Stock Market Update for February 2nd 2024

Stock Market Update for February 2nd 2024

Global Market Overview:

  • Chinese Stocks: Slumping with the Shanghai benchmark index facing its worst week in five years, signaling panic selling and forced liquidation.
  • European Shares: Climbing as traders assess upbeat corporate updates, reflecting a positive sentiment in the European markets.
  • Canada’s Stock Index: Experiencing a downturn due to a rise in business and personal bankruptcies, indicating economic challenges.
  • US Stocks-Nasdaq: Soaring on the back of strong quarterly reports from Meta Platforms and Amazon.com, showcasing the resilience of the tech sector.
  • U.S. Dollar: Trading in a tight range, indicating stability in the currency market.
  • Gold Prices: Remaining flat, suggesting a lack of significant movement in the precious metals market.

European Stock News

  • The Bank of England is expected to maintain its highest interest rates in nearly 16 years, but investors are keenly watching for signs of potential rate cuts as inflation approaches the bank’s 2% target.
  • Qualcomm forecasts fiscal second-quarter profit slightly above Wall Street estimates, with concerns among investors regarding the chip maker’s Android sales in China.
  • German sportswear maker Adidas anticipates its operating profit to nearly double to around 500 million euros this year, following the company’s separation from Kanye West and the discontinuation of its Yeezy business.
  • Julius Baer CEO Philipp Rickenbacher is reportedly leaving as the Swiss bank grapples with fallout from its exposure to the collapsed property group Signa.
  • Vodafone has rejected a sweetened offer from French telecom operator Iliad to merge their Italian businesses. Instead, Vodafone is exploring other deals in a market where it faces revenue loss and no return on capital.

Key Company Highlights:

  1. Exxon Mobil:
    • Posted a better-than-expected $36 billion profit for 2023, driven by fuels trading and higher oil and gas production.
    • Reflects strength in the energy sector despite economic uncertainties.
  2. Chevron:
    • Beat Q4 estimates with adjusted earnings of $3.45 per share, despite annual profits falling nearly 40%.
    • Increased dividends on higher oil and gas production, signaling confidence in the future.
  3. Meta Platforms (formerly Facebook) and Amazon.com:
    • Meta shares jumped after the first-ever dividend declaration and robust results, indicating positive returns from investments in “metaverse” technologies.
    • Amazon.com beat fourth-quarter revenue expectations with strong growth in cloud and e-commerce businesses.
  4. Apple Inc:
    • Forecasted a drop in iPhone sales and lower-than-expected overall revenue, particularly in China.
    • Despite weak China sales, Apple reported fiscal first-quarter sales and profit above analyst expectations.
  5. Atlassian Corp:
    • Beat second-quarter revenue estimates, driven by increased demand for artificial intelligence products.
    • Expects continued growth with a third-quarter revenue forecast above market estimates.
  6. Bristol Myers Squibb Co:
    • Posted better-than-expected fourth-quarter results, citing strong sales of new drugs.
    • Expects single-digit percentage revenue growth in 2024.
  7. Camden Property Trust:
    • Forecasted annual funds from operation (FFO) below estimates due to subdued rental growth rates in key markets.
    • Indicates challenges in the real estate sector.
  8. Cigna Group:
    • Raised its 2024 profit forecast after beating fourth-quarter profit estimates.
    • Lower-than-expected medical costs and strong demand contributed to the positive outlook.
  9. Clorox Co:
    • Raised annual targets after beating quarterly earnings expectations.
    • Rebounding from a cyberattack, the company saw a surge in sales, especially in the health and wellness segment.
  10. DXC Technology Co:
    • Reported better-than-expected quarterly results driven by strong demand for cloud solutions.
    • Appointed Raul Fernandez as President and CEO, signaling a strategic leadership change.
  11. Eastman Chemical Co:
    • Narrowly beat fourth-quarter profit estimates due to cost-cutting measures.
    • Demonstrates the impact of effective cost management in a challenging market.
  12. Gen Digital Inc:
    • Forecasted fourth-quarter revenue below Wall Street estimates, citing sluggish demand for antivirus software.
    • Indicates challenges in the cybersecurity sector.
  13. Hartford Financial Services Group Inc:
    • Exceeded market expectations with fourth-quarter profit, driven by robust premiums and investment gains.
    • Highlights the resilience of the insurance and investment industry.
  14. Hologic Inc:
    • Raised annual sales forecast on strong demand for diagnostics and breast health products.
    • Shows growth prospects in the med-tech sector amid a recovery in surgical procedure volumes.
  15. Microchip Technology Inc:
    • Forecasted fourth-quarter net sales below estimates due to weak demand and excess inventory.
    • Reflects caution about near-term demand in the chipmaking industry.
  16. Mizuho Financial Group Inc:
    • Reported an 8.2% increase in quarterly net profit, driven by brisk loan demand and favorable interest rate conditions.
    • Despite strong results, maintained an annual outlook due to uncertainties.
  17. Regeneron Pharmaceuticals Inc:
    • Beat Wall Street estimates for fourth-quarter revenue, with sales of blockbuster eye drug Eylea meeting targets.
    • Submitted an application to expand the use of eczema treatment Dupixent.
  18. Fractyl Health Inc:
    • Priced its U.S. initial public offering (IPO) below the indicated range, raising $110 million.
    • Indicates market dynamics in the healthcare sector, specifically in obesity and diabetes drug development.
  19. BP Plc:
  20. The British energy giant, BP Plc, has appointed Kate Thomson as its permanent Chief Financial Officer (CFO), completing a leadership reshuffle initiated after the abrupt resignation of Bernard Looney in September. Thomson, who served as interim CFO, takes on the role with immediate effect. She joined BP nearly 20 years ago and previously led the finances of BP’s oil and gas production and operations division. The move aims to bring stability and continuity to the company’s financial leadership following recent changes.
  21. Alphabet Inc (Google):
    • Google, a subsidiary of Alphabet Inc, has requested a U.S. judge to overturn a jury verdict favoring Epic Games, the maker of “Fortnite.” The jury had found that Google abused its market dominance in setting rules for its app store, Play. Google argues that Epic did not present sufficient evidence to support the December verdict, claiming it competes fiercely with Apple over mobile apps. The outcome of this legal battle will have implications for how app store policies are regulated and could shape the competitive landscape in the tech industry.
  22. BP Plc (Whiting Refinery Outage):
    • BP’s Whiting, Indiana, refinery, with a capacity of 435,000 barrels per day, experienced a power outage due to a transformer failure, leading to a plant-wide evacuation of non-essential workers. The refinery, BP’s largest in North America and the Midwest, is undergoing a purge of hydrocarbons, and it is uncertain how long it will take to restart operations. The incident impacted fuel prices in the area, causing concerns about tighter supply and affecting Canadian crude prices due to worries about lower demand.
  23. Cloudflare Inc:
    • Cloudflare, an internet firm, reported that an advanced group of hackers attempted to infiltrate its global network in late November. The company detected the intrusion on Thanksgiving and successfully expelled the hackers the following day. Although the hackers accessed some documentation and limited source code, Cloudflare emphasized that the operational impact was “extremely limited.” Cybersecurity firm CrowdStrike was engaged to remediate the breach, and the last evidence of threat activity was noted on November 24.
  24. Exxon Mobil Corp:
    • Exxon Mobil disclosed that activist investors, Arjuna Capital and Follow This, were withdrawing a climate proposal related to setting Scope 3 emission targets. Exxon had previously sought to block the proposal from being voted on during the shareholder meeting in May, arguing that the groups were driven by an “extreme agenda.” Exxon’s filing states that the proposal would not serve investors’ interests or promote long-term shareholder value. The withdrawal suggests a resolution or shift in discussions between Exxon and the activist investors.
  25. FedEx Corp:
    • A federal appeals court overturned a $366.2 million verdict against FedEx in a case brought by a Black sales manager, Jennifer Harris, who claimed the company fired her in retaliation for accusing her supervisor of race discrimination. The court reduced damages for pain, suffering, mental anguish, and inconvenience from $1.16 million to $248,620. FedEx expressed confidence in its actions regarding Harris’ termination and welcomed the court’s decision to reduce damages.
  26. Hawaiian Electric Industries Inc:
    • Hawaii’s Public Utilities Commission approved Hawaiian Electric Industries’ $190 million climate adaptation plan, aimed at enhancing the resilience of the islands’ electric grids to wildfires and severe weather conditions. The plan includes efforts to strengthen critical power lines on Maui and replace thousands of poles with fire-resistant materials, reducing the risk of wildfires and making Hawaii’s power infrastructure more robust.
  27. Intel Corp:
    • Intel is reportedly delaying the construction timeline for its $20 billion chipmaking project in Ohio due to market challenges and slow disbursement of U.S. grant money. Initial plans had chip-making starting next year, but the construction is now expected to conclude in late 2026. Intel assured that the project is ongoing and emphasized that managing large-scale projects often involves adjusting timelines. The delay reflects the challenges faced by chipmakers amid a complex global market.
  28. Mattel Inc:
    • Activist investor Barington Capital is urging toymaker Mattel to implement significant changes, including exploring strategic alternatives for its Fisher-Price and American Girl brands, separating the roles of CEO and chairman, pausing excessive stock-based compensation, and initiating a $2 billion share repurchase. Barington expressed concerns about the long decline of Fisher-Price and American Girl, suggesting that these brands may be hindering the success of Mattel’s other segments and hurting shareholder value.
  29. Nvidia Corp:
    • Nvidia experienced a record-breaking surge in market value in January, marking the largest monthly increase ever. The surge, totaling $296.52 billion, was driven by heightened optimism around artificial intelligence (AI), positive analyst projections, and the company’s announcement of expanded AI offerings. The robust market performance followed Nvidia’s unveiling of new desktop graphics processors and advancements in AI-related components and software.
  30. Procter & Gamble Co:
    • Police detained an armed man who took staff hostage at Procter & Gamble’s factory in northwestern Turkey. The hostage-taker was protesting against Israel’s military campaign in Gaza. Following failed negotiations, authorities launched a successful operation to rescue seven hostages. Procter & Gamble expressed relief that no one was harmed and thanked the authorities for their professionalism in handling the crisis.
  31. Rio Tinto Ltd:
    • Rusal, the Russian aluminum producer, lost a lawsuit against Rio Tinto over access to its 20% share of alumina produced at a jointly owned refiner in Queensland. The legal battle stemmed from Australia’s sanctions on alumina exports to Russia in response to the 2022 invasion of Ukraine. Rio Tinto gained sole control of Queensland Alumina Ltd, sidelining Rusal. Rusal expressed disappointment in the court’s decision and is considering whether to file an appeal within the 28-day window.
  32. Ryanair Holdings Plc:
    • Ryanair’s flights in January were emptier than the same month a year ago, attributed to online travel agents (OTAs) stopping the sale of its tickets in early December. The average number of empty seats per flight increased to 11%, up from 9% in January 2023. Despite this, Ryanair managed to grow its traffic by 3% year-on-year, flying 12.2 million passengers. The airline had accused OTAs of adding illegitimate extra charges and has been engaged in legal disputes with them.
  33. Stellantis NV:
    • Italy’s industry minister criticized Stellantis’ ownership structure, describing it as “unbalanced” between French and Italian stakeholders. The minister expressed dissatisfaction with the shareholding structure and noted that Italy is open to buying a stake in Stellantis to match the French government’s 6% ownership. The remarks continue the ongoing tension between Stellantis and the Italian government. Additionally, there were complaints about insufficient incentives for electric vehicles (EV) in Italy, impacting domestic EV demand.
  34. Tencent Holdings Ltd:
    • Tencent halted the development of a highly anticipated mobile game based on Square Enix’s “Nier” franchise in December. The cancellation, after two years of development, was reportedly due to challenges in finding a compelling monetization model considering the high development costs and franchise rights. The move highlights difficulties in Tencent’s strategy of adapting console and PC game hits into successful mobile games.
  35. Tesla Inc:
    • Tesla is recalling 2.2 million vehicles in the United States, nearly its entire electric vehicle fleet, due to incorrect font size on warning lights, posing a risk of crashes. The recall is larger than the previous one, which involved 2.03 million vehicles, making it Tesla’s biggest-ever recall. The recall includes various models such as Model S, Model X, 2017-2023 Model 3, Model Y, and 2024 Cybertruck vehicles. U.S. safety regulators have also upgraded their probe into Tesla vehicles over power steering loss to an engineering analysis, a step preceding a potential recall.
  36. UBS Group AG:
    • Switzerland’s financial market regulator, FINMA, is intensifying its focus on UBS Group after the bank’s takeover of fallen rival Credit Suisse. Marlene Amstad, FINMA’s Chair, stated that the regulator has increased its team dedicated to UBS and is scrutinizing the bank more deeply. She defended FINMA’s role during the Credit Suisse crisis and reiterated the need for additional powers, including the authority to impose fines on errant bankers and intervene in banks’ pay policies.
  37. Walt Disney Co:
    • The battle between Walt Disney and activist investor Nelson Peltz escalated as Peltz asserted that his candidates for Disney’s board of directors were better suited to plan for the post-CEO Bob Iger era than two current board members. The shareholder meeting is set for April 3, where investors will vote on board members. Disney emphasized that Iger’s departure is planned for the end of 2026, and both the board and Iger are actively engaged in succession planning. The dispute reflects ongoing tensions between Disney and activist investors.

Top Analyst Ratings

Dri Healthcare Trust:

The National Bank of Canada has increased the target price for Dri Healthcare Trust to C$22 from C$18.50. This decision comes in response to the company’s recent announcement of acquiring an expanded interest in specific royalty payments based on net sales of Omidria. The move signifies confidence in the company’s strategic decisions and potential positive impacts on its financial performance.

Linamar Corp:

CIBC has raised the target price for Linamar Corp to C$93 from C$90. This adjustment is grounded in the company’s strategic approach to building out a diversified manufacturing business. The revised target price reflects CIBC’s positive outlook on Linamar Corp’s ability to capitalize on opportunities within its diversified manufacturing portfolio, potentially leading to increased shareholder value.

Rogers Communications Inc:

Canaccord Genuity has increased the target price for Rogers Communications Inc to C$74 from C$72.5. This change follows the company’s strong fourth-quarter results, indicating optimism about Rogers Communications Inc’s financial performance and growth prospects. The target price adjustment reflects the positive sentiment derived from the recent quarterly performance.

Saputo Inc:

RBC has lowered the target price for Saputo Inc to C$36 from C$40. This adjustment is attributed to challenging commodity prices, which are anticipated to impact the company’s earnings forecasts. The revised target price takes into account the current market conditions and their potential influence on Saputo Inc’s financial outlook.

Amazon.com Inc:

Piper Sandler has raised the target price for Amazon.com Inc to $205 from $185. This adjustment is based on the company’s strong fourth-quarter results, indicating confidence in Amazon’s continued growth and market performance. The revised target price reflects positive sentiment regarding the company’s financial health and strategic direction.

Apple Inc:

JPMorgan has lowered the target price for Apple Inc to $215 from $225. This decision is linked to Apple’s forecasted drop in iPhone sales and revenue. The adjustment acknowledges the potential challenges and uncertainties in the company’s near-term financial performance, leading to a more conservative target price.

Ball Corp:

JPMorgan has raised the target price for Ball Corp to $59 from $54. The decision is grounded in the belief that investors may be drawn to the company due to the potential acceleration in financial returns. This adjustment reflects positive expectations regarding Ball Corp’s ability to generate increased returns for its shareholders.

Merck & Co Inc:

Truist Securities has raised the target price for Merck & Co Inc to $139 from $122. This change follows the company’s better-than-expected fourth-quarter results, indicating optimism about Merck’s financial performance and strategic initiatives. The revised target price reflects confidence in the company’s growth potential.

Meta Platforms Inc:

Baird has raised the target price for Meta Platforms Inc to $525 from $385. This adjustment is based on Meta exceeding high investor expectations in its fourth-quarter results. The revised target price reflects positive sentiment regarding Meta’s ability to deliver strong financial performance and the company’s strategic direction, which is resonating well with investors.

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