S&P 500 breaks through 5,000 mark

On Friday, US shares exhibited mixed performance, with the S&P 500 surpassing 5,000 fuelled by positive inflation data revisions. Equities have gained 5% in 2024, led by small-caps, consumer discretionary, and tech sectors. Global equities and oil prices climbed, while the 10-year Treasury yield inched up. The S&P 500 closed at a record high, driven by tech giants like Microsoft. Major indices closed with the S&P 500 up 0.6%, the Dow down 0.1%, and the Nasdaq up 1.3%.  European equities also closed mixed on Friday, with the Stoxx 50 index hitting a 23-year high on strong earnings from Hermes, while L’Oreal weak sales led to a drop, as Germany confirmed its lowest inflation rate in over two years. 

Summary for 12.02.2024 

• Asian equities traded cautiously this morning as several markets observed the Lunar New Year. Australia’s ASX 200 slipped 0.2%, hampered by losses in CSL despite strong earnings from ANZ and JB Hi-Fi. Investors are on edge awaiting key data releases and Fed speeches, contributing to cautious sentiment across markets. 
• European are expected to edge up at the open this morning, while US equity futures held steady, as investors awaited key economic data and corporate earnings reports, following last week’s milestone of the S&P 500 closing above 5,000 for the first time. 
• prices dipped in Asian trading as investors took profits following significant gains last week, with attention shifting to developments in the Israel-Hamas conflict and upcoming industry reports. Market activity was subdued due to Lunar New Year holidays in most of Asia. OPEC and IEA reports, along with US inflation data, are awaited this week. 
• NATO, in alignment with the White House, dismissed Donald Trump’s statement suggesting he might urge Russia to invade countries with insufficient defence spending commitments. European officials acknowledge the need to brace for potential future provocations from Trump and are better equipped to address such remarks. 
• The December 2023 US CPI rose by 0.2%, revised from the initial 0.3%, with November revised up to 0.2% from 0.1%, and October adjusted to a 0.1% increase from a flat reading. The core rate, excluding food and energy, remained at 0.3% for December and November, and 0.2% for October. 
• The Della Valle family, along with L Catterton, aims to take Italian luxury shoemaker Tod’s private, offering a 17.6% premium to buy 36% of shares at 43 euros each. LVMH supports the move, having increased its stake to 10% in 2021. CEO Diego Della Valle will retain a majority stake if successful. 
• Expedia reported better-than-expected Q4 earnings but disappointed in gross bookings and free cash flow, causing a 17.8% share price drop in after-hours trading. The company’s negative free cash flow and missed gross bookings target led Jefferies to lower its price target. Additionally, Expedia announced a CEO transition, further impacting investor confidence. 
• PepsiCo’s quarterly sales dropped unexpectedly due to price hikes impacting demand, leading to a forecast of slower revenue growth in 2024. Despite anticipating moderated costs and raising dividends, disappointing volume performance prompted a rating downgrade from CFRA, though the price target was increased from $200 to $210. 
• L’Oreal’s shares fell more than 7% on Friday as the company missed sales expectations due to weak performance in Asia, notably in North Asia where sales dropped 6.2%. Challenges in the travel retail business, particularly in China, contributed to the disappointment. Despite this, L’Oreal plans share buybacks and signed a licensing deal with Miu Miu for beauty products. 
• Cloudflare’s shares surged almost 20% on Friday following the announcement of Q1 guidance surpassing Wall Street estimates. The company expects adjusted earnings of $0.13 per share and revenue of $372.5M-$373.5M. CEO Matthew Prince attributed the strong performance to efficient execution despite a choppy macro environment. 
• Amazon founder Jeff Bezos sold around 12 million shares, totalling roughly $2 billion, soon after announcing plans to sell up to 50 million shares over the next year. Bezos’ sale, disclosed in a company filing, occurred on Wednesday and Thursday, as part of a broader divestment strategy. 
• Cisco plans a restructuring, potentially involving layoffs of thousands of employees, as it focuses on high-growth sectors. The company, with 84,900 employees, hasn’t finalised the number of layoffs. This follows a previous restructuring in 2022. Cisco’s move reflects industry trends amid slowing demand for networking equipment. 
• Airbus informs airlines of further delays in aircraft deliveries, pushing back some planes originally slated for late 2024 and into 2025 due to ongoing supply chain issues. Despite a strong start to the year, concerns persist over component shortages, potentially impacting delivery targets for 2024. 
• Hermes plans an 8-9% global price hike after exceeding sales expectations in Q4 2023, reaching €3.36 billion. Analysts praise its performance, citing strong brand momentum and shareholder returns. Despite aggressive pricing by competitors, Hermes maintains dominance in luxury handbags, with strong growth in all regions, particularly China. 
• TD Cowen raised Eli Lilly’s price target to $850 from $635, maintaining an Outperform rating after the company’s strong financial results, expecting continued growth above industry averages through 2030. While acknowledging some doubts, historical performance and momentum in key franchises support optimism. 
• Bank of America Securities raised ASML Holding NV’s price target to EUR 1,064.00, maintaining a Buy rating, citing confidence in ASML meeting its 2025 revenue target of EUR 36 billion amidst growing demand for AI accelerators and EUV systems. Positive financial projections and ASML’s strategic importance support the outlook. 
• Argus analysts downgraded PayPal shares from Buy to Hold due to disappointing EPS guidance and anticipated slower growth in payment volumes in 2024. Despite short-term concerns, they maintain a long-term Buy rating, citing PayPal’s competitive advantages and potential for market share gains amid growing digital payment trends. 
• Tigress Financial Partners raised Meta Platforms Inc.’s price target to $575, maintaining a Strong Buy rating following robust quarterly performance, a $50 billion share repurchase plan, and its inaugural dividend. Meta’s focus on AI-driven advertising, operational efficiency, and strategic partnerships are expected to drive further growth, with a potential 22% upside. 

• CFRA upgraded Pinterest’s price target to $45.00 and maintained a Buy rating following strong Q4 earnings, with EPS surpassing expectations at $0.53. Despite modest ARPU growth, accelerating MAU growth and cost controls drove EBITDA growth. CFRA expects potential upside from the Pinterest-Amazon advertising partnership, raising EPS estimates for 2024 and 2025. 
• Barclays initiated coverage on Adidas with an Overweight rating and €218 price target, citing a challenging operating environment in H1 2024 but anticipating growth from strong product pipelines and major sporting events. They view Adidas’ 2023 progress positively and expect potential upside surprises in 2024 given conservative guidance. 
• Bank of America equity strategists observed a significant $40.1 billion inflow into cash, contrasting with a $15.6 billion outflow from US shares, signalling a shift away from American equities. Emerging market equities saw a record $20.8 billion inflow, particularly driven by investments in China. The market nears a potential sell signal according to BofA’s analysis, despite cash inflows continuing and emerging market debt witnessing significant inflows. 
• Moody’s downgraded Mexico’s state-owned oil firm Pemex by two notches to B3, citing worsening credit quality and a negative outlook. The agency expressed concerns over Mexico’s fiscal conditions, expecting a higher fiscal deficit. Pemex, one of the world’s most indebted oil companies, faces increased financial pressure. 
• In the week ahead, major economies await crucial economic indicators and corporate earnings. In the US, attention is on inflation, retail sales, and Federal Reserve speeches. Elsewhere, highlights include UK GDP, Japan’s flash GDP, and Germany’s ZEW sentiment. Major companies like Coca Cola, Airbnb, Zoetis, Cisco, Applied Materials, and Deere & Company are among those set to report earnings.