There was some sunny optimism on display on Wall Street over the past week, supported by an inflation reading which came in lower than expected.
Both the headline and core measures of CPI (the latter of which strips out the impact of more volatile food and energy prices) were just 0.2% higher month-on-month against the 0.3% rise which had been pencilled in.
This helped lift stocks as it fed expectations the Federal Reserve is close to the end of its rate hiking cycle.
Energy services business Schlumberger (SLB:NYSE) was lifted by a significantly better than expected first-quarter earnings update.
Motor insurance firm Progressive Corp (PGR:NYSE) endured a big slump as its own quarterly numbers fell well short of analyst estimates. The company has been hit by higher claims costs with its combined ratio – a measure of the amount it takes in in premiums versus the amount going out on claims – coming in worse than expected.
DOMINO’S PIZZA
Fast food chain Domino’s Pizza (DPZ:NYSE) surged more than a tenth taking the shares to an 11-month high after revealing (12 July) a new agreement with Uber Technologies (UBER:NASDAQ) that will allow its customers to order through the latter’s Uber Eats and Postmates apps.
The agreement is exclusive to the US and runs to at least 2024, extending the international agreement between the two firms. The US partnership will begin in the Autumn across four pilot markets.
Domino’s will be using its own drivers to make the deliveries allowing it to maintain its brand image and quality. The agreement allows for Uber sharing customer order data with Domino’s which will give insight on less frequent users.
‘Adding Domino's to Uber's US marketplace will expand the pizza brand's reach to new customers,’ said Northcoast Research analyst Jim Sanderson.
The deal is also seen as a positive for Uber as it gives potential to take market share from Doordash (DASH:NASDAQ). Uber shares are up more than 6% since the deal was announced.
PEPSICO
While global consumers continue to wrestle with cost-of-living pressures, they are still finding some spare cash for affordable treats such as fizzy drinks and crisps judging by second quarter results (13 July) from PepsiCo (PEP:NASDAQ). Shares in the soft drinks-to-snacks powerhouse behind Pepsi, Doritos and Frito-Lay corn chips perked up 0.7% to $184.4 after the company maintained its record of beating earnings forecasts and raising guidance, although successive price hikes are beginning to impinge on demand in some areas.
Organic sales rose 13% in the quarter to 17 June, ahead of the 9.7% called for by consensus and boosted by growth in Africa, South Asia and the Middle East, while earnings per share of $2.09 topped the $1.96 Wall Street was looking for.
However, volumes were 3% lower in the convenient food business and down 1% for beverages in the quarter, suggesting limits even to PepsiCo’s pricing power.
Guided by CEO Ramon Laguarta, PepsiCo now expects to deliver full year organic sales growth of 10%, an upgrade from earlier guidance of 8%, and has revised its core constant currency earnings per share growth estimate up from 9% to 12%.
NVIDIA
Excitement is starting to build over the much anticipated IPO (initial public offering) of Arm, the microchip designs champion built right here in Britain’s Cambridge, and AI chip designer Nvidia (NVDA:NASDAQ) might be one of the anchor investors.
This makes a lot of sense considering the trillion-dollar US company tried to buy Arm a couple of years ago, only to be kyboshed by regulators. Nvidia’s AI chips, the source of the stock’s 220% share price rally this year, are all built on Arm architecture so becoming a major backer for the long-term would bring the two as close together as antitrust rules will allow.
Arm is also hoping to hook Intel (INTC:NASDAQ), another of its partners, for a floatation that could come as soon as September.
An Arm flotation would certainly give IPO markets a welcome lift after living on scraps for two years, and analysts forecast a valuation that could run as high as $70 billion. Arm was bought by Japan’s Softbank (9984:TYO) for around $32 billion in 2016.
