US equities closed mostly higher on Wednesday, driven by strong tech earnings. The S&P 500 hit a record high for the fourth consecutive session, and the Nasdaq reached its highest level in over two years. Netflix shares surged 11% after reporting robust subscriber numbers and beating earnings estimates, marking a key point in the current earnings season. Mega-cap tech companies like Apple, Amazon, Alphabet, Meta Platforms, and Microsoft are all set to report over the next seven days, influencing the earnings outlook. In the Euro Area, the Stoxx 50 index surged over 2%, driven by strong earnings reports from major Eurozone companies such as ASML and SAP, despite preliminary PMI data indicating a slowdown in the Eurozone’s private sector activity. 

Summary for 25.01.2024 

  • Asian equities mostly rose on Thursday, with Chinese markets benefiting from government-announced monetary stimulus measures. The Shanghai Composite and CSI 300 rebounded further. Hong Kong’s Hang Seng climbed, but losses in electric vehicle equities, influenced by Tesla’s disappointing Q4 earnings, capped gains. Japanese shares lagged as Bank of Japan signals prompted profit-taking. 
  • European equities are expected to open slightly lower ahead of the ECB’s rate decision, while US equity futures hold steady following Tesla’s 6% drop in extended trading due to missed Q4 earnings, contrasting with IBM’s 8% rise after beating forecasts, and investors await the fourth-quarter GDP report and more Wall Street earnings. 
  • Oil prices rose in Asian trade, nearing one-month highs after China’s stimulus measures. Strong US and UK purchasing managers index readings boosted crude demand outlook. China’s unexpected reserve requirement cut and a significant drawdown in US oil inventories contributed to gains, despite disruptions from severe weather.  
  • Tesla plans to launch its next-gen electric vehicle in H2 2025, acknowledging production challenges. CEO Elon Musk remains optimistic despite a 6.0% after-hours drop, anticipating competition with cheaper EVs. The critical model will initially be produced in Texas, expanding to Mexico and another non-North American factory. Tesla reported slowing sales growth, reduced margins, and potential price cuts. Musk’s warning on Chinese EV makers surpassing foreign rivals without trade barriers adds to concerns in the industry. 
  • Microsoft’s market value surpassed $3 trillion, making it the world’s second most valuable company after Apple. Microsoft’s shares reached a record high of $405.63, briefly crossing the $3 trillion market cap threshold before closing at $402.56. The company’s success is attributed to its investments in AI, particularly through OpenAI. In contrast, Apple faces challenges with slowing iPhone demand, especially in China. Analysts express optimism for Microsoft’s AI initiatives, contributing to a 8.5% increase in its equity value this year. 
  • ASML Holding’s shares surged nearly 10% to a record high after its Q4 earnings beat expectations and a robust order backlog indicated a computer chip market recovery. The Dutch tech giant’s net profit rose 9% to €2.0 billion, with orders exceeding €9 billion in the quarter. ASML’s conservative outlook for flat sales in 2024 reflects uncertainty, despite positive signs of improving chip demand and higher factory utilization rates. The company’s market capitalization exceeded €300 billion for the first time. Sales to China in 2024 will be impacted by new export restrictions. 
  • SAP’s shares surged over 6% after reporting Q4 results and revealing plans to restructure, focusing on AI efforts by cutting 8,000 jobs. Despite missing EPS estimates, the German software firm saw a 25% growth in Q4 cloud revenue. SAP aims for €17.0 to €17.3 billion in cloud revenue in FY 2024, anticipating a fundamental shift with a $2.2 billion investment in AI skills and a commitment to supporting AI startups. Analysts see the restructuring program creating upside to FY25 targets, with efficiency improvements contributing €500 million to operating profit in 2025. 
  • In Q4 2023, Apple’s smartphone shipments in China decreased by 2.1%, yet it claimed the top spot in the market, according to IDC. Huawei experienced a 36.2% increase, securing the fourth position with a 13.9% market share. China’s overall smartphone shipment volume for the quarter was 73.63 million units, a 1.2% increase, but the full-year volume was 271 million units, down 5%. 
  • ServiceNow raised its 2024 annual subscription revenue forecast to $10.56 billion – $10.58 billion, citing increased demand for its generative AI products, such as Now Assist. The company announced a five-year deal with Visa and extended its partnership with EY. In Q4, it posted $2.44 billion in revenue and an adjusted profit of $3.11 per share, surpassing market estimates. Nonetheless shared dropped by over 1% in extended trading. 
  • US aviation regulators ordered Boeing to halt further production-rate increases for its 737 Max aircraft. The action by the Federal Aviation Administration leaves Boeing unable to boost output of its cash-cow jetliners for the foreseeable future, at a time when airlines are clamouring for new planes to meet soaring demand for air travel. It comes days before Boeing CEO Dave Calhoun is due to set annual targets for Boeing’s 737 deliveries, a measure closely watched by investors, with its Jan. 31 earnings. 
  • IBM forecasts full-year revenue growth of 4%-6%, exceeding Wall Street expectations of about 3%, driven by stable demand for its IT software and AI-focused consultancy services. Despite anticipating layoffs in 2024, the company plans to hire for AI-centered roles, maintaining a relatively unchanged headcount. IBM’s Q4 revenue and adjusted profit surpassed estimates, with its generative AI business doubling sequentially. The company’s strategic focus on software and consulting, particularly in AI, has positioned it favourably against competitors. 
  • DuPont De Nemours expects a Q4 loss of $220-370 million, a shift from a $105 million profit a year ago, citing ongoing destocking by customers in its industrial business. The company forecasts Q1 sales of about $2.8 billion, below analysts’ $3.04 billion estimate, leading to a more than 14% drop in its shares to an eight-month low. DuPont will also incur a non-cash goodwill impairment charge of $750-850 million in Q4 for its water and protection segment. 
  • Puma’s shares fell as the sportswear brand reported preliminary 2023 sales of around €8.6 billion, citing an impact from the extraordinary devaluation of the Argentine peso. Despite a 6.6% overall revenue growth, Q4 sales declined by 9.8%. Puma’s 2024 outlook includes mid-single-digit currency-adjusted sales growth and an EBIT range of €620 million to €700 million, disappointing analysts at Citi, who noted an 18% below-consensus FY24 EBIT guidance due to a weaker sales outlook. 
  • Redburn Atlantic initiated coverage on Ford and Tesla with Sell ratings. For Ford, a $10.00 price target was set, citing minimal cost structure improvement until a robust EV platform is developed. Tesla received a $170.00 price target, noting challenges and a widening gap between expectations and margin/FCF issues due to slowing growth. 
  • In a note on Wednesday, Wedbush analysts maintained an Outperform rating and $250 price target on Apple and noted a strong start for the Apple Vision Pro, estimating around 180,000 units sold over the launch weekend. They anticipate Apple shipping approximately 600,000 units in 2024, with future models expected to have lower price points and broader consumer AI applications. Analysts see Vision Pro as the first step in Apple’s broader AI strategy. 
  • Citi anticipates a strong performance from Microsoft in its upcoming earnings report, raising its price target to $470 and maintaining a Buy rating. The bank cites confidence in Microsoft’s growth due to generative AI, with fieldwork indicating high achievement levels and broad-based strength. Citi expects a solid beat and raise, highlighting Microsoft’s leadership in GenAI and potential for multi-year growth. 
  • New Street Research upgraded AMD to Buy with a $215 price target, citing upside potential in the data centre AI chip sector. The firm sees AMD as the best play for a fast adoption scenario, given CEO Lisa Su’s target addressable market of $400 billion for datacentre AI chips by 2027. New Street believes AMD has the most valuation and expectation upside in this scenario.