Wall Street's major indices closed higher on Wednesday, driven by a tech rally led by Nvidia, which surged 5%, surpassing a $3 trillion market value and becoming the second most valuable US company. This optimism, fueled by weaker labor market data suggesting possible Fed rate cuts, lifted the S&P 500 and Nasdaq 100 to record highs. Meanwhile, the Eurozone’s Stoxx 50 rose 1.6% to 5,033, nearing its 23-year high, driven by expectations of improved credit conditions ahead of the ECB decision, with ASML and Inditex leading gains.

Summary for 06.06.2024

Most Asian equities rose on Thursday amid optimism over lower interest rates globally. Regional tech shares surged following Nvidia's rally. South Korea’s KOSPI, Hong Kong’s Hang Seng, and Japan’s Nikkei 225 all gained. Chipmakers, buoyed by Nvidia's success, saw TSMC hit a record high in Taiwan.

Futures indicate European bourses are set for a higher open as the stage is set for the ECB to start lowering rates. US equity futures are steady too ahead of the market open, following record highs for the S&P 500 and Nasdaq Composite, with notable post-earnings moves by Lululemon and Five Below.

Oil prices rebounded this morning, rising for a second consecutive session from four-month lows, buoyed by hopes of Federal Reserve rate cuts amid soft US jobs data. Despite a slight increase in US crude inventories and OPEC+ supply cut extension, market sentiment remains optimistic, anticipating increased economic activity and oil demand.

US private businesses added 152K jobs in May, the lowest in four months and below expectations. The service sector saw the most gains, while manufacturing and mining shed jobs. Annual pay growth slowed for job-changers but remained steady for job-stayers. ADP's chief economist noted emerging weaknesses in the labour market.

The ISM Services PMI in the US surged to 53.8 in May 2024, its highest in nine months, surpassing forecasts. The rebound in services activity was driven by higher business activity, faster new orders growth, and slower supplier deliveries, despite continued employment challenges and inflation-related impediments noted by ISM Chair Anthony Nieves.

The Bank of Canada cut its key interest rate by 25bps to 4.75% in June 2024, signalling more cuts if inflation slows as expected. The central bank's confidence in disinflation growing toward the 2% target, softer Q1 GDP growth, and a tightening job market justify a less restrictive policy stance, despite ongoing upside price risks.

Euro Area industrial producer prices declined by 1% month-over-month in April 2024, led by a 3.6% drop in energy prices. Excluding energy, prices edged up 0.2%. Among major economies, prices fell 3.6% in France and rose 0.2% in Germany. Year-on-year, the PPI decreased 5.7%, following a 7.8% drop in March.

Nvidia's share surged 5.2% to a record $1,224.40, valuing it at $3.012 trillion and surpassing Apple's $3.003 trillion. Nvidia's AI-driven success contrasts with Apple's challenges in the smartphone market. Nvidia's equity, up 147% in 2024, is set for a ten-for-one split tomorrow, boosting appeal to individual investors.

Lululemon Athletica raised its full-year earnings guidance after a strong fiscal first-quarter performance, with diluted EPS expected to be $14.27 to $14.47 and maintained revenue forecast of $10.70B to $10.80B. Shares surged over 9% in after-hours trading. Q1 earnings beat estimates, aided by a 20 basis points increase in gross margins and 6% comparable sales growth.

Five Below Inc. reported disappointing first-quarter earnings and future guidance, leading to a 15.5% decline in its shares. Despite increased net sales, comparable sales dropped 2.3%, with operating income impacted by non-recurring legal expenses. Second-quarter EPS and revenue forecasts fell short of analyst expectations, prompting concerns amid a challenging macro environment.

Brown-Forman, maker of Jack Daniel's, surpassed Q4 profit expectations with earnings per share of 56 cents, driven by price hikes on premium whiskey and tequila, despite an 8% decline in net sales to $964 million. Quarterly gross margin fell to 59%, impacted by increased advertising expenses and input costs. Organic sales of whiskey and tequila declined, with annual growth forecasted at 2-4%.

Inditex, the owner of Zara, reported a 7% increase in first-quarter sales and a 12% rise in recent sales from its Spring/Summer collections, in line with expectations. The company plans to expand livestream shopping and store space, aiming to maintain its competitive edge against rivals like H&M and Shein.

Novo Nordisk faces intensifying competition in China as local drugmakers develop generic versions of its diabetes drug Ozempic and weight loss treatment Wegovy. With patents expiring, multiple Chinese firms are advancing similar treatments, potentially impacting Novo's market dominance and leading to price reductions amid a growing overweight population.

HanesBrands plans to sell its sportswear brand Champion to Authentic Brands Group for $1.2 billion, with the deal potentially reaching $1.5 billion. The move aims to streamline HanesBrands' business focus on innerwear categories while allowing Authentic Brands to enter the sportswear market. Shares surged 15.6% in premarket trading.

ASML shares surged 8.1% after a Jefferies report highlighted positive comments from CFO Roger Dassen regarding potential orders from top customer TSMC, particularly for 2 nm-related orders starting in Q2 or Q3. ASML expects strong demand into 2026, aided by government-subsidised factories. ASML anticipates continued dominance in EUV technology.

Shares of KLA Corporation and Applied Materials surged 4.5% and 5.3% respectively after Barclays upgraded them to equal-weight, citing increased spending in China and aggressive capital expenditure plans in the US. The firm predicts growth in China's spending in CY24 and identifies potential growth sources in wafer fab equipment for 2025.

Raymond James raises Meta's price target to $550, touting its leadership in Generative AI (GenAI) and vast revenue potential. Meta's advantages in computing infrastructure and talent pool are noted, along with a $40 billion annual run rate projection across GenAI monetization avenues, including APIs and cloud-based services.

Citi analysts are cautiously optimistic about Intel's manufacturing capabilities, foreseeing potential competitiveness with TSMC by late 2025. However, they remain neutral on Intel due to concerns about ambitious guidance and long-term profitability. Citi maintains a price target of $35, considering it above Intel's historical average but below semiconductor industry valuation.

Disclaimer: The article is issued by Calamatta Cuschieri Investment Services Ltd, which is licensed to conduct investment services business under the Investments Services Act by the MFSA. 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.