US stocks continued to power to new highs in a shortened 4th July Independence Day holiday, led by a strong performance from Nasdaq-listed names. The Nasdaq Composite rallied almost 2% while the benchmark S&P 500 scaled new highs of 5,537, taking the index’s year-to-date gain close to 17%, or around 800 points, where it began 2024.
A speech by Fed chair Jerome Powell at a central bank monetary policy conference in Sintra, Portugal gave encouragement to investors looking for signs of an earlier than expected interest rate cut. Markets expect the rate cut cycle to begin at September, a fair bit later than projections earlier in the year, as the Fed continues to grapple with stubbornly resistant inflationary indicators.
But with economic data coming in weaker than expected, including ISM manufacturing, Job openings and weekly jobless claims - all signalling slowing growth, markets gained confidence that evidence will quell lingering Fed fears of moving to soon. The US dollar and bond yields fell in response.
More data on the state of the labour market will be revealed on 5 July (at 1.30pm UK time) when non-farm payrolls are reported. Consensus forecasts are looking for 190,000 new jobs in June compared with 270,000 the previous month.
TESLA
The electric vehicles (EVs) maker reversed the entire first quarter 2024 share price loss in just a few days, the stock rallying nearly 25% in a shortened July 4th holiday week.
Tesla (TSLA:NASDAQ) may have reported global deliveries only fractionally above consensus estimates (444,000 vehicles in the three months to June, versus 439,000) but it was enough the shift the dour mood music that has backtracked Tesla’s 2024 so far.
As ever, the devil may be in the detail, and investors might ease up on euphoria until second quarter results, which typically come a couple of weeks after deliveries numbers (17 Jul). EVs account for around 85% to 86% of Tesla profits and after 18 months of declining earnings estimates, many believe a turn is on the horizon as Elon Musk stops price cutting and leverages cheap financing to stimulate demand.
Long-run Tesla backer Gary Black, who runs the US-based Future Fund, sees scope for Tesla to outstrip third quarter deliveries estimates of 435,000, reversing the two-quarter downtrend.
CONSTELLATION BRANDS
There was a good deal of anticipation surrounding the first-quarter trading update from Rochester, New York-based beer, wine and spirits group Constellation Brands (STZ:NYSE) this week. Analysts were predicting a sales miss and a downgrade to full-year earnings, but they were disappointed – in a good way.
The group said sales of premium imported beers, such as Corona and Modelo, topped forecasts, more than offsetting weakness in its wine and spirits division leading to a stronger operating margin and higher-than-expected earnings per share.
Rather than cutting its full-year guidance, Constellation stuck to the same low-double-digit earnings growth forecast it issued at its investor day last November.
Considering its strong execution over the Cinco de Mayo and Memorial Day holidays and the growing appetite among US consumers for premium imported beers, we think guidance is conservative, but the lack of upgrades sparked a small sell-off with the shares dipping 3% to $250 in shortened trading.
PARAMOUNT GLOBAL
Resuming merger talks with Skydance Media did wonders for Paramount Global (PARA:NASDAQ), the multi-national owner of CBS, Paramount Pictures, MTV and a string of other TV, film and streaming services.
The stock rallied more than 10%.
Paramount Global is 77% owned by Shari Ellin Redstone-led National Amusements, and while details of the new terms are vague, it is believed that the new deal would see the Redstone family receive $1.75 billion, about $50 million more than the agreement that was nixed last month.
The whole thing has had more twists and turns than an Agatha Christie movie, including former Paramount CEO Bob Bakish’s resignation in April, while there was talk of alternative offers from a joint Apollo/Sony venture and Barry Diller, chairman of media conglomerate IAC (IAC:NASDAQ).
But the closing credits now look close to rolling, with talk of a tentative agreement being sent for review to the special committee set up to evaluate offers for Paramount Global.
