Sentiment improved markedly on Wall Street over the past week on signs earnings growth is easing, as US Federal Reserve chair Jerome Powell said nothing to spook the markets in his latest speech and as inflation dropped again in December.
A CPI reading of 6.5% may have been bang in line with expectations but still represents a meaningful drop from the peak levels seen last summer.
Investors are increasingly hopeful that the Fed will be able to ease up on interest rate hikes sooner rather than later and technology and small cap stocks enjoyed strong gains.
The travel sector performed strongly as American Airlines (AAL:NASDAQ) hiked its fourth quarter revenue and profit estimates (12 January) on strong demand and high fares.
Retail stocks were mixed as early Christmas updates saw contrasting fortunes for different sector participants.
Pharmaceutical firm AbbVie (ABBV:NYSE) was under pressure amid speculation about the impact of its flagship anti-inflammatory drug Humira facing its first full year of competition from cheaper alternatives in the US.
WALT DISNEY
Shares in Walt Disney (DIS:NYSE) rallied 7.3% to $99.4 after billionaire investor Nelson Peltz launched a battle for a seat on the board in order to save the ‘House of Mouse’ from what he called a ‘crisis’.
The activist criticised Disney's streaming strategy as well as the 2019 purchase of 21st Century Fox and failed succession planning. Peltz's activist firm Trian Fund Management, which owns about 9.4 million Disney shares valued at about $900 million, has filed documents with the US securities regulator for his election as a director after the content-to-entertainment colossus denied him a seat on the board.
Peltz argues Disney should buy the rest of Hulu from Comcast (CMCSA:NASDAQ) or exit the streaming business and needs to boost capital expenditure at its parks business, where it probably raised ticket prices ‘too hard’, as he told business channel CNBC.
Proven change-maker Peltz's campaign creates problems for Disney CEO Bob Iger, the popular Hollywood executive who returned to the top job late last year after a difficult tenure for his one-time successor, now predecessor Bob Chapek. Trian has said it doesn't want to oust Iger, but rather work with him to ensure a successful CEO transition within the next two years.
WARNER BROS DISCOVERY
Media company Warner Bros Discovery (WBD:NASDAQ) got a lift this week with the shares gaining 15% to $12.7 after two bullish analyst notes rekindled interest in the stock.
Guggenheim media analyst Michael Morris upgraded his recommendation to buy from neutral and slapped a $16.50 price target on the stock and highlighting several catalysts.
Last year's merger with Discovery is expected to yield cost savings which should help the company meet its deleveraging goals and boost cash flow.
Morris reduced his loss for estimate for 2023 by 22% to $1.2 billion and sees the streaming business turning a profit next year to the tune of $76 million, a sharp upgrade to his prior forecast for $630 million of losses.
The company announced (12 January) its first price increase for the popular HBO Max since launching in May 2020 with the service increasing by a dollar to $15.99 a month.
Freeport McMoRan
Shares in copper miner Freeport McMoRan (FCX:NYSE) and rival Southern Copper (SCCO:NYSE) have risen sharply since the start of the year as analysts bet on the reopening of China's economy spurring demand for raw materials.
Due to its capacity to conduct heat and electricity, copper is used in a huge range of industrial applications including heating elements, electrical wiring, electric motors and electronics.
Physical copper for delivery in March hit more than $4 per pound or $9,000 per tonne on the Comex market in New York this week, and Goldman Sachs commodities analyst Jeff Currie told Bloomberg TV he saw the metal price rising as high as $11,500 per tonne this year.
The sharp move up in copper has attracted interest from commodity traders at the same time as physical stockpiles held by exchanges remain low as production was curtailed last year by high energy prices.
Metal prices in general are also getting a lift from the weaker dollar as investors bet on the Federal Reserve slowing its pace of interest rate rises.
