Equities set to end turbulent week on a high

US equities rebounded strongly on Thursday, with the S&P 500 up 2.3%, the Nasdaq 100 surging 3.1%, and the Dow Jones gaining 683 points. Positive jobless claims data eased economic slowdown fears. Nvidia, Broadcom, and AMD saw gains, while Eli Lilly rose 9.2% on strong earnings. Meanwhile, the Eurozone’s Stoxx 50 closed flat at 4,666, supported by Siemens and Allianz, though losses in L’Oreal, Airbus, and DHL moderated gains.

Summary for 09.08.2024

Asian equities rose on Friday, buoyed by cooling US recession fears and positive Chinese inflation data, although regional markets remained on track for weekly losses. Japanese shares surged, led by tech equities and positive earnings from Tokyo Electron, while Chinese and South Korean markets saw modest gains.

European markets and US equity futures are set to continue to build on previous day’s gains, with focus shifting to upcoming inflation data amid ongoing recession concerns.

Oil prices were flat in Asian trade on Friday but were set for their first positive week in five, driven by bargain buying, improving US economic sentiment, and ongoing geopolitical tensions. Chinese inflation data and sustained geopolitical risks added support, despite weak demand signals and inventory trends.

China's annual inflation rose to 0.5% in July 2024, the highest since February, driven by increased domestic demand amid government stimulus and interest rate cuts by the People's Bank of China. However, inflation remains subdued due to high unemployment and weak consumer sentiment, with PPI inflation declining for the 22nd consecutive month.

US unemployment benefits claims fell by 17k to 230k for the week ending August 3rd, below expectations, but remained above this year’s average. Outstanding claims rose to 1,875k, the highest since November 2021. The four-week moving average increased to 240.75k, reflecting ongoing labour market softness despite historical tightness.

Federal Reserve Bank of Kansas City President Jeffrey Schmid is reluctant to support interest rate cuts due to ongoing inflation and a still-healthy labour market. Meantime, Donald Trump criticised Fed Chair Jerome Powell for his timing on rate changes and suggested the President should have a say in monetary policy.

Vice President Kamala Harris widened her lead over Donald Trump in the 2024 presidential race after being named the Democratic candidate, holding a 42% approval rating versus Trump's 37%, according to an Ipsos poll. However, Trump leads when respondents must choose between the two on key issues like immigration and the economy.

Eli Lilly raised its 2024 sales forecast by $3 billion, driven by strong demand for its weight-loss drug Zepbound, which surpassed $1 billion in quarterly sales. Shares surged 9.5% on the news. Lilly also upgraded its profit and revenue projections, bolstered by increased manufacturing capacity and investments.

Siemens reported an 11% rise in Q3 adjusted operating profit to €3.0 billion, exceeding forecasts. Despite strong demand for electricity infrastructure and production software, the company cautioned about customer hesitation due to uncertain borrowing costs. Siemens maintained its full-year revenue growth forecast at 4-8% and noted mixed regional demand.

Elf Beauty's shares plunged more than 10% in afterhours trading after forecasting lower-than-expected annual sales and profits. Concerns over potential tariff increases and rising costs overshadowed strong Q1 results. The company projects 2025 sales of $1.28-$1.30 billion, below estimates, and adjusted profit between $3.36 and $3.41 per share.

Expedia's Q2 profit surpassed expectations, driven by strong international travel demand, boosting shares by 11.5%. The company reported a profit of $3.51 per share and revenue of $3.56 billion, both beating estimates. However, Expedia cautioned about a softer travel outlook and revised full-year growth forecasts lower.

Under Armour reported a surprise Q1 profit, with shares rising 19.2% on improved margins from full-price sales and reduced inventory. Despite a 10% revenue drop to $1.18 billion, better-than-expected results and a raised annual profit forecast boosted optimism. The company is focusing on higher-margin items and cutting promotions and inventory.

Rheinmetall AG confirmed strong growth for 2024, projecting €10 billion in sales with an improved operating margin of 14%-15%. H1 2024 saw a 33% increase in sales to €3.8 billion and a 91% rise in operating profit. The backlog surged to €48.6 billion, driven by significant military orders and expansions.

SharkNinja's shares rose 17% after Q2 earnings exceeded expectations, with adjusted EPS of $0.71 and revenue up 37.9% to $1.25 billion. Strong performance across all product categories drove this growth. The company raised its full-year guidance, expecting adjusted EPS of $4.05-$4.21 and net sales growth of 20-22%.

Datadog's Q2 results exceeded expectations, with shares rising over 5%. The company reported adjusted EPS of $0.43 and revenue of $645.28 million, up 27% YoY. Datadog also raised its 2024 revenue forecast to $2.62-$2.63 billion and increased adjusted EPS guidance. The positive results reflect strong customer growth and multi-product adoption.

Plug Power reported Q2 results below expectations, with a loss of $0.36 per share and revenue of $143.4 million, missing estimates. Shares closed practically flat after falling 9.2% pre-market. The company forecasts 2024 revenue between $825 million and $925 million, reflecting ongoing challenges in the hydrogen fuel cell sector.

SoundHound AI reported a stronger-than-expected Q2 with revenue of $13.5 million, up 54% YoY, and a narrower loss per share of $0.04. The company raised its 2024 revenue guidance to over $80 million and provided a 2025 outlook of over $150 million. Shares fell by 5.0% post-results after rallying by over 21% in regular trading.

Delta Air Lines expects a $380 million revenue hit in the current quarter due to the CrowdStrike outage that caused 7,000 flight cancellations. The impact includes $170 million in non-fuel expenses for customer reimbursements and crew costs. Delta is pursuing legal action against CrowdStrike and Microsoft.

TD Cowen raised Kellanova’s share price target to $73, citing an increased likelihood of a takeover, despite uncertainty about a bid from Mars Inc. The revised target reflects an 18x P/E multiple on projected earnings, driven by Kellanova’s strategic appeal and growth potential, despite current volume declines.

Seaport Research downgraded Walt Disney to Neutral from Buy, citing concerns over weak performance in the Parks and Direct-to-Consumer segments. The firm noted reduced profitability and negative growth outlooks for these divisions. They removed the $120 price target, estimating a new range of $94 to $117 per share.

Evercore ISI analysts view the current market selloff as a "buyable correction" within a broader bull market, citing manageable challenges compared to past crises like the 1974 bear market. They highlight the VIX's recent spike and strong earnings growth as positive signs, suggesting the market's long-term trajectory remains upward.

Citi analysts are optimistic about the semiconductor sector despite recent declines, citing strong AI and memory demand. They favour Micron Technology due to expected DRAM price increases and improved inventory. Other Buy-rated stocks include AMD, Broadcom, Analog Devices, Microchip Technology, NVIDIA, and KLA Corporation. They forecast 14% semiconductor sales growth in 2024.

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