Galt&Taggart published a report on Global Markets Weekly Update. According to the document:
Stock Market Overview:
A late rally helped large-cap stocks notch their fourth consecutive weekly gain despite growing tensions in the Middle East and news of a dockworkers’ strike at Eastern seaports. While weighing on sentiment generally, the prospect of a wider war in the Middle East sent oil prices to their highest level in about a month, benefiting energy shares. Conversely, the Middle East worries appeared to weigh on cruise line stocks and the consumer discretionary sector. WTI crude oil futures (CL1:COM) surged more than 9% for the week, while the S&P 500 energy sector was the best-performing sector of the week.
A massive strike of dockworkers at U.S. ports in the East and Gulf coasts—the first since 1977—grabbed eyeballs. The strike eventually lasted three days until the International Longshoremen's Association, the union representing the port workers, reached a new tentative agreement. On Tuesday, dockworkers across the East and Gulf coasts went on strike after they were unable to agree on a new contract that would include higher pay and job protection from increasing automation. The strike was suspended late Thursday evening, and although it was short lived, it could result in temporary shortages, supply chain bottlenecks, and higher prices for consumer goods, potentially impacting short-term inflation figures. Under the tentative agreement, ILU wages will increase 61.5% over six years, sources told CNBC’s Lori Ann LaRocco, but key discussions about port automation are still under negotiation.
The Labor Department announced that employers had added 254,000 jobs in September, nearly twice the consensus estimates and the most since March, significantly higher than the 132.5K consensus. August’s gain was also revised higher. The household survey also brought better-than-expected news, with the unemployment rate unexpectedly ticking lower to 4.1%. The unemployment rate ticked lower by 4.1% from 4.2% in August, creating optimism of the labor market’s health one month before the U.S. Presidential Election. The data pointed to strong hiring in the labor market and led to investors dialing back their expectations for a large 50 basis point interest rate cut by the Federal Reserve in November to zero.
For the week, the S&P (SP500) added +0.2%, while the Nasdaq Composite (COMP:IND) gained +0.1%. The blue-chip Dow (DJI) also rose +0.1%.
Commodities and Bonds:
Crude Oil WTI +9.2% to $74.45/bbl. Gold +0.2% to $2,673.2/oz. Natural Gas -2.5% to 2.831. Ten-Year Bond Yield -0.2 bps to 3.969.
Corporate News:
CVS Healthcare:
CVS has engaged advisors in a strategic review of its business, CNBC has reported Monday. One option being weighed is splitting up its retail pharmacy and insurance units. The news, sent CVS shares up about 2% premarket on Tuesday.
CVS is considering splitting its business into separate entities, with options including dividing its drugstore chain, Aetna insurance, and Caremark pharmacy benefits manager. No final decisions have been made, and discussions with financial advisers continue. CVS plans to lay off 2,900
employees, impacting corporate roles but not store-level jobs. The potential spinoff of Aetna could significantly reduce CVS's business scope, though it may boost operating profit. Aetna's insurance segment, which grew 21.4% in Q2 2023, accounts for a large portion of CVS's projected 2024 revenue, raising concerns about future growth for the remaining CVS segments.
CVS risks losing the customers it peels off its vertically integrated business segments — not to mention revenue. The pharmacy chain has spent tens of billions of dollars on acquisitions to become a one-stop shop for consumers, but it’s struggled recently, slashing its full-year 2024 earnings guidance for three consecutive quarters and seeing its stock fall more than 20% this year as it grapples with higher-than-expected medical costs in its insurance unit and pharmacy reimbursement pressure, among other issues. Shares are up +2.44%.
Nike: Investors Need Proof That New CEO Can Turn Things Around!
Company had released its first FQ25 earnings report; Even though the company’s quarterly EPS technically beat estimates, it still represents a setback as compared to last year.
• Earnings per share: 70 cents vs 52 cents
• Revenue: $11.59 billion vs $11.65 billion
The company’s reported net income for the three-month period that ended August 31 was $1.05 billion, or 70 cents per share, compared with $1.45 billion, or 94 cents per share, a year earlier (decrease from last year).
Nike beat earnings expectations by 18 cents, but it fell short on revenue as it works to fix its product assortment and rework its approach to innovation.
Sales dropped to $11.59 billion, down about 10% from $12.94 billion a year earlier.
Additionally, Nike’s sales fell on a year-over-year basis, particularly in the area of digital sales. That’s troubling, and it’s happening during a time of transition. Moreover, Nike’s refusal to provide a full-year sales outlook further clouds the crystal ball. Nike closed Wednesday’s trading session with a sharp ~7% drop, following a mixed fiscal first-quarter report for the August quarter.
Last month, the company announced that CEO John Donahoe would be stepping down in October and replaced with longtime company veteran Elliott Hill, effective Oct. 14. Given the impending CEO change, the company has decided to withdraw its full-year guidance and intends to provide quarterly guidance for the balance of the year, executives said.
Over the past year, Nike has faced criticism for lagging in innovation and losing market share to competitors, as it focused on selling directly to consumers through its own stores and websites, rather than wholesalers like Foot Locker and DSW. While this strategy initially boosted profits during the pandemic, it became more complex as consumers returned to in-person shopping. Nike’s reliance on legacy franchises such as Air Force 1s, Dunks, and Air Jordan 1s has also backfired, with sales for these products dropping significantly. Overall, Nike's online sales declined by 15%, and key franchise sales were down nearly 50%, raising concerns about future growth.
Currently company is looking forward new CEO Elliot Hill how was the main person who was in charge of franchising and company is relying on him to boost relationship with its wholesale partners; Weekly change down - 8%.
Tesla:
Tesla posted its third-quarter vehicle production and deliveries report on Wednesday. The stock fell as much as 3.7% after the report. Tesla Weekly change down -
3.4%.
• Total deliveries Q3 2024: 462,890
• Total production Q3 2024: 469,796
Tesla (TSLA) global third-quarter deliveries increased 6% compared to a year ago, hitting the third best quarterly total ever, as the EV giant saw vehicle unit sales return to growth for the first time in 2024. TSLA shares dropped Wednesday but pared losses.
Tesla’s Q3 2024 production and deliveries report fell slightly short of expectations, with 462,890 deliveries and 469,796 vehicles produced. Analysts anticipated around 463,310 to 472,000 deliveries, leading to a stock drop of up to 3.7%. Despite the minor miss, Tesla's deliveries increased compared to last year’s 435,059. While production of 469,796 potentially indicated weak demand as the company produced more than it could sell. The company faces growing competition, especially from Chinese brands like BYD and Geely, and U.S. rivals like Rivian, Ford, and GM, with GM’s EV sales rising 60% year-over-year.
Investors are keenly watching for updates on profit margins and will focus on Tesla’s self-driving technology at a marketing event on October 10, where the company is expected to showcase a “dedicated robotaxi.”
Tesla also recalled 27,000 cars last week due to rearview mirror issue, it reflects 8 sec delayed image while driving reverse which is not in line with US regulations ( 2 second delay ) ;
Tesla has a busy October ahead after third-quarter deliveries. The EV giant has the robotaxi event on Oct. 10 and then Q3 earnings on Oct. 23.
Tesla's stock has surged over 20% in the past month, driven by optimism around improved Q3 deliveries and the upcoming "We, Robot" event on October 10. Tesla is expected to unveil the design of its "CyberCab" robotaxi and provide updates on its humanoid robot, Optimus. Despite falling EV sales in early 2024 and the lack of a fully autonomous robotaxi system, Tesla hopes to regain momentum. Competitors like Waymo, Pony.ai, and Zoox have already launched or are close to launching commercial robotaxi services, increasing pressure on Tesla to deliver innovations.
The Calendar:
Third-quarter earnings season kicks off next week, with results from major U.S. banks and several other notable firms. The main events on the macro front will be the release of a pair of inflation reports for September.
Pepsico will publish results on Tuesday, followed by Delta Air Lines and Domino’s Pizza on Thursday. Then, on Friday, JPMorgan Chase, Wells Fargo, Bank of New York Mellon, BlackRock, and Fastenal will all report. The event schedule for the week ahead is dominated by AI events for Nvidia (NVDA), AMD (AMD), and Hewlett Packard Enterprise (HPE).
On Thursday morning, the Bureau of Labor Statistics will release the consumer price index for September. Economists' consensus calls for a 2.3% increase from a year earlier, which would be a two-tenths slowdown from August. The BLS will release the producer price index a day later, on Friday morning. The general expectation is that the CPI print will not be weak or strong enough to affect the size of the next Fed cut.
Economists and Federal Reserve watchers will also be paying close attention to the minutes from the central bank's September policy meeting, which will be published on Wednesday afternoon. There will be plenty of interest in the details of the debate over whether to lower interest rates by a quarter or a half of a percentage point after the confab.
Europe
ECB October rate cut in view as growth and inflation slow:
In local currency terms, the pan-European STOXX Europe 600 Index ended 1.80% lower as an escalation of conflicts in the Middle East made investors cautious. Major stock indexes also fell sharply. Italy’s FTSE MIB dropped 3.26%, France’s CAC 40 Index declined 3.21%, and Germany’s DAX lost 1.81%. The UK’s FTSE 100 Index eased 0.48%.
Purchasing managers’ indexes (PMIs) pointing to weaker eurozone growth and inflation falling below the European Central Bank’s (ECB) 2% target combined to strengthen expectations of an interest rate cut in October. Annual headline inflation in the eurozone slowed to 1.8% in September, the lowest level since April 2021 and below forecasts for 1.9%. Core inflation also eased to 2.7% from 2.8% in August. The eurozone composite PMI reading for September was revised higher to 49.6 from 48.9. (PMI readings less than 50 indicate a contraction in activity.)
ECB leaders appear to signal easier policy:
Comments from ECB officials indicated that their gradualist approach to easing monetary policy may be shifting. ECB President Christine Lagarde, for example, hinted that borrowing costs might soon be lowered. "The latest developments strengthen our confidence that inflation will return to target in a timely manner," she told a European Union parliamentary hearing. "We will take that into account in our next monetary policy meeting in October." Executive Board member Isabel Schnabel suggested that inflation is increasingly likely to ease back to the 2% target and dropped her usual warning that rates must not be cut too early.
BoE’s Bailey raises prospect of more policy easing but Pill still cautious:
Bank of England (BoE) Governor Andrew Bailey said in an interview with The Guardian newspaper that the bank could become “a bit more aggressive” in lowering borrowing costs if the inflation rate continues to fall. However, Chief Economist Huw Pill warned against cutting rates too far and too fast. He said inflation among services firms and pay growth represented "a continued source of concern."
Japan
New PM comments on monetary policy, signals economic policy continuity
Japan’s stock markets suffered sharp losses around the start of the week as investors digested the country’s latest political developments. Shigeru Ishiba won the Liberal Democratic Party’s (LDP’s) closely contested leadership election on Friday, September 27—with the surprise win over Sanae Takaichi in a runoff vote making Ishiba Japan’s new prime minister (PM). His monetary policy views are considered slightly hawkish, leading the yen to initially strengthen and sending stock markets lower.
While markets recouped some of the lost ground over the week as Ishiba adopted a more dovish tone than had been anticipated, weighing on the yen, the Nikkei 225 Index and the broader TOPIX Index still registered respective declines of 3.0% and 1.7% over the week. The yen weakened to around JPY 146 against the USD, from about JPY 142 at the end of the previous week.
Despite a generally dovish tone being adopted by Japan’s top government officials, the yield on the 10-year Japanese government bond rose to 0.87%, from the prior week’s 0.80%, tracking U.S. Treasury yields higher as strong U.S. economic data tempered expectations that the Federal Reserve would cut interest rates aggressively.
On the first full day of Ishiba’s new government, the PM commented on monetary policy. While careful not to encroach on the Bank of Japan’s (BoJ’s) independence, he said that environment is not ready for an additional interest rate hike and stressed his hope that the economy will make progress in a sustainable manner toward the end of deflation with the monetary easing trend in place.
On the economic policy front, Ishiba pledged to maintain continuity with his predecessor, Fumio Kishida, calling for intensive efforts to overcome deflation without the risk of reversing the virtuous cycle. Ishiba also instructed his cabinet to draw up a stimulus package to support households struggling with inflation and to boost regional economies. This comes ahead of a snap election that has been called for October 27, where the LDP’s dominance and general backing are likely to remain strong.
