Wall Street spirits have been higher over the past week than a couple of college dropouts, with all three major indexes ripping up the record books, including the S&P 500 closing above 5,300 (15 May) for the first time.
Cooler-than-expected inflation in April sets the scene for a potential Fed rate cut soon despite a string of hot inflation reports from the first three months of the year. Like a toddler on a carpet, the economy may still be capable of a soft landing, markets seem to think.
Core CPI, which tracks the price of goods and services excluding volatile food and energy prices and is closely watched as an inflation indicator, rose 3.6% from the same period last year. That’s the smallest annual increase since April 2021.
You can judge the relative euphoria levels by Meme stock 2.0 emerging over the past week, albeit a seemingly short-lived one. Popular names like AMC Entertainment (AMC:NYSE), GameStop (GME:NYSE) and Blackberry (BB:NYSE) jumped anywhere from 12% to 60% in pre-market trading this week, although they held on to almost none of those gains as the dust settled.
It seems that block trades were light and small share orders dominated, which tells us that this was a retail investor frenzy largely ignored by big institutions, although it has presumably led to some embarrassing short covering by some hedge funds.
There was also some interesting earnings from IT kit bellwether Cisco Systems (CSCO:NASDAQ) for investors to chew over, and Shares take can be read here.
CHUBB
We got a great example of Warren Buffett’s power to drive share prices over the past week after the ‘Sage of Omaha’ revealed that US insurer Chubb (CB:NYSE) was the new stock his Berkshire Hathaway (BRK.B) firm has been stakebuilding in recently.
Chubb shares jumped to a new $264.88 all-time high after regulatory filings showed Buffett has amassed a $6.7 billion stake.
Berkshire started purchasing shares in Chubb in the third quarter of 2023 and received permission from the Securities and Exchange Commission to temporarily keep the purchases under its hat until it had finished buying to prevent other investors piggybacking off the idea.
The purchase comes shortly after the Berkshire annual shareholder meeting (4 May) where chairman Buffett told investors he had trimmed its stake in Apple (APPL:NASDAQ) to around $135 billion triggering an $11.2 billion after tax gain.
Buffett also revealed the company’s cash pile reached a record $190 billion at the end of the first quarter reflecting a dearth of worthwhile investment opportunities.
In that context the Chubb purchase is noteworthy, and it becomes one of Berkshire’s top 10 holdings adding to its burgeoning insurance interests. Last month (23 April) Chubb reported a 14% rise in first quarter net written premiums and a 22% increase in core operating income. [MG]
WALMART
Also breaking share price records was Walmart (WMT:NYSE), closing at $64.01 after first quarter figures from the world’s biggest retailer beat on both the top and bottom lines.
Revenue of $161.5 billion for the quarter ended 30 April was up 6% year-on-year and exceeded the $159.5 billion Wall Street scribes were looking for, while adjusted earnings per share of $0.60 came in above the $0.52 consensus estimate.
The Arkanas-based chain called out gains with high-income shoppers, who are flocking to Walmart for its convenience, as well as same-store sales growth of 3.8% for its US business, which also generated e-commerce growth of 22%, where it is neatly using its spread of stores to meet quick delivery targets.
The big-box retailer and US economic bellwether also highlighted progress with newer revenue streams, such as advertising and its subscription-based membership programme. Walmart said now expects to deliver full-year results at the high end or slightly above previous guidance of 3% to 4% sales growth with 4% to 6% operating income growth. [JC]
SUPER MICRO COMPUTER
Ever popular AI (artificial intelligence) play Super Micro Computer (SMCI:NASDAQ) scorched 15% higher during the past week, a massive jump considering there was no company-specific news.
Analysts reckon positive backcloth sounds being made by the likes of Dell Technologies (DELL:NYSE) plus the buzz created by back-to-back AI product events from OpenAI and Alphabet (GOOG:NASDAQ) led to levels barely short of euphoric, and sentiment is a great driver of share prices.
It shows that when investors feel in a good mood, share prices can run higher for longer than you might otherwise expect. Remember, this just a couple of weeks after Super Micro’s stock tanked after missing quarterly revenue forecasts. Since then (30 Apr), Super Micro stock has surged more than 22%.
