FTSE 100 today: Stocks rise as housebuilders surge on equity loan scheme
Market scorecard
US markets were terrible yesterday, with the S&P 500 declining to a four-month low. A bout of selling broke out after better-than-expected US employment data reminded traders that the Fed probably isn't done raising rates. We still aren't out of the woods it seems and more patience will be required.
In company news, spice-maker McCormick (NYSE:MKC) sank 8.5% after reporting poor third-quarter sales and a messy exit from its business in Russia. Elsewhere, WK Kellogg (NYSE:KLG) dropped 16%, taking its shares down 23% in just two sessions since it traded as a separate business. In a generally weak market Nike (NYSE:NKE) stood out, rising by 0.6%. Well done!
Izolo, the JSE All-share closed down 0.65%, the S&P 500 fell 1.37%, and the Nasdaq was a painful 1.87% lower.
One thing, from Paul
I really like Jamie Dimon. He's the 67-year-old CEO of JP Morgan. Why can't people like him run for president, instead of dishonest blowhards like Donald Trump, or half-senile twits like Joe Biden?
This week Dimon noted that artificial intelligence is already being used by thousands of employees at his bank, and is likely to make dramatic improvements in workers' quality of life, even if it eliminates some jobs.
He went on to say "Your children are going to live to 100 and not have cancer because of technology. And they'll probably be working three-and-a-half days a week."
I agree with him, that's where we'll be in a few decades. This is the correct long-term perspective. Don't get stuck in the weeds.
Byron's beats
The recent listings of chip designer Arm and online grocer Instacart (NASDAQ:CART) have sparked some excitement. These initial public offers (IPOs) get a lot of attention, so we've had a few clients ask if they should get involved on the first day. Our general answer is "no".
Companies that are not yet listed are valued by investment bankers and advisors. We prefer buying shares that have traded for a while so that they are properly valued on the open market. This process of price discovery depends on thousands of analysts and traders, and is far more efficient than a bunch of bankers with their own agendas.
It's also a good idea to wait until newly-listed companies have reported a few quarterly earnings. Accounting requirements are stricter for a listed businesses than they are for private ones.
The chart below shows the IPO ETF versus the S&P 500. Clearly, it was best to avoid IPOs over that period. In defence of IPOs, this chart overlaps a bubble collapse so maybe a little unfair?
Bright's banter
Amazon (NASDAQ:AMZN) Prime Video is introducing an ad-supported subscription tier in the US starting in early 2024. These subscribers will pay an additional $2.99 per month to continue enjoying content like The Marvelous Mrs. Maisel or The Boys without ads.
Amazon needs to up revenues to sustain its hefty content spending, which reached $16.6 billion in 2022, up 28%.
Notably, Amazon's ad business generated nearly $10.7 billion in the most recent quarter, making it one of the world's largest advertising ventures, surpassing platforms like YouTube, Snapchat, and Twitter combined, which had $9.3 billion in ad revenue for their recent quarters.
Despite this, the ad business contributed only about 8% of Amazon's total net sales during the same period. Some industry experts suggest that the ad division could boast margins exceeding 50%, potentially equating to operating profit levels comparable to Amazon Web Services (AWS).
However, Prime Video ads may not be as lucrative as other Amazon ads, as they won't be shown to individuals with "high intent" like with search results, where ad visibility often leads to immediate purchases.
Signing off
Asian markets are also lower this morning, as the Wall Street havoc spreads to the east. This pushed the MSCI Asia Pacific Index down for a third day, taking its losses to about 10% since the July high. The South Korean market was down the most with a 2.1% drop.
US equity futures are still in the red in early trade. The Rand is not looking very healthy either, trading at around R19.40 to the US Dollar.
Hang in there, good times will return. It's a beautiful morning in Johannesburg.
