Apple shares rise on positive iPhone sales outlook

General market commentary

U.S. equity markets ended Thursday on a positive note, supported by strong Q4 GDP data and upbeat corporate earnings, with the S&P 500, Dow, and Nasdaq all posting modest gains. Technology stocks were a mixed bag, with a notable 6% drop in Microsoft shares weighing on the sector, while Apple’s after-hours trading saw a 3% jump following its better-than-expected quarterly results. Other tech firms like Intel and KLA also performed well, rising 4% and 3%, respectively. Despite concerns over an AI-related selloff earlier in the week, the broader market showed resilience, with the Dow up 5.5% for the month, and both the S&P 500 and Nasdaq tracking gains of 3.2% and 1.9%, respectively.

Economic data presented a mixed outlook, with U.S. GDP growing at a 2.3% annual rate in Q4, slightly below expectations but still indicative of solid growth driven by strong consumer spending. The labour market remained robust, although inflation showed signs of acceleration, and pending home sales unexpectedly fell, suggesting a cooling housing market. The Federal Reserve maintained its cautious stance, keeping interest rates unchanged, while commodity markets saw gains, with gold and silver prices rising sharply. Investors are now focused on upcoming earnings reports and inflation data, with particular attention on the PCE price index due for release on Friday.

Latest market and economic update

• Asian stocks were mixed on Friday, with investors cautious amid President Trump’s threat of 100% tariffs on the BRICS bloc and ongoing trade uncertainties. While Japan’s market showed slight gains and Singapore’s Straits Times index rallied, other regional markets, including India and South Korea, were weighed down by concerns over tariffs and declines in technology stocks.

• U.S. equity markets are expected to open on a positive note, building on Thursday’s gains as investors digest mixed economic data and corporate earnings. With a focus on upcoming inflation data and earnings reports, market sentiment remains cautiously optimistic, particularly in the tech sector following strong results from Apple and other key firms.

• The STOXX 50 and STOXX 600 rose 1% and 0.9%, respectively, on Thursday, following the ECB's expected rate cut, despite weak Eurozone data. Key market movers included Shell, which gained 1.2% after an earnings miss, while Deutsche Bank dropped over 4% and H&M fell 4.1% after disappointing results.

• The US dollar held steady above 108, extending its gains for the third consecutive session, as traders awaited further clarity on tariffs and the PCE inflation report. Against the euro, the dollar was trading at 1.0390, reflecting strength in the currency amid solid US economic data and a cautious Fed stance.

• Oil prices rose slightly in Asian trade on Friday but were still on track for a second consecutive week of losses, weighed down by concerns over U.S. trade tariffs and global demand. Traders are also awaiting the U.S. PCE inflation data for clues on interest rate decisions, while President Trump’s tariff threats on Canada, Mexico, and China add further uncertainty to the market.

• The U.S. economy grew at a 2.3% annualised rate in Q4 2024, with personal consumption driving the expansion, although weak nonresidential investment and declining inventories limited growth. Overall, 2024 saw a 2.8% GDP growth, and strong labour market conditions and moderating inflation are expected to support continued expansion into 2025.

• The European Central Bank cut key interest rates by 25 basis points yesterday, with the deposit rate now at 2.75%, reflecting an easing of price pressures and a moderating inflation outlook. Despite persistent inflation in some areas, the move is expected to gradually reduce borrowing costs, though the ECB remains cautious and data-driven in its approach to reaching the 2% inflation target.

• Christine Lagarde, President of the European Central Bank, dismissed the idea of Bitcoin being included in the monetary reserves of any EU country, citing concerns over its liquidity, security, and potential for criminal activity. She emphasized that Bitcoin does not meet the necessary criteria set by the ECB or other EU policymakers.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

• Apple forecasted strong sales growth, buoyed by the gradual rollout of AI features, despite a slight drop in iPhone revenues for the holiday quarter. The company’s iPads and Macs performed better than expected, and its services business saw robust growth, helping to offset weaker iPhone sales in China.

• Samsung Electronics warned of sluggish sales in its AI chip division due to U.S. export restrictions on high-bandwidth memory chips to China, as well as challenges in meeting Nvidia's chip requirements. The company expects limited first-quarter earnings growth, with its memory chip business facing weak demand, and forecasts a slower mobile phone market, despite efforts to revive its margins with the Galaxy S25.

• Visa Inc. exceeded Wall Street's expectations for Q1, reporting earnings of $2.75 per share and revenue of $9.51 billion, driven by strong payment volumes and a surge in cross-border transactions. The company provided an optimistic revenue outlook for the year, forecasting net revenue growth in the low double digits and EPS growth in the low-teens percentage range.

• Mastercard's fourth-quarter profit exceeded expectations, driven by strong consumer spending and a 20% increase in cross-border volume. The company posted adjusted earnings of $3.82 per share and a 16% rise in net revenue to $7.49 billion.

• KLA Corporation reported strong fiscal Q2 results, with earnings per share of $8.20 and revenue of $3.08 billion, surpassing analyst expectations. For Q3, the company forecast revenue of $3.0 billion and adjusted EPS in the range of $8.05, both above consensus estimates despite the impact of new U.S. chip export controls.

• Intel's December-quarter results exceeded expectations, though its revenue forecast for the current quarter fell short due to weak demand for data center chips and uncertainty surrounding its CEO transition. The company is grappling with increased competition, particularly from Nvidia in the AI space, and investors are awaiting clarity on leadership and long-term strategy.

• Baker Hughes exceeded Wall Street's profit expectations for the fourth quarter, driven by strong demand for natural gas equipment, despite weaker sales in its drilling segment. While its oilfield services revenue declined in both North America and international markets, its industrial and energy technology segment saw significant growth, particularly in LNG orders.

• Caterpillar reported fourth-quarter earnings that exceeded expectations, but revenue fell short, primarily due to lower sales volumes and a decrease in dealer inventory. For the full year, sales dropped 3% to $64.8 billion, with the company focusing on share repurchases and dividends.

• Sherwin-Williams forecast lower-than-expected full-year profits due to ongoing demand weakness, particularly in several key markets. Despite this, the company posted a fourth-quarter adjusted profit of $2.09 per share, surpassing analyst estimates.

• Deckers Outdoor exceeded third-quarter sales estimates, driven by strong demand for its Hoka running shoes, with revenue up 17% to $1.83 billion. However, its in-line annual forecast caused shares to drop by 17%, as analysts found the guidance overly conservative despite the positive results.

• Deutsche Bank reported a larger-than-expected drop in fourth-quarter profit due to legal provisions and restructuring costs, while abandoning its cost target for 2025. Despite strong performance in its investment banking division, the bank missed full-year profit expectations, and its shares fell 3%.

• UPS plans to cut Amazon deliveries by over 50% by mid-2026, aiming to focus on more profitable shipments, which led to a 15.5% drop in its share price. The company forecasts lower-than-expected 2025 revenue of $89 billion, as it shifts towards higher-margin customers like Temu and Shein.

• OpenAI is in talks to raise nearly $40 billion, potentially valuing the company at $340 billion, with SoftBank leading the round and investing up to $25 billion. The funding will support OpenAI’s joint venture, Stargate, and its ongoing business operations, including building new data centres in the US.

• Heidelberg Materials plans to pursue more deals in the U.S. in 2025, confident that President Trump's policies will benefit its business. The company aims to expand its presence, particularly in the southeastern U.S., and is targeting acquisitions of up to 1 billion euros.

• New Street Research upgraded MercadoLibre to Buy, raising its price target to $2,300, citing a positive macroeconomic outlook in Argentina and improving credit provisioning. The analysts highlighted strong e-commerce trends and the company's potential to benefit from increased credit availability and operational improvements into 2025.

• Benchmark upgraded Meta Platforms to Buy, raising its price target to $820 due to strong 2025 business prospects and potential long-term capital savings from AI investments. They expect Meta’s ad market share to grow, with AI-driven efficiencies boosting revenue and reducing R&D costs.

• Bernstein upgraded Lam Research to Outperform, raising its price target to $91, citing a potential recovery in NAND sales and improved risk-reward dynamics. The firm expects a strong third-quarter performance, with better gross margins and a more balanced exposure to key industry trends.

• Jefferies upgraded Coca-Cola to a Buy rating and raised its price target to $75, citing strong fundamentals and anticipated cash flow growth. The analysts expect continued volume growth and an increase in free cash flow by 2026, with Coca-Cola shares currently undervalued despite recent declines.

Upcoming data and events

Markets will today focus on the release of the Core PCE Price Index, a key inflation measure, which could influence investor sentiment. Major earnings reports are expected from companies including AbbVie, Exxon Mobil, Chevron, Novartis, and Colgate-Palmolive, offering insights across pharmaceuticals, energy, and consumer goods sectors.

For more information visit https://cc.com.mt/. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning investments or investment decisions, or tax or legal advice.