Wall Street Week in Review: Amazon and Apple Earnings, Labor Market Figures, and Short Sellers Impact

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Another hectic week on Wall Street, characterized by earnings releases from the giants Amazon and Apple on Thursday evening and labor market figures earlier on Friday, was rounded off with a broad but cautious decline for the key indices.

This is how it looked right after closing time:

The Nasdaq fell 0.4 per cent and was therefore down 2.9 per cent for the week. The Dow Jones fell 0.4 percent to end the week down 1.2 percent. The S&P 500 fell half a percent and ended the week down 2.3 percent.

The development on Wall Street came after a mixed labor market report an hour before the opening. Although the “month’s most important figure”, or nonfarm payrolls, showed lower growth than expected in July, unemployment still fell at the same time as wage growth rose.

Amazon, for its part, rose more than eight percent after presenting its quarterly figures after closing time on Thursday. Apple fell over four percent.

Government interest rates rose earlier in the day before falling clearly on the labor market figures. The two-year interest rate is around 4.78 per cent, while the ten-year interest rate is just over four per cent.

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Blame it on short sellers

Icahn Enterprises, the company of billionaire activist investor Carl Icahn, plunged on Wall Street on Friday. It happened after the company released results for the second quarter, together with an announcement that the dividend will be halved to one dollar per ownership share (depositary unit). The stock fell more than 20 percent.

Icahn has been one of the big investor profiles on Wall Street in recent decades and controls a number of companies through Icahn Enterprises LP. He is considered one of the great activist investors on Wall Street.

The strategy is that he buys up a large enough stake to be able to put pressure on the management to make changes that he believes will be in the shareholders’ best interest, often in the sense of repayments to the owners. In the US, he is referred to as a “corporate raider”.

Carl Icahn.
(Foto: Mark Lennihan)
Mer…

He is possibly best known for the acquisition of Trans World Airlines in the last millennium and for the famous argument he had on live television with Bill Ackman about Herbalife in 2013. According to Forbes, he is worth ten billion dollars.

In the second quarter, Icahn Enterprises reported revenue of $2.5 billion and a net loss of $269 million. Losses more than doubled from the same quarter last year.

– I believe the development in the second quarter shows the impact of short positions taken on our portfolio companies, which I attribute to the misleading Hindenburg report, Icahn said himself in a press release.

“Highly overrated”

It was at the beginning of May that Hindeburg announced a short position on Icahn Enterprises.

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Together with the announcement, the research company, which therefore bets on a fall in the price, released a very critical report on Icahn’s conglomerate, in which it was claimed, among other things, that the company has far too much debt and that it is traded at an overvalued premium in relation to the value-adjusted equity.

Hindenburg also pointed out that more than a hundred million shares have been used as collateral for loans by Icahn himself, almost a third of the billionaire’s stock holding in Icahn Enterprises.

– We believe that Icahn, a Wall Street legend, has committed the classic mistake of taking on too much debt while the losses continue. It is a combination that rarely ends well, the report said.

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