5 August 2024 | Weekly Snapshot

Did you know?

On 31st July, Nvidia’s market cap rose by US$331bn, a record daily gain in itself and more than the market cap of the bottom 479 companies in the S&P500.

Market Movements

The ASX rose 0.2%, led by the defensive sectors (Utilities up 2.7%, Health up 1.5%). Gold miner Newmont was the best performer, summing up what was a bleak week for investors overseas. Bond yields dived, which was a helpful backdrop for the gold price (up 1.9%) to outperform. Fortescue dived 7.9% after another large block trade crossed hands at a discount to the market price.

In the USA, the S&P500 fell 2.1%, led by tech stocks (Nasdaq down 3.4%). Investors set fire to stocks in Japan (down 4.7%), Germany (down 4.1%) and Europe (down 2.9%). China was the leading market up 0.8%. The July FOMC meeting concluded with no change to interest rates. Markets are currently pricing in 2 interest rate cuts in the US this year, although, given the pace of bond yield moves this week, those expectations seem far from anchored.

41% of S&P 500 have now reported Q2 results with the blended annual EPS growth rate running at 9.8% and better than the 8.9% expected at the end of the quarter. Around 78% of companies have beaten earnings expectations, however, they are only small beats, coming in at 4.4% above expectations. Q3 guidance has generally been lower than expected. Bond yields fell significantly, potentially reacting to the lower-than-expected forward earnings guidance from Microsoft, Amazon, et al.

Portfolio Movements

RIO reports 14% earnings growth for first half.

• First-half profit rose by 14%. Underlying earnings of $5.75 billion was largely in line with the estimate of $5.79 billion. The interim dividend of $1.77 a share was unchanged
• CEO Jakob Stausholm said RIO expects to increase overall production by roughly 2% this year and is targeting a 3% compound annual growth rate from 2024 to 2028 from operations. “We are at an inflection point in our growth…with considerable growth in cash flow from the ramp-up of the underground copper mine at Oyu Tolgoi. Simandou (iron ore) and Rincon (lithium) proceeded at pace.”

Amazon Q2 beats on earnings, misses on guidance

• Amazon reported Q2 results with EPS $1.26 per share a beat on the $1.03 expected and 91% growth from a year ago. Revenue of $147.98 billion was a slight miss.
• Sales in its online stores grew just 5% year over year. AWS (cloud) beat expectations, growing 19% from a year earlier and Amazon’s advertising revenue jumped 20%.
• Q3 revenue guidance for between $154 billion and $158.5 billion (growth of 9%) was below estimates for $158.24 billion.

Microsoft income rises 10% (4th quarter 2024) but forward guidance below expectations.

• Microsoft, currently the 2nd largest company in the world, reported Q4 results with EPS of $2.95 and revenue of $64.73B slight beats on the $2.93 and $64.39B expected.
• Revenue increased 15% year over year in the fiscal fourth quarter, while net income increased 10%. These are solid numbers but perhaps the bar was set too high after a 30% rally in the share price this year. Shares were lower after the result.
• Revenue from Azure and other cloud services grew a solid 29% during the quarter, but below the 31% growth expected. But CEO Nadella was pretty upbeat saying demand for Azure AI services remained higher than available capacity, with share gains accelerating this year driven by AI.
• Microsoft has guided for Q1 revenue between $63.8 billion and $64.8 billion or around 14% growth year on year, but also below the $65.24 billion in revenue consensus estimates.

The Week Ahead

• Monday: Warren Buffett’s Berkshire Hathaway will report earnings and sales growth of -6% and -2% respectively.
• Tuesday: RBA interest rate meeting, expecting no change. Last month, hot inflation numbers suggested a rate rise was on the cards, but the recent dive in US bond yields has signalled no change needed.
• Wednesday: Novo Nordisk reports earnings, where expectations are for 24% revenue growth and 11% earnings growth (vs same time last year). Novo is a leading Danish-listed health company, pioneering the fight against obesity.
• Thursday: Eli Lily, one of the world’s top 10 listed companies, reports quarterly earnings, where expectations are earnings and sales growth of 30% and 20% respectively.