Despite all the doubts about the durability of the rally, US stocks continue to power head with the S&P 500 and Nasdaq Composite posting new life-highs during the past week leaving them up 7.5% and 9% respectively year-to-date.
Both indices have registered their best February since 2015, with the Dow Jones recording its best return in three years.
Importantly, it isn't just the 'Magnificent Seven' which are fueling the rally as over 70% of S&P 500 stocks registered gains last month.
Even the fact the Federal Reserve’s preferred gauge of underlying inflation rose in at the fastest pace in nearly a year in January wasn't enough to deter buyers.
The lack of fear in the market is clear from the CNN Greed & Fear index which has been rooted in ‘Extreme Greed’ territory for over a month now.
RETAIL SECTOR
It has an eventful week for retail sector watchers with shares in supermarket group Kroger (KR:NYSE) climbing 2% to $48.5 after the FTC (Federal Trade Commission) sued to block its $25 billion deal to buy Albertsons (ACI:NYSE) amid competition concerns.
Investors seemed relieved Kroger could be spared the integration headaches associated with the acquisition of smaller rival Albertsons, whose stock was marked down 3.5% to $20.5 over the week, although the mega-deal would have strengthened Kroger’s position as America’s second biggest grocery player.
While the FTC argues the deal would eliminate ‘fierce competition’ between Kroger and Albertsons, Kroger insists the FTC’s stance will only strengthen larger rivals like Walmart (WMT:NYSE), Costco (COST:NASDAQ) and Amazon (AMZN:NASDAQ) by allowing them to boost their growing grocery industry dominance.
Elsewhere in the sector, shares in Lowe’s (LOW:NYSE) rose 4.3% to $239 after the home improvement retailer’s fourth quarter sales and earnings beat Wall Street estimates.
Revenue and earnings per share of $18.6 billion and $1.77 bested the $18.45 billion and $1.68 analysts were looking for but a slowdown in DIY demand and unfavourable January winter weather meant comparable sales were down 6.2% year-on-year and Lowe’s forecast comparable sales would decline by 2% to 3% in the new financial year.
Autozone (AZO:NYSE) shares accelerated 10% to an all-time high of $3,012 after the car parts-to-accessories seller’s second quarter profits topped estimates, the Memphis-based company benefiting from a DIY trend among motorists eager to maintain the roadworthiness of older vehicles.
Sales increased by 4.6% to $3.9 billion in the quarter to 10 February 2024. Chief executive Phil Daniele explained that while ‘a difficult holiday comparison for both Christmas and New Year’s negatively impacted quarterly sales performance, we continue to be encouraged with our sales initiatives, and believe we are well positioned for future growth.’
BEYOND MEAT
It seems so long ago that plant-based food became a ‘thing’ that Beyond Meat (BYND:NASDAQ) has probably slipped off most people's radars, but the stock came back with a vengeance this week gaining as much as 45% in a single session.
Having traded at $200 per share not long after listing, giving it a market value of nearly $13 billion, the company soon faded into obscurity as investors gave up hope of it ever turning a profit.
It’s somewhat surprising therefore that despite the firm reporting a fourth-quarter loss of $2.40 per share – on a share price of $7.52 before its trading update and compared with estimates of a loss of 89c per share – and forecasting first-quarter sales of just $70 million to $75 million compared with the consensus of $89 million, traders jumped on the stock.
The answer appears to be the company has ‘found religion’ and is now on a mission to cut its operating costs and cash burn and right-size its production facilities in the name of margin expansion.
Chief executive Ethan Brown also promised a ‘years-in-the-making core platform renovation’ which will deliver ‘superior health benefits and taste’, which clearly left investors salivating.
VIKING THERAPEUTICS
Shares in Viking Therapeutics (VKTX:NASDAQ) more than doubled this week after the biotechnology firm announced positive mid-stage trial results for its obesity drug which induced more weight-loss than market leaders Wegovy and Zepbound.
These two weight-loss treatments are made Novo Nordisk (Novo-B:CPH) and Eli Lilly (LLY:NYSE) respectively, and their shares fell on the news as investors weighed the prospect of a disruptive product potentially entering the market.
Over the last five years, Viking’s shares have surged more than 800% making them one of the best-performing US biotech stocks.
Viking’s investigational drug candidate VK2735 helped overweight patients lose 14.6 kilos on average in a thirteen-week study which enrolled 176 patients. The company will be hoping to replicate the results in a larger late-stage trial.
The firm said it planned to meet the US regulator around the middle of the year to discuss its next steps. Viking also initiated a fully underwritten $350 million share public offering.
Analysts at Goldman Sachs (GS:NYSE) have predicted the weight-loss market could grow to become worth more than $100 billion annually by 2030.
