After a downbeat start to September, US markets have staged a healthy recovery thanks to buying of heavyweight big tech stocks and huge excitement over ARM’s (ARM:NASDAQ) IPO, the biggest in the US for two years.
As of the market close (14 Sep), Amazon (AMZN:NASDAQ) was up 5.7%, Meta Platforms (META:NASDAQ) up 4.1%, Microsoft (MSFT:NASDAQ) up 2.7% and Tesla (TSLA:NASDAQ) up around 7.5% over the week.
There was also support from big pharma, with a 3.4% rise for Eli Lilly (LLY:NYSE), a 2.6% rise for Amgen (AMGN:NASDAQ) and a 3% rise for Johnson & Johnson (JNJ:NYSE).
Oddly, these gains came in the context of a hotter-than-expected US CPI (consumer price inflation) print for August, with the year-on-year rate hitting 3.7% against expectations of 3.6% and just 3.2% in July due to a 10.6% jump in gasoline prices.
The market’s response suggests investors and economists believe the increase is temporary, and everything will get back to normal next month.
However, the core rate of inflation, which excludes volatile items like energy and food, crept up last month for the first time since February on a sequential basis, which makes the Federal Reserve’s job of bring price rises back to their 2% target more difficult.
ARM
Set at $54 billion, ARM’s IPO was priced to pop on day one, and pop it did, the stock rallying 25% on its market debut (14 Sep). The biggest new listing for two years, ARM priced its shares at a top-of-the-range $51, but they closed day one at $63.59, riding a wave of AI excitement.
Parent Softbank still owns 90% of the company and it played its hand neatly, capping available stock amid huge interest – the shares were 12-times oversubscribed, according to Reuters. We can probably expect ARM to not only hang on to those gains, but to add to them over the coming weeks with plenty of forced buyers – Nasdaq ETFs for example.
There’s plenty of growth potential for this built-in-Britain tech business, as Shares explained in this pre-IPO feature, so now it’s about execution. The market is watching, and plenty of retail investors will be too.
AMERICAN AIRLINES
A post-Covid rebound as people prioritised spending on long-delayed holidays with their disposable cash provided a clear flight path for travel and airline stocks. However, turbulence is starting to return to the space driven by higher fuel costs.
This was reflected in a big cut to guidance from US carrier American Airlines (AAL:NASDAQ) which saw the shares descend to four-month lows. The company now expects third quarter EPS (earnings per share) of between 20 cents and 30 cents down from 85 cents to 95 cents.
The company also halved its operating margin from what it had previously projected to just 4% to 5%. As well as the impact of higher oil prices feeding through, the numbers are set to be affected by a pay agreement with its pilots which will lead to a retroactive pay expense of $230 million which will be recognised in the period. American Airlines is set to announce Q3 results in full in late October.
ORACLE
The enterprise software titan has long been a barometer of corporate demand for tech and for most of this year, the readings were optimistic, and the stock had surged more than 50% this year… until first quarter 2024 figures.
Oracle’s (ORCL:NASDAQ) stock suffered its biggest one-day drop (11 Sep) since March 2020 after dialing down growth projections for Q2. Slowing cloud growth was the key reason. Oracle’s foray into AI has been met with both excitement and scepticism, touting contracts worth over $4 billion from its AI-focused cloud service, so why is its cloud infrastructure growth tapering off? It’s a reasonable question.
AI remains a topic of debate and while the long-term potential of this technology could still be game-changing, for now investors are watching closely for some more tangible results.
