Rally falters after eight positive sessions

US equities closed slightly lower on Tuesday, ending an eight-day winning streak with the Dow down 0.15%, the S&P 500 falling 0.20%, and the Nasdaq losing 0.33%. Energy shares led losses, dropping 2.7%, while consumer staples gained 0.5%. Palo Alto Networks surged 7.2%, and Eli Lilly rose 3.1%. In Europe, the Stoxx 50 fell 0.3% to 4,856, ending its recent rally due to declines in energy, metal producers, and major banks amid economic concerns.

Summary for 21.08.2024

Asian shares retreated Wednesday, led by a 0.7% drop in Hong Kong’s Hang Seng index, driven by JD.com's 11% decline following reports of Walmart's $3.74 billion stake sale. Wall Street losses and caution before Fed Chair Powell’s speech weighed on regional sentiment. Japan’s Nikkei fell as yen strength pressured export shares, while Chinese markets dipped on growth concerns.

European equity futures were pointing to a slightly lower open while their US counterparts were steady, with the market expected to open mixed as investors await cues from the upcoming Jackson Hole Symposium.

Oil prices were steady in Asian trade this morning amid concerns over rising US inventories and potential easing of Middle East tensions. Brent crude held at $77.21 a barrel while WTI was flat at $76.61. An unexpected inventory built signalled cooling US demand, while progress towards an Israel-Hamas ceasefire reduced geopolitical risk premiums.

Walmart is selling its 5.19% stake in JD.com, aiming to raise up to $3.74 billion by offering 144.5 million shares priced between $24.85-$25.85. Walmart stated that the move allows it to focus on its China operations while maintaining a commercial relationship with JD. JD’s shares dropped 10% on the news.

Lowe’s second-quarter earnings beat estimates with adjusted EPS of $4.10 but missed revenue expectations at $23.59 billion. Comparable sales dropped 5.1% due to weak DIY spending and poor weather. The company revised its full-year outlook downward, expecting sales between $82.7 and $83.2 billion. Analysts noted mixed reactions, highlighting margin improvements and long-term growth potential despite near-term challenges.

Eli Lilly's weight loss drug, tirzepatide, demonstrated a 94% reduction in the risk of developing type 2 diabetes among individuals with pre-diabetes and obesity, according to a three-year follow-up of the SUMMIT-1 trial. The drug, sold as Zepbound and Mounjaro, led to a 22.9% average weight reduction. Shares rose 3% in regular trading on Tuesday.

HSBC is considering selling its South African business as it shifts its focus to Asia. The South African unit, part of HSBC's British operations, provides commercial and investment banking services. Bidders from Africa, China, and the UAE have expressed interest. HSBC has been scaling back operations in Western markets, aiming to concentrate on regions where it has significant presence.

Toll Brothers reported strong Q3 results, with earnings per share of $3.60 beating estimates. Revenue rose 2% YoY to $2.73 billion. Home deliveries increased 11%, while the average price fell slightly. The company raised full-year guidance, expecting a 28.3% adjusted gross margin, and boosted share repurchase plans to $600 million for fiscal 2024.

Amer Sports Inc. shares rose over 10% in regular trading of Tuesday after reporting strong Q2 earnings. The company posted adjusted EPS of $0.05, exceeding expectations of a loss, and revenue grew 16% YoY to $994 million. Driven by strong brand performance and a raised full-year outlook, Amer Sports also expects Q3 revenue growth of 12-13% and EPS of $0.08-$0.10.

The European Union plans a 9% tariff on Tesla cars imported from China, lower than the previously suggested 20.8%. This decision follows an EU probe into Chinese EV subsidies. Tesla requested a recalculation based on its specific subsidies, but the EU found it benefitted from various incentives. The tariffs, effective by November, face opposition from some member states and China’s threat of retaliation.

PayPal expanded its partnership with Adyen to introduce "Fastlane by PayPal" for Adyen’s US enterprise and marketplace clients. This service enhances guest checkout, increasing conversion rates and reducing checkout time. Analysts view the collaboration as a significant growth opportunity, potentially unlocking a $3 trillion market and boosting PayPal’s transaction margins.

Netflix announced a successful conclusion to its 2024 Upfront negotiations, achieving a 150% increase in ad sales commitments compared to last year. The company secured deals with major agencies and for popular content like "Squid Game" and "Bridgerton." Netflix plans to enhance its ad tech, with a global launch expected in 2025. The strong performance reflects growing confidence from advertisers.

Wells Fargo named Eli Lilly its top large-cap pharmaceutical pick, citing a strong pipeline and growth potential. The firm expects Eli Lilly to surpass 2025 estimates with key trials and international expansion. Vertex Pharmaceuticals moved to second place, with AbbVie in third. Wells Fargo's update highlights Eli Lilly’s long-term prospects and shifts in the sector rankings.

Edward Jones has initiated coverage of AMD with a Buy rating and added it to its Stock Focus List. The firm cites strong growth potential driven by increasing demand for data centre infrastructure, AMD's acquisition of Xilinx, and the rise of AI-enabled PCs. Edward Jones believes these factors are not fully reflected in AMD's current share price, presenting an attractive investment opportunity.

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