On Tuesday, the S&P 500 and Nasdaq indices surged to new peaks, while the Dow Jones hovered near its highest levels. Market participants scrutinised earnings releases from retailers and anticipated Nvidia's upcoming results, all while digesting remarks from Federal Reserve officials. Lowe's cautioned of persisting consumer demand challenges, whereas Macy's outperformed expectations amid sales and profit declines. Conversely, Peloton shares nosedived post-announcement of a comprehensive refinancing initiative. Elsewhere, the Stoxx 50 index in the Euro Area declined by 0.5%, with major megacap shares such as LVMH and ASML dropping by over 1%, while SAP and Linde experienced gains.

Summary for 21.05.2024

  • Asian equity markets mostly rose on Wednesday, as investors assessed mixed economic data from South Korea and Japan, while the Reserve Bank of New Zealand held the cash rate steady at 5.5% for the seventh straight meeting. Shares in New Zealand, Australia, South Korea, Japan, Hong Kong and China advanced. Meanwhile, Japanese equities fell as a wave of profit selling hit the technology sector.
  • European equity markets are heading for a higher open while US equity futures are seen holding steady, with technology shares driving gains, ahead of key earnings from Nvidia and the release of Federal Reserve meeting minutes.
  • Oil prices declined in Asian trade due to unexpected US inventory builds and concerns over high interest rates, with Brent crude falling to $82.40 and West Texas Intermediate dropping to $78.13. Fear of sluggish demand amid inflation and Fed rate concerns persisted. All eyes turn to the OPEC+ meeting at the beginning of June for potential output cut extensions.
  • Federal Reserve officials, including Mester, Collins, and Waller, underscored the importance of patience regarding interest rates, signalling a commitment to a higher-for-longer stance. Waller's remarks hinted at potential rate cuts later in 2024 contingent upon sustained favourable inflation trends. However, bond traders are showing scepticism, reversing earlier expectations of rate cuts.
  • Toll Brothers, Inc. exceeded analyst expectations in its second-quarter earnings report, with EPS of $4.55 and revenue of $2.84 billion. Despite a one-time land sale gain, adjusted net income was $357.5 million. The company saw growth in home sales revenue and net signed contracts, prompting increased full-year guidance and a 1.2% increase in its share price in after-hours trading.
  • Lowe's warned of operating margin pressure due to subdued demand, despite a smaller-than-expected drop in quarterly same-store sales. The company anticipates a comparable sales decline in line with the first quarter, driven by cautious consumer spending on costly renovations. Pro-customers drove positive sales, while DIY sales remained under pressure.
  • Macy's lifted its full-year profit forecast under new CEO Tony Spring, focusing on cost reductions and operational overhaul amidst stiff competition. Despite a 3.7% drop in first-quarter net sales, the company's improved earnings outlook to $2.55-$2.90 per share prompted a 5.1% uptick in its share price during Tuesday’s session.
  • AutoZone reported a slight increase in net sales for Q3 but fell short of analyst revenue expectations. Despite this, earnings per share surpassed estimates. The company cited factors like timing of tax refunds and cooler weather impacting domestic sales. It remains optimistic about summer sales and continues to focus on enhancing inventory availability and expanding store count.
  • Amer Sports surpassed Q1 revenue and profit expectations, fuelled by robust demand for its sporting goods brands in China and the US. Despite projecting full-year earnings per share at the higher end of its range, shares dipped almost 8% in regular trading yesterday due to a current-quarter loss forecast slightly exceeding estimates.
  • Assicurazioni Generali's shares dipped despite better-than-expected premiums and a 5.5% rise in operating profit to 1.9 billion euros in the first quarter. The increase in premiums, particularly in life insurance, boosted income, while improved combined ratios in the Property & Casualty division reflected profitability. Analysts noted concerns over flat loss ratios.
  • Eli Lilly's diabetes drug tirzepatide received approval in China, intensifying competition with Novo Nordisk's Ozempic. Both companies aim to capitalise on the burgeoning weight-loss market, with GLP-1 agonists like tirzepatide showing potential for substantial weight loss. Demand for these drugs is high, prompting production increases and raised sales forecasts.
  • TD Cowen anticipates a challenging second quarter for Boeing due to sporadic 737 deliveries and production issues, projecting lower-than-consensus revenue and a cash outflow doubling Street forecasts. However, they maintain a Buy rating, foreseeing a substantial free cash flow increase by 2026 and a strong recovery in the latter half of 2024.

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