Despite a sell-off on Wednesday (27 November) on the back of stubbornly strong inflation, US markets still put in a strong performance over five days with the S&P 500 index closing above 6,000 (26 November) before easing back.
October’s PCE (personal consumption and expenditure) data showed a steeper-than-expected rise in prices, while the economy and employment remain robust, raising concerns the Federal Reserve – which monitors the PCE as one of its data inputs – may be cautious about cutting interest rates next month.
For the second week running, AI server firm Super Micro Computer (SMCI:NASDAQ) was the best-performing stock as it sought more time to regain reporting compliance after an accounting scandal earlier in the year.
In contrast, a couple of other high-profile tech companies, Dell Technologies (DELL:NYSE) and HP (HPQ:NYSE), slipped up this week as their outlook statements disappointed investors, and a slew of retailers missed expectations sending their share prices sliding.
Even so, most analysts are predicting further gains for US stocks next year with Bank of America and RBS projecting 10% further upside for the S&P 500 index in 2025 after gains of 24% in 2023 and 26% so far this year.
DELL TECHNOLOGIES
‘Out with the old, in with the new’, could be Dell Technologies’ mantra right now as it drives towards an AI-powered future. Demand for AI servers continues to climb and, as a crucial provider of tech infrastructure to consumers and businesses, Dell looks well positioned to benefit in the longer term.
Not that investors were convinced during the past week, when the firm’s third quarter results and Q4 guidance left them a little deflated. This was largely down to its traditional servers, PCs and laptops that aren’t getting sold as hoped, almost certainly a short-term buyer reaction waiting to get hold of the latest kit.
Getting that latest AI-powered tech out the door is the challenge, with chief suppliers like Nvidia (NVDA:NASDAQ) struggling to meet surging demand, which trickles down to Dell. That said, Dell’s AI server orders hit a record $3.6 billion in Q3 and its pipeline grew by more than 50%, so the company looks well set for 2025.
That’s certainly the view from The Street, with analysts at JPMorgan, Morgan Stanley, Goldman Sachs, Deutsche and more, talking up Dell’s prospects. Even more so with rival Super Micro Computer also reporting struggles with deliveries, amid other things. Buy Dell’s dip? That’s the question facing investors after the stock’s sharp fall over the past week.
AMGEN
The competitive landscape in the race to develop more effective obesity drugs just got easier for incumbents Eli Lilly (LLY:NYSE) and Novo Nordisk (NOVO-B:CPH) after Amgen’s (AMGN:NASDAQ) experimental weight loss drug MariTide fell short of expectations in a mid-stage clinical trial this week (26 November).
Despite patients achieving an average weight loss of 20% over 52 weeks around 11% stopped the treatment early due to adverse side-effects including nausea and vomiting. The disappointment sent Amgen’s shares down by as much as 13% wiping more than $7 billion from its market value before recovering slightly.
Amgen insisted the side effects were ‘predominantly mild to moderate, transient, and primarily associated with the first dose.’ It said the nausea was resolved within around six days and the vomiting in one to two days.
MariTide works differently to the leading obesity drugs on the market and potentially offers more durable weight loss and monthly injections instead of weekly injections.
On an investor call Amgen’s chief scientific officer Jay Bradner said: ‘As a physician, I've never met a patient who prefers more injections. Think about those 52 injections down to potentially 12 or fewer.’
BEST BUY / KOHL’S
Investors switched out of Best Buy (BBY:NYSE) after the electronics retailer reported (26 November) a 12th consecutive quarter of negative same-store sales growth and cut full year guidance amid softer demand for consumer electronics across the pond. However, the shares did regain some spark to close the week 2% to the good at $88.2 as bargain hunters swooped.
Bossed by Corie Barry, Best Buy’s third quarter sales of $9.45 billion and earnings per share of $1.26 missed expectations of $9.63 billion and $1.29 respectively. Slower demand for appliances, home theatre systems and gaming products was behind the drop, though growth in computing and tablets helped to offset some of the losses.
Best Buy’s outlook also disappointed investors, with the retailer now forecasting a full year comparable sales decline of between 2.5% and 3.5%, versus its prior expectations of a 1.5% to 3% drop.
Also throwing the resilience of the US consumer into question was Kohl’s (KSS:NYSE), whose shares sank 9% to $14.75 after the department store delivered (26 November) weaker-than-expected third quarter earnings and joined Best Buy in massaging down its full year outlook.
Dire results were posted a day after Kohl’s announced CEO Tom Kingsbury will be stepping down after less than two years running the struggling retailer, to be replaced by Ashley Buchanan, CEO of The Michaels Companies.
