Market scorecard
US markets bounced back strongly yesterday on a wave of dip buying. Big tech stocks led the charge again, with the "Magnificent Seven" up 1.7% and Meta (NASDAQ:META) adding to its longest winning streak ever, 12 sessions in a row.
In company news, Google (NASDAQ:GOOGL) dropped 7.6% in after-hours trade due to a miss on revenue as cloud growth slowed. Elsewhere, AMD (NASDAQ:AMD) slid 8.8% because of weak results, showing it's still trailing Nvidia (NASDAQ:NVDA) in the AI chipmaking race. Lastly, Spotify (NYSE:SPOT) crushed it in the fourth quarter with strong subscriber growth that beat expectations, propelling the Swedish music giant to its first-ever annual profit. It's share price closed 13.2% higher.
At the end of a swell day, the JSE All-share was up 1.13%, the S&P 500 rose 0.72%, and the Nasdaq was 1.35% higher. That should calm the nerves.
Bright's banter
Apple (NASDAQ:AAPL)'s latest quarterly numbers were solid. Total (EPA:TTEF) revenue grew 4% to $124.3 billion, beating estimates, notwithstanding iPhone sales being 1% softer at $69.1 billion.
China was a weak spot, with sales down 11% to $18.5 billion, short of the $20.9 billion analysts expected. However, the company's Services segment, which includes the App Store and subscriptions, grew 14% to $26.3 billion.
Profit for the quarter rose over 7% to $36.3 billion. A tidy sum, indeed.
AI remains a work in progress for Apple. They've introduced some AI-powered features, adoption has been slower than expected, and some tools, like notification summaries, have had issues.
Unlike Microsoft (NASDAQ:MSFT) and Google, Apple hasn't gone all-in on costly AI infrastructure, instead focusing on integrating third-party AI services into its devices. This cautious approach has its merits.
Apple faces competition in China from Huawei and Xiaomi (HK:1810), and potential trade risks with the new Trump administration. However, the iPhone remains the top-selling smartphone, and Apple's ecosystem continues to drive steady growth.
While short-term headwinds persist, Apple's strong cash flow, resilient services business, and long-term AI potential make it a solid hold.
One thing, from Paul
Baboons drive people crazy because it's hard to secure the public rubbish bins in the areas that they frequent. Park rangers know that you can't make a trash receptacle that is baboon-proof, because there is considerable overlap between the dumbest humans and the smartest baboons.
Recent research by European scientists now suggests that baboons can do linear regression. That means they can spot a correlation between two variables.
In other words, if given the right training, baboons can look at charts with a scatter plot of data points, and tell if the trend is up and to the right, or not.
The researchers compared 23 baboon volunteers (16 females, average age 14.5 years) with 3 943 human volunteers (2 409 females, average age 28.8 years). The results were pretty similar. The smartest baboons outperformed the dumbest humans. Haha!
Perhaps baboons could also pick investments on the basis of buying anything that is going up? Why don't we start them out on cryptocurrency?
I'm joking. Forgive me for being facetious. Stock picking is tough, and probably well above the capability of our primate cousins.
Michael's musings
Amazon (NASDAQ:AMZN) and UPS have worked together for almost 30 years, with the e-commerce giant now accounting for 12% of UPS's revenue. Last week, UPS announced that it planned to halve Amazon's transport volumes, its biggest customer, over the next two years because it was a very low-profit margin business. Their argument is that they are doing a lot of work for not much money, and their efforts are better focused elsewhere.
Over the last few years, Amazon has been rapidly building its own delivery network, Prime delivery, which is becoming more central to its business model. Amazon Air already has a fleet of 100 delivery aircraft. I suspect that UPS is making this move to cut Amazon's volumes so that they have more control over how quickly Amazon moves its deliveries in-house.
It's a very brave move from UPS management, and we will only know a few years from now if it is correct. Wall Street doesn't like uncertainty though, and the stock dropped 15% on the news. Ouch.
Signing off
Chinese stocks opened lower today amid rising trade tensions between the world's two largest economies. Hong Kong shares slipped.
In local company news, Pick n Pay (JO:PIKJ) released a trading update for 45 weeks which looked grim. Over the period, they have closed 32 supermarkets and like-for-like sales grew by just 1.9%.
US equity futures are in the green pre-market. The Rand is trading at around R18.72 to the US Dollar.
Today, we are anticipating quarterly results from Novo Nordisk (CSE:NOVOb), Walt Disney (NYSE:DIS), Qualcomm (NASDAQ:QCOM), Uber (NYSE:UBER) and MicroStrategy (NASDAQ:MSTR).
Stay cool, and don't do anything too crazy. Unless you are young.