As concern about the banking sector began to die down a little, Wall Street enjoyed a more settled and constructive time over the past week, repairing some of the damage seen earlier in March.
Gains among tech names as expectations for interest rates are revised down and some decent numbers are put up by constituents of the sector helped with the improving mood.
Clothing company Phillips-Van Heusen (PVH:NYSE, which owns the Tommy Hilfiger brand among others, as it beat expectations with its quarterly numbers. Spice maker McCormick & Co (MKC:NYSE) also reported results ahead of forecasts as it proved able to pass on higher costs.
In a sign of the dampening of fears over banks, troubled regional lender First Republic Bank (FRC:NYSE) also moved higher, albeit from a low base.
Despite the wider positive sentiment towards the technology sector Alphabet (GOOG:NASDAQ) shares traded lower, while bio-technology firm Embecta (EMBC:NASDAQ), a recent spin-off from medical device outfit Becton Dickinson (BDX:NYSE), saw its shares continue to struggle.
MICRON TECHNOLOGY
Considering memory-chip maker Micron Technology (MU:NASDAQ) just posted the biggest quarterly loss in its history and its worst gross margin since the financial crisis, many observers are asking why the share price rose 7% on the day of its half-year results.
The answer is, analysts are counting on the last three months - which saw the firm post more than $2 billion in losses due to a $1.4 billion writedown - marking the bottom of the cycle in terms of inventories.
According to chief executive Sanjay Mehrotra, ‘while still elevated, customer inventories are improving, and we expect the volume of shipments both for DRAM and NAND will continue to increase on a sequential basis from here’.
Mehrotra said he also expected purchases by data centres, who are among Micron's biggest customers, to start growing again this quarter.
The market reaction suggests investors aren't waiting for the evidence of a bottom in memory chips, they are buying in anticipation the worst is already over.
ALIBABA
Shares in Nasdaq listed Chinese e-commerce giant Alibaba (BABA:NASDAQ) surged 20% higher this week to a five week high after announcing the break-up of the company into six separate entities.
Crucially each division will have its own CEO and board of directors who will determine the appropriate strategy and funding which could include a stock market listing.
Subsequent to the initial announcement on 29 March, Bloomberg reported that Alibaba's $20 billion logistics division Cainiao Network Technology was preparing for an initial public offering in Hong Kong before the end of the year.
Investors welcomed the restructuring as a signal that relations with Beijing were becoming more supportive and less intrusive. In addition, there is a sense the restructuring will create more focused businesses, unlocking hidden value at the group level.
In a letter to staff seen by Reuters, CEO Daniel Zhang said: ‘The original intention and fundamental purpose of this reform is to make our organisation more agile, shorten decision making links and respond faster.’
PAYCHEX (PAYX:NASDAQ)
Shares in Paychex (PAYX:NASDAQ) powered 8.3% higher over the week to $116 after the payroll services company posted better than expected third quarter results and issued a positive outlook for the year to May 2023.
For the quarter to February 2023, total revenue came in at US$1.38 billion, up 8% year-on-year and breezing past Wall Street estimates by at least $30 million. Earnings per share (EPS) of $1.29 was up from $1.15 a year earlier and ahead of the $1.24 called for by consensus. The strong quarter reflected ‘continued growth with 8% in total revenue and double digit adjusted diluted earnings per share’, remarked John Gibson, CEO of the Rochester-headquartered firm.
‘Solid execution throughout our calendar year-end and selling season resulted in growth in new sales and strong retention.’ Paychex now expects EPS for the year to grow in the range of 13% to 14%.
