US equities closed lower on Wednesday, with the S&P 500 and Nasdaq slipping by 0.17% and 0.55%, respectively, while the Dow Jones shed 23 points. Investors awaited the PCE inflation report and absorbed comments from Fed officials. Nvidia and Alphabet declined, while eBay surged after dividend announcements. Despite a strong historical performance in February, growth investments lagged. Meanwhile, the STOXX 50 closed marginally lower at 4,881 points, as investors awaited inflation data for insights into major central banks’ monetary policy trajectories.
Summary for 29.02.2024
- Most Asian stocks traded flat to lower as investors awaited US inflation data for cues on interest rates. Chinese markets rebounded from previous losses amid tighter derivatives market regulations. Japan’s Nikkei and Topix fell on mixed economic data, while Hong Kong’s Hang Seng rose despite lower-than-expected GDP growth. Focus turns to key Chinese PMI data for further economic insights.
- European markets are set for a stable opening while US equity futures show a slight dip as investors await the US PCE inflation report.
- Oil prices held steady as US crude stockpiles saw a larger-than-expected increase, surpassing market forecasts. The notable rise in inventories is attributed to reduced refinery operations. Caution prevails in financial markets ahead of a crucial US inflation report, potentially influencing the Federal Reserve’s monetary policy stance. Geopolitical tensions in the Middle East are expected to provide support for oil prices despite the inventory build.
- Three Federal Reserve officials said the pace of interest-rate cuts will depend on incoming economic data, suggesting the path to lower borrowing costs may look different than in previous rate-cutting cycles. Boston Fed President Susan Collins and New York’s John Williams said the Fed’s first rate cut will likely be appropriate “later this year,” while Atlanta’s Raphael Bostic said he’s currently penciling in a cut for sometime this summer.
- In January 2024, Australian retail sales rebounded, rising 1.1% month-over-month after December’s 2.1% fall, fuelled by increased spending during Black Friday across all sectors. Most states saw growth of 1.0% or more, except Tasmania, contributing to a 1.1% year-over-year increase. Meanwhile, Japanese retail sales expanded by 2.3% year-on-year, slightly lower than December’s 2.4%, with non-store retail and pharmaceutical & cosmetics sectors leading the growth, while overall monthly sales rebounded by 0.8%, marking the 23rd consecutive month of expansion.
- In Q4 2023, the US economy expanded at an annualized rate of 3.2%, slightly below the advance estimate of 3.3%, with private inventories detracting from growth. However, consumer spending was revised higher, driven by services, and government spending rose significantly. Non-residential investment also increased, while residential investment exceeded expectations. Full-year 2023 growth reached 2.5%, up from 1.9% in 2022.
- Malta’s economy expanded by 4.3% in Q4 2023, down from a revised 7% in the previous period, marking its 12th consecutive quarter of growth. Foreign trade, private consumption, and government spending were significant contributors, while gross fixed capital formation declined due to a drop in investment in transport equipment.
- Baidu Inc’s Hong Kong shares fell 6.6% this morning after reporting a 6% rise in Q4 revenue to RMB 34.95 billion, driven by its core online advertising business. However, increased AI expenses and a sharp profit drop overshadowed gains. CEO Robin Li noted stockpiling Nvidia chips due to US restrictions.
- Snowflake’s shares plummeted over 20% in extended trading as it forecasted Q1 product revenue below Wall Street estimates, citing anticipated spending cutbacks from customers amidst economic uncertainty. The company appointed Sridhar Ramaswamy as CEO, succeeding Frank Slootman. Snowflake’s total revenue surpassed expectations in Q4, but its current-quarter forecast fell short.
- Salesforce exceeded expectations in Q4 with adjusted earnings of $2.29 per share on revenue of $9.29 billion, surpassing estimates. They anticipate Q1 adjusted EPS of $2.37 to $2.39 and revenue of $9.12B to $9.17B, higher than expected. The company initiated its first quarterly dividend of $0.40 per share and increased its share buyback plan by $10B. However, despite the positive news, Salesforce’s shares fell 1.6% in after-hours trading.
- AMC Entertainment reported a larger-than-expected quarterly loss, attributing it to higher distribution costs for concert movies and delays in big Hollywood releases due to strikes. The CEO acknowledged challenges from strikes, anticipating a temporary impact on earnings. The company hopes for a rebound with upcoming releases like the “Dune” sequel and “Kung Fu Panda 4”.
- Reckitt faced a significant drop in shares as it missed fourth-quarter sales expectations due to under-reported liabilities in the Middle East. An investigation revealed employee misconduct, resulting in a £55 million revenue shortfall. Disappointing guidance for 2024, including lower-than-expected volumes and vague margin forecasts, further disappointed investors.
- Teleperformance’s shares plummeted more than 14% yesterday following concerns about the impact of artificial intelligence advancements on call centre operations. The decline was attributed to Klarna’s announcement that its AI-powered assistant handled most customer service chats, raising fears of AI disintermediation and affecting broader growth expectations and valuations in the business process outsourcing sector.
- During Apple’s shareholder meeting, CEO Tim Cook announced plans to unveil more about the company’s use of generative artificial intelligence later in the year, emphasizing its potential for transformative opportunities. Despite rejecting a proposal for increased AI disclosure, Cook highlighted AI’s existing role in Apple products. Bank of America analysts, meanwhile predict a robust iPhone refresh cycle in the coming years based on findings from their global smartphone survey, noting a significant portion of users still have older models, with the shift expected due to the adoption of Generative AI features on smartphones.
- Google faces a €2.1 billion lawsuit from 32 media groups, including Axel Springer and Schibsted, alleging losses in digital advertising due to Google’s practices. The suit, filed in a Dutch court, follows antitrust scrutiny. Google refutes the claims, stating they work constructively with publishers and that the suit is speculative.
- Eli Lilly plans to launch its diabetes and obesity drug, Mounjaro, in India next year pending regulatory clearance. The move targets India’s high obesity and diabetes rates. Lilly is open to partnerships for market access. Regulatory reforms are urged to boost investment and streamline drug approvals in India.
- UnitedHealth Group’s shares plunged around 5% yesterday following news of a US Department of Justice antitrust probe into its acquisitions through Optum. The investigation, reported by The Wall Street Journal, compounded investor concerns amid an ongoing outage due to a cybersecurity attack at its Change Healthcare unit. Other health insurers’ shares also dipped.
- Abercrombie & Fitch received a price target increase from Jefferies to $149.00, up from $120.00, while maintaining a Buy rating. The adjustment follows Abercrombie & Fitch’s improved performance in the apparel market, gaining market share in the US and globally, particularly in categories like jeans and outerwear. Jefferies anticipates a robust financial outlook for fiscal year 2025, reflecting confidence in the company’s strategic position.
- Tigress Financial Partners raised Nvidia price target to $985, citing its leading position in accelerating AI adoption. Nvidia reported record Q4 revenue of $22.1 billion, with strong performance in data centres and gaming. Strategic partnerships and expansion into healthcare further contribute to the optimistic outlook.
- Jefferies upgraded Mercedes-Benz from ‘hold’ to ‘buy’ and increased the target price from €75 to €100. The decision is based on the company’s strong balance sheet, strategic investments in transitioning, and its resilience in a less cyclical sector. Jefferies believes Mercedes-Benz can sustainably return all cash flow to shareholders.
- Stellantis NV saw a downgrade from Outperform to Market Perform by a Bernstein analyst, with a slight price target adjustment. The analyst cited the company’s recent surge in share price as reflecting its value relative to peers and highlighted anticipation for Stellantis’ upcoming capital markets day to reveal future strategies and milestones.
- Raymond James maintained a Strong Buy rating on AutoZone, raising the price target to $3,400 following solid Q2 fiscal year 2024 results. Despite flat DIY segment sales, strong EBIT percentage and EPS exceeded expectations. Strategic initiatives like expanding mega hub locations and investing in IT are expected to drive market share growth.
- Susquehanna is optimistic about Broadcom, citing its integration of VMWare and growth prospects in AI networking. They maintain a positive rating, raising the price target to $1,550, reflecting about 31.5 times the estimated 2024 enterprise value to net operating profit after tax.
- CFRA upgraded eBay from Hold to Buy, raising the price target to $55, impressed by strong fourth-quarter results and a promising 2024 outlook, including anticipated GMV growth. Meanwhile, Stifel maintained its Hold rating at a $45.00 price target, citing economic uncertainties despite eBay’s stable performance and potential.
- Wells Fargo revised its outlook on Norwegian Cruise Line Holdings, raising the price target to $21.00 while maintaining an Equal Weight rating. Norwegian Cruise Line reported Q4 earnings meeting expectations, with a strong Q1 forecast suggesting a 35% increase in EBITDA, although concerns about valuation remain. Analysts await insights from the company’s upcoming Analyst Day in May.
- Oppenheimer and Morgan Stanley both remain bullish on First Solar. Oppenheimer reiterated an Outperform rating with a slightly increased price target of $269.00, highlighting strong execution and pricing for new bookings. Meanwhile, Morgan Stanley maintained an Overweight rating, raising the price target to $245.00, citing optimistic guidance and potential for stock value adjustment.
- Northland downgraded SoundHound AI from Outperform to Market Perform, citing concerns over steep valuations compared to revenue forecasts and deployment timelines for its technology in the restaurant sector. Despite recognising its leadership in Natural Language Processing, the firm set a new price target of $5.50, reflecting a cautious stance on investment outlook.