Notable market news this past week (04-Jul-24)
Here is the Skeptivest roundup of the latest market headlines for the week
🇺🇸 US employment cooling, half-point rate cut now more likely
US hiring slowed in July: In July, the US added 114,000 jobs, falling short of the expected 175,000. Additionally, the unemployment rate unexpectedly rose to 4.3%, its highest level in nearly three years. This trend positions the Federal Reserve to cut interest rates in September to achieve a soft landing.
Economists expect more aggressive rate cuts: Wall Street economists from Bank of America, Barclays, Citigroup, Goldman Sachs, and JPMorgan now forecast more aggressive rate cuts, with Citigroup predicting half-point cuts in September and November, and a quarter-point cut in December.
Market reaction: The S&P 500 fell sharply with losses led by tech stocks with growing fears of an economic slowdown. The selloff partly reflects worries that the Federal Reserve has left it too long to cut interest rates.
☕️ Quick fire happenings to note
🌏 Global macro
- BOJ hikes, BOE cuts: This week, the Bank of Japan raised interest rates, and the Bank of England cut its key rate to 5% by a narrow 5-4 vote, citing lower inflation. Following the BoE decision, UK and European bank stocks fell, and bond markets priced in further rate cuts.
- TOPIX decline, Yen strengthens, following BOJ rate hike: Japan has been hit hard by recent market turmoil, with the Topix index experiencing its largest two-day drop since the 2011 tsunami, following a record high in July. The Japanese yen gained to the strongest since March against the USD and strategiests are suggesting it could reach 140 to the dollar. These trends follow the Bank of Japan’s unexpected rate hike on Wednesday and Governor Kazuo Ueda’s hawkish stance.
- US sued TikTok over alleged child privacy violations: DOJ and the FTC sued TikTok and its parent company, ByteDance, claiming that the app unlawfully collected data from users under age 13.
- Chip restrictions on China: The US may soon impose unilateral restrictions on China’s access to AI memory chips and equipment, targeting key suppliers Micron, SK Hynix, and Samsung. This move aims to prevent Chinese firms from obtaining high-bandwidth memory (HBM) chips, which these companies dominate. Additionally, new legislation would block firms with ties to China and foreign adversaries from receiving tax credits for domestic energy manufacturing.
🏦 Individual stocks/companies
- Tech concerns fuel S&P500 decline: Amazon (competition from Temu/Shein) and Intel reported disappointing results, raising doubts among traders about the value of artificial intelligence investments. While Apple anticipated that its new AI features would boost iPhone upgrades, it also noted weak performance in China. Nevertheless, sales surged 5% to $85.8b in the last quarter, in part due to its new line of iPads offsetting weak China performance.
- Intel (-31.63% past 5 days) falls to lowest price in > a decade: Intel shares had their biggest drop since 1974 on Friday after the chipmaker reported a big miss on earnings in the June quarter and said it would lay off more than 15% of its employees. Intel's numbers were bad across the board - $1.61b net loss vs $1.45b net income positive in the year prior, adjusted earnings per share of 2 cents which fell way short of analyst conse4nsus of 10 cents.
- Shake Shack (+19.52% past 5 days) rallies as SSSG grew 4%: Shake Shack saw net income grow 50% annually, easily beating estimates, while revenue grew 16%. Same-store sales grew 4%.
- Meta (+3.8% past 5 days) to spend $37-$40b of capex mostly on AI-based ventures this year: Some analysts are concerned about the large capital expenditures, but as long as the company continues to surpass sales and EPS estimates by 2% and 10%, respectively, everything should remain on track.
- Match Group (+9.33% past 5 days) crushed earnings: Match Group exceeded earnings expectations, reporting EPS of $0.48 per share, matching estimates, on revenue of $864m, a 0.9% beat. Hinge’s revenue surged by 48%.
🇸🇬 Singapore related
- Singapore hotels' average room rate falls to 1-year low in June: Singapore hotels' average room rate fell slightly in June to the lowest in a year (S$268.87 down 3.9% from S$279.87 in May), as international visitors arrivals reached a third straight month of declines.
- Singapore employment growth increased in Q2, despite a seasonal dip in resident employment: Total employment – excluding migrant domestic workers – grew by 11,300 in Q2 2024, more than double the increase of 4,700 charted in Q1. In Q2, while resident employment continued to rise in growth sectors – such as financial services, health and social services, information and communications, as well as professional services – it shrank slightly overall, dragged by retail trade.
