S&P 500 tops fresh records, near the 5,000 mark

Major US indices surged higher on Wednesday, with the S&P 500 nearing the 5,000 mark, propelled by robust corporate earnings halfway through the season. Notable gainers included Roblox, Ford, and Emerson. Transportation shares led gains, buoyed by strong earnings from companies like XPO, Inc. Consumer discretionary and semiconductor sectors also performed well.  In the Euro Area, the Stoxx 50 index closed down 0.3%, reflecting losses driven by declines in key sectors such as energy and transportation amid mixed corporate updates. 

Summary for 08.02.2024 

• Asian stocks mostly rose this morning, led by Japan’s Nikkei 225 surging 1.7% on SoftBank’s rally and strong tech sector gains. Chinese markets lagged due to weak inflation data and Alibaba’s losses, with Shanghai Composite up 0.9% and Hang Seng down 1.1%. Wall Street’s record highs amid a strong earnings season and firm interest rate cut expectations boosted regional sentiment. 
• European stocks are poised for a higher open, while US equity futures remain steady, with positive corporate earnings and strong guidance driving sentiment. 
• Oil prices edged up on Thursday amid Middle East tensions and potential supply disruptions in the Suez Canal. Weak economic signals from China tempered gains, while mixed US inventory data influenced market sentiment. Despite expectations of reduced US production, a strong dollar and Fed rate hike outlooks limited price increases. 
• China’s consumer prices dropped 0.8% year-on-year in January 2024, the fourth consecutive monthly decline, with food prices falling at a record pace. Meanwhile, producer prices fell by 2.5% year-on-year, marking the 16th straight month of contraction, reflecting persistent deflationary pressures in the economy. 
• SoftBank Group Corp’s shares surged 8% this morning as its subsidiary Arm experienced a $16 billion windfall from an AI-driven chip demand boom, doubling its value since its late-2023 IPO. SoftBank, still holding a 90% stake, anticipates its first quarterly profit in five, fuelled by tech valuations and AI optimism. 
• Also this morning, Alibaba Group’s Hong Kong shares tumbled 5.2% after fourth-quarter earnings missed estimates, fuelled by weaker revenue growth in Taobao and Tmall. Despite a $25 billion share repurchase programme expansion, investor confidence waned amid intensified competition and China’s sluggish consumer spending environment, impacting both domestic and overseas markets. 
• Nvidia’s market capitalisation surged 40% in 2024, reaching $1.715 trillion, inching close to Amazon’s $1.767 trillion and Alphabet’s $1.812 trillion. Analysts’ optimism and surging AI demand fuel the share price rally, potentially making Nvidia the fifth most valuable US company. Earnings on 21^st February could provide further insights into future growth. 
• Walt Disney’s fiscal first-quarter results exceeded estimates, prompting a 6.7% after-hours share gain. Adjusted EPS stood at $1.22 on revenue of $23.55 billion, with cost-cutting efforts driving over $500 million in savings. Despite Disney+ subscriber decline, the company plans a sports streaming service collaboration and anticipates a 20% EPS increase for fiscal 2024. 
• PayPal reported better-than-expected Q4 earnings and revenue, with EPS at $1.48 and revenue reaching $8 billion. Despite a 15% year-over-year increase in total payment volume and growth in transaction revenue, a flat profit forecast for 2024 led to an 8% after-hours share price decline. Active customer accounts slightly declined. 
• CVS Health adjusted its 2024 profit forecast downward due to increased medical procedures among older adults, particularly in its Aetna Medicare Advantage plans. Despite beating Q4 profit estimates, rising costs prompted a cautious stance. Shares rose over 3%, reflecting confidence in the company’s diversified business model. 
• Uber Technologies reported market-beating Q4 results, including its first annual net profit as a public company. Strong demand in ride-sharing and food delivery businesses fuelled revenue growth of 15% to $9.9 billion, with gross bookings rising 22% to $37.6 billion. Quarterly core profit and gross bookings forecast exceeded estimates. 
• Roblox exceeded expectations with quarterly bookings crossing $1 billion for the first time, forecasting annual bookings of $4.14-$4.28 billion. Despite a widened net loss in Q4, its shares surged 10.2%. The platform’s growth, driven by in-game purchases and partnerships, reflects momentum building behind the scenes amid a growing gaming market. 
• TotalEnergies reported a 31% drop in net adjusted income for Q4 2023, below analyst expectations, citing weak refining margins. CEO Patrick Pouyanne outlined plans to allocate a third of investments to new oil and gas projects, despite uncertainties around US LNG approvals and ongoing projects in Namibia and Mozambique.  Shares fell by more than 3% on Wednesday. 
• Two major investors, Union Investment and Deka Investment, urged Siemens to simplify operations by reducing investments in Siemens Energy and Siemens Healthineers, citing complexity as a drag on share price. They advocate for unbundling the conglomerate structure to enhance shareholder value, highlighting the need for strategic divestments. 
• Apple is reportedly developing prototypes of foldable iPhones, a significant departure from its traditional design. The move follows similar offerings from competitors like Samsung and Motorola. While foldable smartphones are niche and come with a higher price tag, Apple’s entry could reshape the market landscape. 
• Germany’s KfW bank sold 50 million DHL shares for €2.17 billion as part of a government plan to invest in rail infrastructure. KfW’s stake decreased to 16.5%, with proceeds earmarked for Deutsche Bahn. The government aims to raise up to €4 billion this year through such sales, leveraging privatization to fund rail projects. 
• Morgan Stanley raised Nvidia’s price target to $750, citing surging demand in AI. Analysts emphasise strong near-term growth and dismiss short-term concerns, noting tight GPU cloud instances and supply chain indicators suggesting upside. They express confidence in Nvidia’s competitive position, highlighting the impact of the B100 transition. 
• Jefferies raised Eli Lilly’s price target to $814.00, maintaining a Buy rating. The adjustment follows strong quarterly results, with Mounjaro and Zepbound sales exceeding expectations. Eli Lilly’s 2024 guidance, positive trial outcomes, and confidence in drug interactions contribute to the bullish outlook. 

• Oppenheimer upgraded Enphase Energy from Perform to Outperform, setting a $133.00 price target. Despite missing consensus guidance, Enphase’s innovations and improved cost structure prompted the upgrade. 
• Stifel adjusted Infineon Technologies AG’s price target to €43.00 from €45.00, maintaining a Buy rating. The revision follows Infineon’s earnings report and reduced guidance, citing weakness in non-automotive sectors. Despite lower forecasts, Stifel remains optimistic, citing substantial order backlog supporting automotive sector growth and suggesting a recovery in the second half of 2024. 
• Barclays analysts view European equities as offering favourable upside potential amid global growth prospects, despite challenges from US market dominance and geopolitical concerns. They emphasise improving risk-reward dynamics, particularly in value/cyclical sectors, suggesting opportunities in areas like energy/materials and banking while adjusting sector weightings accordingly.