'Tis the season

QUOTE OF THE DAY

[It’s just] a fancy four letter word."

Market Snapshot

• The S&P and Nasdaq closed at records from strong tech gains.
• The Dow was dragged down by Goldman’s weak earnings.
• The dollar dropped on growing uncertainty of President Trump’s agenda.
• Greece will issue bonds for the first time in three years.

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'TIs the Season

Goldman Sachs and Bank of America stepped up to the podium Tuesday, cleared their throats and announced better than expected earnings for the second quarter (Goldman $3.95 vs. $3.39 & BoA $0.46 vs. $0.43).

But, it was the awkward chorus of crickets that stole the show—both stocks fell (2.45% and 0.58%, respectively) after the announcement.

Wait...this feels oddly familiar…

That’s because it should. Last week, three bulge-bracket banks—JPMorgan (-0.35%), Wells Fargo (+0.16%) and Citigroup (+0.09%)—suffered the same fate. All three beat earnings, but their shares couldn’t care less.

On to the newbies.

Goldman Sachs, you’re up first.

For Lloyd Blankfein and Goldman, the tale starts and ends with bond and commodities trading.

Goldman’s bread-and-butter has always been exotic trading. Said another way, the harder it is to pronounce the name of the investment vehicle, the more likely wide-eyed investors will be to do business with it.

But those days appear to have run their course.

Bond trading sank 40%, pegging it behind all of the big U.S. banks (except Morgan Stanley, who has yet to report) as piles of money are being moved from actively-managed portfolios to passively-managed index funds.

As for commodities trading? The business had its worst quarter in 17 years. And if it hadn’t been for an 88% surge in private equity holdings, topping earnings wouldn’t have even been part of the equation.

Bank of America...you’re up

Bank of America was carried by gains from the Fed’s rate hikes. Net interest income (NII) rose 8.6% year-over-year (to $10.99 billion) with the bank earning higher rates on loans and securities. But, let’s think back to JPMorgan’s report from last Friday—sometimes a spike just doesn’t tell the whole story.

Brian Moynihan (CEO) and BofA had their hearts set on NII rising $150 million from last quarter. Instead? It fell $75 million.

That may feel like chump change to Bank of America, but it’s a warning sign to investors.

You Might Need a Doctor’s Note

With one swift sneeze, Chipotle’s stock fell 8%, faster than you could say "God bless you."

A handful of innocent lunch-goers went into the Chipotle in Sterling, VA looking for a burrito bowl (and maybe a little extra guac), but they left feeling sick.

The company pointed to a possible norovirus—a foodborne illness that can be transferred between people—but, swiftly denied responsibility.

Still, it was all for naught. The news spread through Wall Street like a…foodborne illness...(too soon?).

Chipotle might be trying to forget the E. coli scare in 2015, which crippled its stock price and far too many stomachs, but it seems to still be glimmering in the rear-view mirror for many investors.

Hence, today’s fire sale.

For now, the Virginia store has shut its doors for sanitization, but if the past becomes Chipotle’s present, the burrito-maker better prep itself with a whole lot more than a few bottles of Purell.

Good Day to be Lazy

Pizza Hut just made it a little easier to say "screw it, we’re doing delivery."

The Yum!-owned (+0.26%) pizza chain is hiring 14,000 more delivery drivers before 2018 as part of its $130 million plan to turn up the heat against Domino’s (+1.44%)—but it won’t be easy.

Pizza Hut’s same-store sales have slipped 7% year-over-year, while Domino’s powered its way to 10% growth, one lava cake at a time.

The Hut is hoping its secret ingredient will be an increase in ad spending and a push on the tech side.

Its state-of-the-art "Delivery Network Algorithm" tracking system gauges delivery time based on meal prep, weather, local construction and traffic jams (sounds like they literally just downloaded Waze).

Regardless, with any luck, a few more cheesy football ads and a brand spankin’ new squad of ultra-savvy pizza delivery guys could be just the boost it needs.

...it’s not like the pizza is getting any better.

Tell Me More…

• Discovery and Scripps are revisiting merger talks.
• Amazon (+1.43%) launched Spark, a new Instagram look-a-like aimed at product discovery.
• Alphabet (+1.13%) is reintroducing Google Glass, marketing it towards corporate customers.
• McCormick is buying British consumer goods conglomerate Reckitt for $4 billion.

Economic Calendar

• Monday    Earnings: JPMorgan (+), Citigroup (+), Wells Fargo (+)
• Tuesday   Earnings: Bank of America (+), Goldman Sachs (+), Harley-Davidson (+), Johnson & Johnson (+)

                 Economic Events: Housing Market Index (-)

• Wednesday   Earnings: American Express, M&T Bank, Morgan Stanley, Qualcomm Inc, T-Mobile

                       Economic Events: Housing Starts

• Thursday   Earnings: American Airlines, Capital One, E*TRADE, Microsoft Corp, Ruby Tuesday, Visa, eBay

                  Economic Events: Jobless Claims

• Friday      Earnings: General Electric

                 Economic Events: Baker-Hughes Rig Count

Gimme 5...Market Concepts

We came across a term the other day that we struggled to boil down for you. It didn’t make us happy. So, from one brewer to another, here is our way of saying sorry.

Arbitrage

Arbitrage is a strategy where you take advantage of a price difference for the same item in two markets. The result: profit. Imagine buying a lamp at a yard sale for $10 and flipping it on Amazon for $12. Yup, that’s arbitrage.

EBITDA

Earnings Before Interest, Tax, Depreciation and Amortization. Sounds complicated, but really, it’s all the money a company has leftover after paying for all of its operations…that is, before Uncle Sam has a go at least.

Hedging

Hedging is a strategy an investor uses to protect himself/herself from risks associated with an investment. Think about hedging as taking out an insurance policy; you aren’t guaranteed a "bad event" won’t happen, but you’ll reduce the financial impact of the potential damages if it does.

ETF

An ETF or (Exchange Traded Fund) is a tradable stock that tracks an index. The index could be anything from the financial sector to all companies with cat references in them (seriously, there is a cat ETF). So when you buy an ETF, it is just a stock that tracks that indexes overall performance.

Mutual Fund

People tend to mix this one up with ETFs. Rather, a mutual fund is a stock you can own that tracks the performance of a wide variety of sectors. You buy a mutual fund to diversify risk. Let’s say the energy sector is down one year, no worries! The tech sector can earn it back for you.

Did you enjoy our Brewified business terms? Let us know and we can do more next week!

Question of the Day

Running at the same constant rate, 6 identical machines can produce a total of 33 widgets per hour. At this rate, how many widgets could 14 such machines produce in 3 hours?

(Give up?)

Who Am I?

I started my first business at age six, selling greeting cards.

My colleagues praise me for my photographic-like memory.

My company manages two trillion in assets.

I helped negotiate the acquisition of Bear Stearns.

(Got any guesses?)

Stat of the Day

$18 billion

The expected amount of money spent on mobile video advertisments next year. That’s a 49% jump from 2017.