Market rally broadens out of tech

On Tuesday, the US equity market surged as the S&P 500 rose 0.6% and the Dow Jones gained 742 points to a new record close, fuelled by optimism surrounding potential Federal Reserve rate cuts. The Nasdaq 100 edged higher by 0.2%. Industrial giants like Caterpillar and Boeing led gains. Meanwhile, in the Eurozone, the Stoxx 50 Index fell 0.6% amidst cautious investor sentiment ahead of the ECB's interest rate decision, with mining shares declining but travel equities showing slight gains.

Summary for 17.07.2024

Most Asian markets were mixed on Wednesday, with Taiwan and China experiencing losses following comments from US presidential candidate Donald Trump suggesting Taiwan should pay for US defence support. Japanese and Australian markets advanced, buoyed by expectations of global interest rate cuts, while tech shares, particularly chipmakers, faced pressure ahead of key earnings reports from industry leaders like TSMC and ASML.

European markets are seen opening higher this morning taking cues from strong US markets overnight. Meantime, US equity index futures indicated a slight decline in tech shares and a slight rise in the Dow, with market focus on upcoming earnings and the 2024 presidential race.

Oil prices remained steady this morning as concerns over weakened demand growth in China and a stronger US dollar offset signs of tightening US supply. Geopolitical risks, including an attack on a Liberian oil tanker by Yemen's Houthis, also influenced market sentiment.

The IMF forecasts global growth at 3.2% for 2024, with 2025 revised up to 3.3%. US growth is lowered to 2.6%, Euro Area improved to 0.9% (Germany unchanged at 0.2%), and the UK raised to 0.7%. Asia sees China up to 5% and India to 7%, while Japan slows to 0.7%. Services inflation complicates monetary policy amid rising inflation risks and trade tensions.

Federal Reserve Governor Adriana Kugler indicated that inflation is expected to continue declining towards the Fed's 2% target due to easing price pressures, moderated wage growth, and a balanced job market. She suggested a potential start to monetary policy easing later in 2024, contingent on continued favourable economic conditions and inflation trends.

US retail sales were stagnant in June compared to May, following a revised 0.3% increase previously. Declines were noted in sales at fuel stations (-3%) and autos (-2.3%), while nonstore retailers saw a significant increase (1.9%). Excluding volatile sectors, sales rose 0.9%, marking the strongest growth since April 2023.

Donald Trump stated Taiwan should pay the US for its defence, causing TSMC shares to drop over 2%. Taiwan faces Chinese military pressure and delays in US arms deliveries. The US supports Taiwan but has no formal defence agreement. China uses grey zone tactics against Taiwan and has not renounced force to control it.

UnitedHealth reported a larger earnings impact from a cyberattack on its tech unit, Change Healthcare, expecting a 30-cent per share reduction in adjusted profit for the year. Despite this, it maintained its full-year profit forecast. Shares rose over 6% as the company beat second-quarter profit estimates and planned to resume share buybacks.

Bank of America reported second-quarter earnings of $0.83 per share, beating expectations of $0.80, with revenues of $25.4 billion surpassing estimates of $25.24 billion. Despite a decrease in net income to $6.9 billion year-on-year, the bank saw growth in asset management and investment banking fees, with plans to increase dividends pending Board approval. Shares rallied by over 5% in yesterday’s session.

Morgan Stanley reported strong second-quarter results, exceeding expectations with earnings per share of $1.82 and revenue of $15 billion. Total client assets grew to $7.2 trillion, and the company raised its quarterly dividend. Bolstered by these results, shares rallied by almost 1% in yesterday’s sessions.

Charles Schwab's second-quarter profit declined 2% as higher interest payouts on client deposits and borrowings impacted earnings, causing an almost 9% drop in its shares. Despite this, the company saw a 17% increase in total client assets to $9.41 trillion, with net revenue up 1% to $4.69 billion.

State Street reported a 3% increase in quarterly revenue to $3.19 billion, driven by higher fee revenue of $2.46 billion, surpassing analyst expectations. Assets under management rose 16% to $4.42 trillion, bolstered by equity market gains. Despite this, the bank's profit declined 7% to $711 million due to elevated expenses.

Adidas announced a higher full-year earnings outlook following a strong second quarter, where sales increased by 9% year-over-year to €5.82 billion. Operating profit for 2024 is now expected to reach around €1 billion, up from the previous guidance of approximately €700 million. Still, shares closed 1.2% lower in Tuesday’s trading session.

Richemont's sales were nearly flat for the June quarter, slightly missing expectations due to a significant drop in Chinese demand, despite strong growth in Japan. Sales at constant exchange rates rose 1% to €5.3 billion. All regions grew except Asia Pacific, where sales dropped 18%.

Hugo Boss shares plunged 7.5% yesterday after lowering its 2024 sales forecast due to global macro uncertainties, particularly impacting China and Britain. CEO Daniel Grieder expressed confidence in their brand strategy despite challenges. Analysts from Jefferies maintained a 'buy' rating with a €55 price target, while UBS reduced its target to €40, citing weaker consumer conditions.

Ocado's shares surged 8.5% on Tuesday after upgrading its annual guidance due to improved profitability in its warehouse technology business. The company raised its profit margin forecast and cash flow target, while first-half results showed narrowed losses and increased revenue. Despite optimism, RBC Capital Markets maintained an 'underperform' rating with a £4.20 price target.

Verizon is considering selling 5,000 to 6,000 mobile phone towers, potentially fetching over $3 billion, according to Bloomberg. This move follows a previous tower sale in 2015 to American Tower Corp. for $5 billion. The decision is in early stages and aims to raise funds, possibly attracting infrastructure and strategic buyers.

HSBC Holdings Plc has appointed Georges Elhedery as its new group chief executive, effective 2nd September, replacing Noel Quinn. Elhedery, currently the chief financial officer and previously co-head of Global Banking and Markets, brings extensive banking experience, including leadership roles in the Middle East and North Africa. Quinn will continue until Elhedery assumes office.

ASML posted second-quarter net income of €1.6 billion on revenues of €6.2 billion, surpassing analysts' expectations. This performance marked a decline from the previous year's net income of €1.94 billion and sales of €6.90 billion amid ongoing strong demand for its products.

Fitch Ratings upgraded Delta Air Lines' credit rating to investment grade 'BBB-' due to significant debt reduction and balance sheet improvements over the past three years. Despite lower-than-expected third-quarter profit forecasts, Fitch expects Delta to remain highly profitable, driven by strong travel demand and increased corporate bookings.

JPMorgan analysts report a modest -1% sequential decline in global smartphone shipments for Q2 2024, contrasting with typical seasonal growth, but note a +6% year-over-year increase. Apple's iPhone shipments exceeded expectations, hinting at positive upcoming earnings despite a slight dip in market share year-over-year. Overall, the industry shows signs of a gradual recovery for 2024.

Goldman Sachs raised Amazon's equity outlook, citing expected growth in operating income driven by improved margins in eCommerce and strong AWS performance. They anticipate continued strength in retail and advertising, projecting a 12% increase in their 12-month price target to $250, emphasising potential for margin expansion and robust future profitability.

JPMorgan highlighted Broadcom's bullish outlook on AI and core semiconductor sectors, noting strong year-over-year bookings and sustained AI order momentum. Broadcom anticipates a $150 billion opportunity in AI silicon revenue over five years, driven by technological leadership and expanding Ethernet networking solutions adoption in AI clusters.

Northland Capital Markets lowered Intel's 2024 estimates due to export restrictions affecting Huawei, market share losses to AMD in server CPUs, and anticipated PC demand slowdown in the second half of 2024. Despite these challenges, they reiterated an Outperform rating with a $68 price target, citing Intel's strategic positioning as a leading-edge foundry alternative.

Bank of America upgraded Shopify to a Buy rating, raising its price target to $82, citing solid growth, free cash flow conversion, and improved margins. Analysts highlighted Shopify's robust eCommerce market share gains, disciplined expense management, and strong future revenue and FCF growth projections under new CFO Jeff Hoffmeister.

Mizuho analysts downgraded Palantir from Neutral to Underperform, citing its rich valuation and concerns over business visibility despite recent strong performance. They lowered the price target from $21 to $22, reflecting a potential 23% downside from Monday's close. Palantir's high multiples and upcoming earnings release also contributed to the cautious outlook.

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.