Oil falls 2% to one-week low as Middle East supply disruption fears ease
Market Scorecard
The US market took a hit yesterday, in what can be defined as another mild "risk-off" day. Market sentiment is still a little wobbly after the release of the robust jobs report from last week. This too shall pass.
In company news, Baidu (NASDAQ:BIDU) stock skyrocketed by as much as 13% after they confirmed plans to unveil a bot similar to ChatGPT in March. The biggest gainer on the S&P 500 was contract manufacturer Catalent (NYSE:CTLT), up 19.6% following a Bloomberg report on takeover interest from Danaher (NYSE:DHR). Elsewhere, Pinterest (NYSE:PINS) slipped 2% in late trade after the social media company reported revenue that missed expectations and issued a light forecast for the quarter.
At the end of the trading day, the JSE All-share closed down 0.82%, the S&P 500 lost 0.61%, and the Nasdaq was 1.00% lower.
Byron's Beats
Apple (NASDAQ:AAPL) released their fourth quarter earnings last week Thursday which missed expectations. This was only the third time in 20 years (80 quarterly reports) that Apple missed estimates, according to an analyst that I follow. That's a great track record! The share price actually rallied by 2.5% on Friday, against the tide as the Nasdaq dropped 1.6%.
Revenues came in at $117.1 billion versus $121.0 billion expected. Earnings came in at $1.88 per share versus expectations of $1.94.
There were three main reasons for the miss: supply chain constraints in China, currency headwinds and a tougher macro environment. Two of those are already looking better. China has opened up and the USD has weakened significantly since its peak late last year. The macro environment is always tough to predict but with a strong US labour market and a Chinese economy starting to normalise, there is light at the end of the tunnel.
Apple's guidance for 2023 looked favourable and the share price reacted positively.
Apple really is the creme de la creme of companies. Take a look at the image below from App Economy Insights which breaks down Apple's annual results ending September 2022. The scale of the financial flows are just mind boggling. Apple made just under $100 billion in net profit last year.
Apple remains a must-own in all investment portfolios.
One Thing, From Paul
According to the United Nations, there are now around 600,000 people who are 100 years old or older.
This article in the Washington Post quotes a professor of gerontology who thinks that genetics account for around 25 percent of longevity, and the other 75 percent relates to factors in your environment.
The top four tips for making it to a ripe old age are: (1) stay active by walking, (2) keep old friends and make new ones, (3) don't eat too much, and (4) go outside in the early morning, preferably into a sunny and leafy environment.
I'm in! Let's see if I can make it to the year 2066.
Michael's Musings
Last week was very interesting for the market. We started off with the Fed indicating that they are near the top of their rate raising cycle, which lead to a surge in stock prices. Goldman Sachs (NYSE:GS) estimates that hedge funds closed short positions (a bet against the market) at the quickest rate since 2015.
Then on Friday, the US reported a very strong labour market. The economy added twice as many jobs as expected and has the lowest unemployment rate since the 1960s. It seems the global recession 'everyone' was certain would happen this year will be delayed a bit longer.
Unfortunately for the market, the news was too good, making it bad for stock prices. A strong economy gives the Fed more room to raise interest rates. Remember that price stability is the primary focus of central banks, but they do keep one eye on economic growth.
Even if strong data is bad for stocks in the short term, stock prices need a thriving economy for long-term gains.
Bright's Banter
Activision Blizzard (NASDAQ:ATVI), the video game publisher in the process of being bought by Microsoft (NASDAQ:MSFT) for $69 billion, reported net bookings of $3.57 billion in the fourth quarter of 2022, a 43% increase over the previous period. The increase was due to the success of new titles including Call of Duty: Modern Warfare II and Overwatch 2.
The video game industry is expected to rebound this year after many titles were delayed in 2022. Activision will release a continuation of Modern Warfare II and Diablo 4 in 2023. I can't wait to play some of these games myself, including the latest Call of Duty which is the best-selling game of 2022.
The acquisition of Activision by Microsoft is far from done as it needs to pass through regulatory approvals in 16 jurisdictions. European regulators have sent a list of concerns to Microsoft regarding the deal and the UK Competition and Markets Authority is expected to issue its findings soon.
Signing Off
Asian stock markets are bouncing back today and recovering from their recent dip. They had a pretty rough two days, with the biggest drop in four months. Markets rose in Hong Kong, Japan, mainland China, and South Korea thanks to a rally in technology stocks.
US equity futures are modestly higher in early trade, hopefully they can hold onto these gains. The Rand is weaker against a resurgent US Dollar, around R17.63.
Two companies that we like have earnings out tonight: Illumina (NASDAQ:ILMN) and Enphase Energy.
Have a happy day.
