3 February 2025 | Weekly Snapshot

Did you know?

The below diagram shows the 10 largest US companies 28 years ago and where they sit in the biggest list of companies today.

Microsoft is the only company that has stood the test of time.

Interesting to see the transition of market leadership.

Market Movements

Over the weekend, Donald Trump announced tariffs of 25% on most goods from Canada & Mexico starting Tuesday, plus 10% tariffs on Chinese goods, and 10% tariffs on Canadian Energy. Justin Trudeau (Canada) & Claudia Sheinbaum (Mexico) vowed retaliation, and Xi Jinping threatened WTO action. Whilst the implementation of tariffs by the US has been widely anticipated, the timing and magnitude of the measures always had the potential to shake markets. Our opinion is that tariffs are going to be a tactical measure rather than a long term policy fixture, and therefore not something that would prompt wholesale portfolio changes.

Last week the ASX200 finished the week +1.47% higher, while US equities posted mixed results with the Dow up 0.27%, the S&P 500 down 1.00%, and Nasdaq down 1.64%. The ASX200’s outperformance was driven by strong results in key sectors such as Consumer Discretionary and Materials, and gains in individual stocks, while US markets faced headwinds due to earnings volatility and sector-specific challenges.

Emerald Resources was the best-performing stock on the ASX200, gaining 14.85%, driven by higher gold prices and optimistic production guidance. On the downside, Zip Co Ltd fell 23.51% as concerns over profitability and sector-wide challenges weighed on the stock. Magellan Financial Group Ltd declined 13.71% following a leadership reshuffle, including the appointment of Jen Driscoll as COO and the departure of its investment head.

US equities faced a more challenging week. IBM Corp gained 13.75% after reporting better-than-expected earnings and optimistic guidance. Nvidia Corp had a rollercoaster week, falling 15.81% as it faced a $600 billion market value decline coinciding with the emergence of China’s DeepSeek R1 Artificial Intelligence model. This model, developed for under US$6 million, reportedly outperformed major U.S. models like OpenAI’s offerings, leading to concerns about Nvidia’s dominance in the AI space. Meanwhile, Alibaba unveiled a new AI model, further intensifying competition in the sector. Hewlett Packard Enterprise declined 13.05%, weakened by sector-wide technology headwinds.

The Federal Reserve held interest rates steady at 4.25-4.50%, as expected. GDP Annualized QoQ for Q4 was 2.5%, slightly above the anticipated 2.4%, indicating continued economic resilience. The Core PCE Price Index QoQ for Q4 came in at 2.2%, in line with expectations, supporting the view that inflationary pressures are moderating.

Portfolio Movements

Apple reports in line Q1 result – Earnings at all time high

• Apple, having reclaimed its crown as the world’s largest company, reported Q1 EPS of $2.40 on Friday, largely in line with the $2.35 estimate. Q1 revenue of $124.30B was also in line. iPhone sales were a bit off, but Mac, iPad and particularly Services were a decent beat with Services revenue of $26.34B still growing at double digits. Revenue, up 4% yoy, was new record for the company as was the 10% yoy increase in EPS.
• “Today Apple is reporting our best quarter ever”” said Tim Cook, Apple’s CEO. “We were thrilled to bring customers our best-ever lineup of products and services during the holiday season. Through the power of Apple silicon, we’re unlocking new possibilities for our users with Apple Intelligence, which makes apps and experiences even better and more personal. And we’re excited that Apple Intelligence will be available in even more languages this April.”
• Take aways were mixed with revenue in-line but iPhone and Wearables misses were offset by beats from Mac and iPad. China seems like a headwind with revenue there down 11% yoy.

Meta (Facebook) posts strong Q4 results

• Meta Platforms reported a solid Q4 with Q4 EPS $8.02 a big beat on the $6.76 expected with full year EPS surging 68% on last year. Family daily active people (DAP) was 3.35 billion on average for December 2024, an increase of 5% year on year and average price per ad increased by 14% and 10% year-over-year for the fourth quarter and full year 2024, respectively. Q1 revenue guidance of $39.5-41.8B midpoint was seen as a bit below the $41.68B estimate.
• FY25 Capex guidance of $60-65B was higher than the $52.60B expected with tech stocks spending big on growing their businesses.
• “We expect capital expenditures growth in 2025 will be driven by increased investment to support both our generative AI efforts and core business. The majority of our capital expenditures in 2025 will continue to be directed to our core business.” The company said.

Microsoft beats Q2 estimates – Shares fall on Q34 guidance and slower Azure growth

• Microsoft reported Q2 EPS of $3.23 ahead of the $3.11 expected on revenue of $69.63B which was also ahead of the $68.87B expected although shares dropped 6.2% after issuing weaker Q3 guidance.
• Q3 revenues guidance for between $67.7 billion and $68.7 billion is below the $69.78 billion expected with revenue growth a bit slower than expected.
• Microsoft also posted a slowdown in growth in its Azure and other cloud services revenues. The segment was still up a strong 31% but down from 33% growth in the prior quarter. A bright spot for Microsoft is its 365 Commercial business where products and cloud services revenue grew 15% in the quarter.

The Week Ahead

• Monday: China Caixin MFG PMI expected to be 50.6 in January compared to 50.5 in December and Caixin China Services PMI expected to be 52.4 in January compared to 52.2 in December
• Wednesday: USA Factory Orders are expected to show a -0.7% fall compared to the previous -0.4%, Durable Goods Orders are expected to be -2.2% lower, in line with the previous month. China PPI YoY expected to show -2.2% in January compared to -2.3% in December and CPI YoY expected to be 0.4% compared to 0.1% in December
• Thursday: S&P Global Services PMI is expected to be 52.8, in line with December’s reading. United Kingdom Bank of England expected to cut interest rates to 4.5% from 4.75%
• Friday: USA Initial Jobless Claims are expected to rise to 213k, up from 207k the previous week, Continuing Claims expected to be 1.875m up from 1.858m,
• Saturday: USA Change in Non-Farm Payrolls expected to slow to 170k in January, from 256k in December, Unemployment Rate expected to hold steady at 4.1%,