Having hit a new record high of 5,040 points on Monday, the S&P 500 index quickly went into reverse on Tuesday after a hotter-than expected January inflation report.
However, economists were quick to point out that when it comes to interest-rate decisions, the Federal Reserve pays more attention to the PCE (personal-consumption expenditure) data which is released at the end of the month.
Sure enough, the market picked up mid-week helped by a softer-than-anticipated retail sales report which revived hopes of a Fed rate cut and stocks look poised to test new highs ahead of the weekend.
The technology sector had a mixed week with Meta Platforms (META:NASDAQ), Nvidia (NVDA:NASDAQ) and Tesla (TSLA:NASDAQ) gaining but Alphabet (GOOG:NASDAQ), Apple (AAPL:NASDAQ) and Microsoft (MSFT:NASDAQ) losing.
The best-performing sectors were basic materials, financials and utilities, with mid- and small-cap stocks posting stronger gains than large-caps, suggesting the rally has legs and is broadening out from the narrow leadership of the last year, which is a welcome development.
NVIDIA
First Wall Street, then the world. We don’t know if Nvidia (NVDA:NASDAQ) had the champagne corks popping this week but the firm’s top brass might feel smug as the chip firm’s market cap surged beyond ‘Magnificent Seven’ peers Amazon (AMZN:NASDAQ) and Alphabet (GOOG:NASDAQ) this week to become Wall Street’s third most valuable company, worth $1.8 trillion.
Nvidia has become the pin-up company for all things AI and investors cannot get enough of it. Some believe this is just the start of a major AI transformation for the global economy, others are more sceptical
Speculation has emerged that lead times are shortening, which is traditionally a negative indicator, yet this might not be an immediate problem if AI-related demand remains strong. That’s a big ‘if’ right now and something which will be at the centre of the conversation when Nvidia reports results on 21 February.
UBER TECHNOLOGIES / LYFT
The ride-hailing space had shocks in store for investors this past week with Uber Technologies (UBER:NYSE) unveiling a shock $7 billion share buyback after its first annual net profit, and Lyft (LYFT:NASDAQ) committing to positive free cash flow this year.
Uber’s news sent the stock up 14% to $81.39. Lyft’s share price performance takes a little more explaining. It’s initial 60% jump post its earnings report was largely due to a typo in the statement, which promised a 500-basis point margin boost. This was not the case, as CFO Erin Brewer confirmed within an hour to analysts, admitting an erroneous 0 in the text… it should have been 50 basis points.
Down came the stock, albeit still ending the day up nearly 20%. The stock has continued to rally since, ending the week up nearly 50% at $19.03, peaks not seen since summer 2022.
Back at Uber, it expects gross bookings growth to be in the ‘mid to high teens’ with earnings before interest, taxation, depreciation, and amortisation ranging from the ‘high 30% to 40%’ range.
COCA-COLA
Famed the world over for its iconic fizzy drink, shares in Coca-Cola (KO:NYSE) popped on results day (13 February) but finished the week flat at $59.40. The beverages giant served up fourth quarter earnings of 49 cents, bang in line with forecasts and a small beat on sales thanks to price increases.
Q4 revenues bubbled up 7% to a better-than-expected $10.8 billion including tasty 12% organic revenue growth. However, a 1% volume decline in North America suggested Coca-Cola has been pushing its luck a bit too hard with price hikes in the US, where lower income consumers are feeling the pinch from inflation.
‘During the year, our people and partners rose to meet new challenges, allowing us to excel globally and deliver in a dynamic world,’ said CEO James Quincey. ‘As we begin a new year, we’re confident that our all-weather strategy, powerful portfolio and harmonized system will continue to create value for our stakeholders in 2024 and for the long term.’
For 2024 Coca-Cola, which has increased its dividend in each of the last 61 years, is forecasting organic revenue growth in the 6% to 7% range with a comparable earnings per share increase of 4% to 5%.
