Slower, yet strong US job growth expected in February

US equities surged for the third consecutive day, driven by tech shares after Fed Chair Jerome Powell hinted at potential rate cuts. Both the S&P 500 and Nasdaq 100 hit record highs, with the Dow Jones rising 126 points. Semiconductor stocks, led by Nvidia, soared despite slightly higher initial jobless claims, while Apple shares continued their decline. Additionally, the STOXX 50 index surged over 1% to achieve an over 23-year high on positive market sentiment following the ECB’s decision to maintain record-high interest rates amidst significant downward revisions to inflation forecasts. 

Summary for 08.03.2024 

• Asian equity markets rose on Friday, tracking Wall Street higher as Fed Chair Powell indicated that the central bank could be closer to dialling back restrictive policy if signs of moderating inflation prove sustainable.  Technology shares also extended a record rally on enthusiasm over artificial intelligence and related products.  Shares in Australia, Japan, South Korea, Hong Kong, and China all advanced. 
• European stocks are poised for further gains on interest-rate optimism, while US equity futures are anticipated to open steady ahead of a key US economic report, following extended trading dips for Broadcom and Costco due to disappointing quarterly results. 
• As tensions in the Middle East escalated, WTI crude futures climbed above $79 per barrel on Friday. Supply concerns mounted following a Houthi attack on a commercial vessel in the Red Sea, resulting in fatalities. Additionally, US crude stockpiles increased less than expected, while speculation arose regarding a potential Israel-Hamas ceasefire during Ramadan. 
• Federal Reserve Chair Jerome Powell indicated that the central bank is nearing the level of confidence required to initiate interest rate reductions. Speaking to the Senate Banking Committee, Powell suggested that once this confidence is attained, it would be suitable to gradually ease the current monetary policy restrictions in the coming months. 
• During its March meeting, the ECB maintained interest rates steady, with the main refinancing rate at 4.5% and the deposit facility rate at 4%, both at 22-year highs. Inflation forecasts were revised downwards, expecting 2.3% for 2024, 2.0% for 2025, and 1.9% for 2026. Core inflation is projected at 2.6% for 2024, 2.1% for 2025, and 2.0% for 2026. Growth prospects for 2024 were lowered to 0.6%, with expectations of expansions of 1.5% in 2025 and 1.6% in 2026. 
• Broadcom surpassed Wall Street expectations in its fiscal first-quarter results, driven by demand for AI-led chips and growth in its software business, fuelled by the VMware acquisition. Despite this, Broadcom’s shares fell over 3% in after-hours trading. The company reported adjusted earnings of $10.99 per share on revenue of $11.96 billion, exceeding analyst forecasts. 
• DocuSign reported robust fiscal fourth-quarter results, surpassing estimates with strong revenue and billings. The software company’s adjusted EPS stood at $0.76 on revenue of $712.4 million, with billings reaching $833.1 million, up 13% year-over-year. DocuSign also provided upbeat guidance for the first quarter and the full year ahead, leading to an 11% rally in shares during after-hours trading. 
• Costco’s fiscal second-quarter results were mixed, with earnings surpassing expectations but revenue falling short, indicating a more budget-conscious consumer base. The company reported earnings of $3.92 per share on revenue of $57.33 billion, missing analyst estimates. However, adjusted same-store sales grew 4.8%, with strong performance in the US, Canada, and international segments.  Shares fell 4% in extended hours. 
• Gap exceeded Wall Street expectations for its fourth-quarter results, with strong demand for its Old Navy and namesake brands during the holiday season. Despite sales slumps in Athleta and Banana Republic, lower supply-chain costs and controlled promotions boosted gross margins. However, Gap anticipates flat fiscal 2024 net sales, signalling prolonged efforts in brand reinvention. 
• Hugo Boss shares plunged 14% as the German fashion house projected slower sales growth and lower profit for the year, citing potential fiercer promotional activity and unfavourable currency effects. Despite benefiting from a brand revamp, it faces challenges from inflation and cautious consumer trends, particularly in Europe and China. 
• Aviva shares surged Thursday following the announcement of a robust 9% increase in operating profit for 2023, surpassing forecasts. The company also raised its dividend by 8% and introduced a £300 million share buyback program, signalling confidence in its future performance amid challenging market conditions. 
• Novo Nordisk surpassed Tesla in market valuation after announcing positive trial results for a new obesity drug, leading shares to surge over 9%. The Phase I trial showed participants lost 13.1% weight on amycretin. Novo’s success expands beyond Wegovy, with plans to focus on cardiovascular disease treatments alongside obesity. 
• Rivian’s shares surged 13% yesterday after unveiling three new EVs and announcing $2 billion in savings from pausing production at its Georgia plant. The R2 SUV, R3, and R3X crossovers promise a 300-mile range and fast acceleration, with production moving to Illinois for cost efficiency. Meantime, Jefferies initiated coverage with a Buy rating, noting parallels to Tesla and highlighting challenges, including cost reduction and proving the R2 model’s viability. 
• Mizuho analysts raised price targets for ARM Holdings to $160 (from $100), NVIDIA to $1,000 (from $850), Broadcom to $1,550 (from $1,450), and AMD to $235 (from $200), expecting further multiple expansion with upcoming catalysts. They highlight ARM’s post-IPO potential and NVDA’s AI dominance, with AMD and AVGO also benefiting.  
• Evercore ISI maintains its Outperform rating for Microsoft, affirming a $475.00 price target. The firm highlights Microsoft’s strides in monetising General AI, projecting a potential $82.5 billion revenue increase by 2028. Bull case scenarios suggest even higher revenue and EPS growth, underpinning Microsoft’s strong market position. 
• Citi reiterates its Buy rating for CrowdStrike, raising the price target to $425 from $320. Following a robust fiscal fourth quarter, the cybersecurity firm’s strong growth trajectory and profitability prospects have impressed analysts. With expanding product offerings and solid financial performance, CrowdStrike is poised for sustained growth. 
• Stifel analysts upgraded Micron to “Buy” from “Hold,” citing tightening supply and increasing demand, while Goldman Sachs raised its price target to $112, maintaining a Buy rating. Both anticipate strong second-quarter earnings due to favourable pricing dynamics, with CEO Sanjay Mehrotra expecting improved chip supply in 2024. Micron’s focus on AI applications adds to its prospects. 
• TD Cowen raised General Electric’s share price target to $175, maintaining a Market Perform rating after the company’s Investor Relations Day. GE’s Aerospace division forecasts robust earnings and cash flow for 2024 and ambitious targets for 2028, alongside a $15 billion stock buyback authorization, indicating confidence in future growth. 

• UBS upgraded Sherwin-Williams from Neutral to Buy, raising the price target to $402.00. The shift reflects a bullish outlook on the company’s earnings potential, supported by anticipated growth in the U.S. residential market. Sherwin-Williams’ history of outperforming industry growth and increased investment further bolster confidence in its future performance. 
• TD Cowen raised XPO’s price target to $136, maintaining an Outperform rating, following positive virtual meetings. Optimistic about XPO’s near-term trends and network initiatives, the firm expects improved operational efficiency, potentially narrowing the performance gap with industry peers.  
• Goldman Sachs anticipates Brent oil prices reaching $90 by summer, foreseeing OPEC+ cut phase-out by late 2024. Principal risks include geopolitical tensions and potential Iran supply reduction, with Chinese demand as a slight concern. They foresee sustained prices below $70 as unlikely without reduced demand or a change in Saudi strategy. 
• Last year, Huawei Technologies and Semiconductor Manufacturing International collaborated on producing an advanced chip in China, reportedly relying on US technology. Semiconductor Manufacturing, based in Shanghai, utilized equipment from California’s Applied Materials and Lam Research to manufacture a 7-nanometer chip for Huawei, highlighting China’s continued dependency on foreign components for cutting-edge semiconductor products.