, and total year-to-date sales of $640.2m, up +9.4%.