Equity markets remain anxious ahead of Powell’s testimony

On Tuesday, both Wall Street and European shares experienced declines as concerns over a potential economic slowdown and lacklustre investor enthusiasm weighed on markets. The S&P 500, Dow Jones, and Nasdaq dropped by 1%, 404 points, and 1.6% respectively, with weak data exacerbating market apprehension. Similarly, the STOXX 50 index fell by nearly 0.5%, reflecting cautious sentiment amid uncertainties surrounding China’s economic initiatives and anticipation of the upcoming ECB policy meeting. 

Summary for 06.03.2024 

• On Wednesday, Asian equity markets mostly fell, following a technology-led selloff on Wall Street. Investors, cautious of profit-taking, awaited Federal Reserve Chair Jerome Powell’s congressional testimony for clues on potential interest rate adjustments. Economic data from Australia and South Korea also influenced market sentiment. Australian, Japanese, South Korean, and Chinese equities declined, while Hong Kong shares rose. 
• US equity futures are expected to stabilise on Wednesday after a recent sell-off, while European equity futures signal a steady open as investors await Thursday’s ECB meeting for hints on the monetary policy outlook and focus on earnings reports from companies like Deutsche Post and Dassault Aviation, alongside CrowdStrike’s impressive performance and Nordstrom’s cautionary sales outlook. 
• The oil market showed resilience, with WTI crude futures holding steady around $78 per barrel after recent losses. Despite ongoing OPEC+ supply cuts, concerns over weakening demand loomed large, fuelled by signs of economic slowdown in the US. Moreover, the absence of clear stimulus signals from China and persistent geopolitical risks in the Middle East added to market uncertainty. 
• In Q4 2023, Australia’s economy expanded by 0.2% quarter-on-quarter, marking the ninth consecutive period of growth but at the slowest pace in five quarters. Subdued household spending, particularly on essentials, and a notable slowdown in government expenditure were key factors. Despite challenges, the GDP grew by 1.5% year-on-year, slightly surpassing expectations. 
• In January, US factory orders dropped by 3.6%, the largest decline since April 2020, driven by decreases in transportation equipment and primary metals. However, orders for computers/electronic products and electrical equipment rose. Meanwhile, the ISM Services PMI fell to 52.6 in February, indicating slower growth amid employment contraction and increased concerns about inflation and geopolitical conflicts. 
• Industrial producer prices in the Euro Area saw a year-on-year decrease of 8.6% in January, slightly above the anticipated 8.1% decline but moderating from the previous month’s 10.7% drop. Energy prices fell by 21.3%, while costs for intermediate goods decreased by 5.8%. Excluding energy, producer prices dropped by 1.5% month-on-month. 
• Bitcoin soared to an all-time high before retracing, down 7.6% to $62,380 on Tuesday, amid a bearish equity market. Gold also surged to a record high, buoyed by expectations of interest rate cuts. Economic concerns drove investors to seek alternative assets, propelling both Bitcoin and gold to new peaks. 
• CrowdStrike Holdings reported robust Q4 results, beating estimates with adjusted EPS of $0.95 and revenue of $845.3M. The cybersecurity firm provided stronger guidance for Q1, expecting adjusted EPS of $0.89 to $0.90 on revenue of $902.2M to $905.8M, surpassing Wall Street estimates. The stock surged over 23% in after-hours trading following the report. Additionally, CrowdStrike announced the acquisition of Flow Security, further enhancing its cloud security capabilities. 
• Bayer announced a legal victory in a Pennsylvania court, where a retired postal worker’s lawsuit alleging non-Hodgkins lymphoma from Roundup use was dismissed. Additionally, a California farmer and his wife dropped their similar case mid-trial. Bayer reaffirmed Roundup’s safety, amidst ongoing litigation over the product, with around 54,000 claims remaining. 
• Novo Nordisk shares dropped over 2.5% yesterday following disappointing kidney disease trial results for its drug Ozempic. The late-phase trial showed a 24% reduction in major cardiac events and death, below the expected 30%. Nonetheless, the data suggests GLP-1 medications like Ozempic have broader therapeutic benefits beyond diabetes and weight management. 
• US luxury chain Nordstrom forecasted lower-than-expected annual results due to cautious consumer spending amidst inflation concerns, causing an almost 10% drop in shares. While fourth-quarter revenue surpassed estimates, weak demand for apparel persisted. Nordstrom plans to expand its discount Rack stores, aiming to attract lower-income consumers, while Macy’s focuses on luxury brands for higher-earning customers. 
• Amer Sports Inc. reported strong fiscal year 2023 results, with revenues and net income at the upper end of estimates. Despite supply chain disruptions affecting wholesale revenues, the company saw a 10% increase in Q4 revenue and a notable 23% surge in full-year revenue, driven by growth in Greater China. Operating profit significantly improved, although a net loss was reported for the year. The CEO expressed confidence in continued growth for 2024, focusing on strengthening the balance sheet and investing in key growth drivers. 
• Traton, Volkswagen’s truck arm, anticipates a stable return on sales in 2024 after nearly doubling core earnings in 2023 due to heightened demand for commercial vehicles post-pandemic. Despite a 20% decrease in order backlog, Traton aims to capitalise on strengths amidst a softer truck market. 
• Stifel and DA Davidson both raised Target Corporation’s price targets, with Stifel increasing it from $153 to $177 while maintaining a Hold rating, and DA Davidson raising it from $167 to $195 with a Buy rating. Both firms express optimism for Target’s growth prospects, emphasising strong cost management, expansion plans, and expected rebound in sales. 
• Dan Ives of Wedbush Securities sees Apple’s recent share price decline as a chance to buy, citing concerns over Chinese sales and highlighting AI integration potential. Wedbush maintains an outperform rating with a $250 target. Meantime, Rosenblatt analysts stress the importance of AI advancements for Apple’s innovation reputation, suggesting a reveal at the June WWDC could bolster its valuation. 
• CFRA maintained a Buy rating on NVIDIA and raised its price target to $1,000.00, citing bullish expectations for the company’s next-gen GPUs amid supply constraints. Anticipated advancements, growing AI workloads in enterprises, and expanding market penetration in edge computing contribute to CFRA’s positive outlook. 
• Citi maintained a Buy rating on Dell Technologies Inc., citing its impressive share price surge and optimistic outlook. The firm’s confidence stems from Dell’s strong financial performance, conservative projections for fiscal year 2025, and anticipated recovery in the personal computer market, suggesting further growth potential. 
• Oppenheimer reiterated its Outperform rating on Builders FirstSource (NYSE: BLDR) with a $242.00 price target, citing confidence in the company’s market position following recent industry events and management meetings. Despite temporary margin contraction, the firm anticipates gross margin expansion in 2024, maintaining Builders FirstSource as a top pick. 

• Wolfe Research upgraded AT&T to Outperform from Peer Perform, maintaining a $21 per share price target. The firm highlights AT&T’s core growth, efficiency gains, debt reduction, and improved churn rates. Analysts suggest taking AT&T seriously as a long-term investment, noting its resilience amid competitive pressures and industry price increases. 
• Deutsche Bank maintained a Buy rating on NIO Inc. with a $9.00 price target after mixed Q4 results. Despite challenges, a strong revenue beat and an optimistic Q1 2024 outlook support the stance. Morgan Stanley reaffirmed an Overweight rating and $13.00 price target, citing NIO’s exceeded revenue guidance and improved gross margin, despite a widened net loss and decreased Q1 2024 deliveries. 
• UBS downgraded Chemours from Buy to Neutral, slashing the price target to $21 from $37 amid ongoing internal investigations and leadership changes. Concerns about potential impacts on the share price performance led to the downgrade, despite maintaining a positive outlook on the core business aspects.