It hasn’t been a blockbuster week for US stocks, but the S&P 500 index has quietly crept back towards the 4,600 level putting it less than 5% below its January 2022 record high of 4796.56.
A rally in large-cap tech stocks such as Alphabet (GOOG:NASDAQ) and Apple (AAPL:NASDAQ) have helped the mood, while investors have also been looking for – and finding – evidence of a cooling of the US economy to strengthen the case for rate cuts in 2024.
November’s ADP non-farm employment came in at 103,000 new jobs created against a forecast of 130,000, not too dispiriting, while non-farm productivity rose 5.2% in the third quarter, above the 4.9% consensus but not so much as to spark concerns.
However, it only needs one rogue number to upset the bullish mood, and few reports are more closely-watched than today’s non-farm payroll data, so investors will be hoping for a figure under 180,000 but above 100,000 in order for the rally to continue.
CAMPBELL SOUP
American processed foods-to-snacks company Campbell Soup (CPB:NYSE) provided some portfolio nourishment as forecast-beating first-quarter earnings (6 December) and reaffirmed full year guidance stoked an 8.7% share price rally to $43.2.
Most closely associated with its flagship canned soup products, the New Jersey-based company served up adjusted earnings per share of $0.91, down 11% year-on-year but ahead of Wall Street estimates.
Revenue softened 2% to $2.5 billion as the group lapped tough prior-year comparatives whilst benefiting from earlier price increases. Steered by former US army pilot and seasoned food industry executive Mark Clouse, Campbell Soup reported strong demand for its cookies and crackers, notably the Lance and Goldfish brands.
Clouse insisted his charge continues to ‘effectively navigate’ the tough consumer landscape, flagging an ‘encouraging start’ to the key holiday season and reiterating his excitement about the Sovos Brands acquisition expected to complete during 2024.
GAMESTOP
Once the king of ‘meme stocks’, video games and electronics retailer GameStop (GME:NYSE) has been in steady decline for most of the last three years with its shares languishing at just $12 from their January 2021 peak of over $100.
However, like a ‘jump scare’ in a horror film, the company has risen from the dead with earnings returning to breakeven in the latest quarter against a prior-year loss of around $95 million, sending its shares up 10% yesterday.
The firm also proposed a radical new strategy allowing chief executive Ryan Cohen to use company cash to buy shares in other businesses rather than short-term debt, and to use his own cash to invest in the same companies.
Wedbush analyst Michael Pachter called the decision ‘alarming’ and argued investors ‘do not need GameStop to act as a mutual fund’ given the plethora of investment vehicles available to them.
BROADCOM
Fabless chip and software company Broadcom (AVGO:NASDAQ) reported results in line with analyst expectations in Q4 2023, posting earnings per share of $11.06 on $9.3 billion revenue. On the other hand, the company's full-year revenue guidance of $50 billion at the midpoint came in a couple of percentage points shy of hopes, which may put pressure on current first quarter 2024 consensus for $11.07 earnings per share on $9.44 billion revenue.
Talking about the VMware acquisition, CEO Hock Tan took a bit of a victory lap after getting the deal through regulatory hoops eventually, but it will mean taking charges of about $1.3 billion as the pair integrate. Tan called the VMware deal ‘transformational’, although sceptics might ponder hearing that sort of talk before, but he expects the semiconductor space to sustain its mid to high single-digit revenue growth rates. VMware, he says, ‘will drive consolidated revenue to $50 billion and adjusted EBITDA to $30 billion.’
