Philippe Pratte comments:
-War and interest rate fluctuations: a measured impact on stock markets
Despite a tense geopolitical backdrop and raging war, global stock markets seem surprisingly resilient to external pressures. This week, we have seen an apparent dissociation between world events and financial market reactions.
Although armed conflicts traditionally exert an influence on financial markets, the world's stock markets have shown remarkable resilience in the face of recent confrontations. Investors seem, for the time being, to be putting geopolitical tensions aside, focusing instead on economic fundamentals and corporate results, as evidenced by the robust performance of Eli Lilly and other major players.
Fluctuating interest rates, particularly in the USA, have created an atmosphere of uncertainty in the markets. Every upward movement in interest rates seems to affect liquidity, creating volatility, particularly in risky assets such as equities. The heightened sensitivity of markets to movements in long-term US bonds has become a key factor for investors and portfolio managers to monitor.
Investors therefore need to navigate with caution, judiciously balancing risky and safe assets in their portfolios to mitigate the potential impacts of this increased volatility.
At Pratte Portfolio Management, we remain vigilant and attentive to the various factors influencing the markets. Although markets have shown remarkable resilience in the face of geopolitical tensions and interest rate fluctuations, we continue to monitor these elements closely and adjust our strategies accordingly. Our aim remains to uncover opportunities that offer not only solid returns, but also long-term growth potential.
Now it's time for the blog. Happy reading!
Your portfolios in brief
Indianapolis-based Eli Lilly is one of the world's most respected pharmaceutical companies. Since its foundation in 1876, it has been dedicated to producing medicines that improve the quality of life of patients worldwide. With a presence in fields as diverse as endocrinology, oncology, neurology and cardiology, Eli Lilly has always been at the forefront of medical research.
-Highlights of 2023:
Second-quarter data: Eli Lilly raised its annual guidance after second-quarter earnings were up 85% on the same period last year. The company reported sales of $8.31 billion for the quarter, up 28% on the same period last year. Eli Lilly also raised its adjusted earnings guidance to a range of $9.70 to $9.90 per share for the year, up from a range of $8.65 to $8.85.
Drug performance: The company has seen strong results with the breast cancer pill Verzenio, the type 2 diabetes drug Jardiance and newer drugs like Mounjaro, a diabetes injection.
Mounjaro: Mounjaro, Eli Lilly's injection for the treatment of type 2 diabetes, performed remarkably well, with sales of $979.7 million for the quarter. This meteoric growth reflects investors' optimism about Mounjaro's potential trajectory, not only as a treatment for diabetes, but also as a potential solution to obesity. Indeed, some research suggests that Mounjaro could be even more effective at reducing weight than the popular injections from Novo Nordisk, Wegovy and Ozempic.
Donanemab: Perhaps one of the most promising developments of the year, Eli Lilly's Donanemab has shown positive signs in the treatment of Alzheimer's disease. With potential US approval on the horizon, this could be a turning point for patients and investors alike.
-Why keep an eye on this stock?
The share's impressive year-to-date growth of 67% is a testament to the company's strength and resilience. Eli Lilly shares reached a new 52-week high on Wednesday, closing the session up 5% at $605.28. With a strong pipeline of drugs in development and a global presence, Eli Lilly is well positioned to continue delivering solid returns.
-Conclusion
At Pratte Portfolio Management, we're always on the lookout for opportunities that not only offer solid returns, but also long-term growth potential. Eli Lilly, with its commitment to innovation and research, fits this description perfectly. We are convinced that this stock will continue to strengthen our portfolio in the months ahead.
Markets in brief
Monday
- Wall Street faces geopolitical tensions
Dow Jones (DJIA): +0.59% to 33,604.65 points
NASDAQ: +0.39% to 13,484.24 points
S&P 500: +0.63% to 4,335.66 points
The session had started in negative territory due to concerns about the offensive by the Palestinian Islamist movement Hamas against Israel. The markets were supported by traders who, seeing Wall Street holding up better than expected, sought to hedge their bets by buying shares.
-Stockss in brief
Lockheed Martin (+8.93%), Northrop Grumman (+11.43%), General Dynamics (+8.43%) and VRTX (ex-Raytheon, +4.62%): Sharp rise in the wake of tensions in the Middle East, putting the spotlight on the defense sector.
Carnival (-4.30%), Royal Caribbean (-2.92%): The gloomy outlook for tourism due to geopolitical tensions had a negative impact on cruise operators.
American Airlines (-4.08%), United Airlines (-4.88%), Delta Air Lines (-4.65%): The suspension of flights to Israel led to a fall in the share price.
ExxonMobil (+3.50%) Chevron (+2.77%) ConocoPhillips (+5.63%): Tensions in the Middle East drove up oil prices, benefiting the oil giants.
Tuesday
-Wall Street: Bond rates and Fed outlook
Dow Jones (DJIA ): +0.40% to 33,739.30 points
NASDAQ: +0.58% to 13,562.84 points
S&P 500: +0.52% to 4358.24 points
The New York Stock Exchange closed higher, influenced by falling bond yields and geopolitical tensions in the Middle East. Yields on US Treasuries fell, with the ten-year yield at 4.64% and the two-year yield at 4.95%. Several members of the US Federal Reserve (Fed) suggested that there was no longer any need to raise interest rates, indicating that current monetary policy was sufficiently restrictive.
-Stockss in brief :
Pepsico (+1.88%): The beverage and snack giant raised its annual outlook after a better-than-expected third quarter. Third-quarter sales totaled $23.45 billion, compared with $21.97 billion a year earlier.
Coca-Cola (+2.19%): The stock benefited from Pepsico's positive momentum.
Boeing (+2.67%): One of the Dow Jones heavyweights posted a solid performance.
Walmart (+1.13%) and Target (+3.66% ): These retailers also posted gains.
Northrop Grumman (-1.68%) and Lockeed Martin (-0.33%): After rising sharply the previous day due to tensions in the Middle East, these defense stocks fell back slightly.
Wednesday
-Wall Street up for the third straight session
Dow Jones (DJIA ): +0.19% to 33,804.87.
S&P 500: +0.43% to 4,376.95. This is the fourth consecutive day of gains for this index.
NASDAQ: +0.71% to 13,659.68.
Wall Street continued to climb for the third day in a row, buoyed by a number of positive factors. Market participants were boosted by robust economic indicators and better-than-expected corporate balance sheets. The U.S. Producer Price Index (PPI) rose by 0.5% in September, beating forecasts by +0.3%, following a +0.7% rise in August.
Investors also took note of the minutes of the latest US Federal Reserve meeting. The report indicated that a majority of Fed members were considering a further increase in key rates to combat inflation, and were in favor of keeping rates high for an extended period. The yield on the 10-year US Treasury note fell by around 9 basis points on Wednesday after hitting a 16-year high earlier this month.
- Stockss in brief
ExxonMobil (-3.59% to $106.49): The company announced the acquisition of its compatriot Pioneer Natural Resources for around $60 billion. Pioneer, a major producer in the Permian Basin in Texas, saw its share price rise by 1.44% to $240.82. Both companies underlined their ambition to achieve carbon-neutral production in the Permian Basin for Pioneer by 2035.
Stellantis (+3.42%): Theautomaker announced a major $3.2 billion investment in partnership with Samsung SDI to establish an electric vehicle battery plant in Indiana.
HP (HPQ) (+1.51%): The computer and printer manufacturer shared solid guidance for its annual results, anticipating a 5% increase in its dividend.
-Birkenstock: A difficult IPO
Birkenstock's long-awaited debut on the NYSE proved disappointing. The famous German sandals with chunky leather soles failed to convince investors on their first day of trading. The stock, which trades under the ticker symbol "BIRK", closed at $40.20, down 12.61% on its $46 IPO price.
This difficult start is surprising, especially for a company as renowned as Birkenstock. This misstep could affect investor confidence in the Wall Street IPO market, which is already struggling to recover.
Birkenstock's IPO is seen as a barometer for Wall Street, testifying to the gradual recovery of the IPO market. Three other companies have recently gone public: semiconductor specialist Arm, delivery platform Instacart and online marketing expert Klaviyo. Of these three, only Instacart has seen its share price fall below its IPO price.
Thursday
-U.S. inflation and its impact on Wall Street
The New York Stock Exchange had a tumultuous day, ending lower following the announcement of higher-than-expected US inflation. US inflation was more persistent than expected, with prices remaining at 3.7% year-on-year in September. This disappointed analysts, who were expecting a slowdown to 3.6% year-on-year. In addition, yields on ten-year Treasuries rose to 4.70%, from 4.55% the previous day.
Dow Jones (DJIA ): -0.51% to 33,631.14 points
NASDAQ: -0.63% to 13,574.22 points
S&P 500: -0.62% to 4,369.61 points
-Stockss in brief
Ford (-2%): The unexpected strike by the United Auto Workers union has extended its impact to the Ford unit that produces SUVs and pickup trucks in Kentucky. This action could have significant consequences for Ford, given that this plant is responsible for $25 billion in annual revenues.
General Motors (-2.13%): The company also suffered a decline, although the specific reasons are not mentioned.
BAT (British America Tobacco) (-3.80%): The company saw its shares fall after the US health agency (FDA) banned the sale of menthol electronic cigarettes from its Vuse Alto brand.
Birkenstock (-6.57%): After an unsuccessful IPO in New York, shares in the German sandal brand continued to fall.
Delta Airlines (-2.39%): Despite record quarterly sales, the airline has reduced its profit forecasts due to higher fuel prices. However, for the full year, the company is forecasting an increase in sales of around 20%.
Friday
-Equities rise on big bank results and lower Treasury yields
Stock markets showed a positive trend in the morning, as investors analyzed the results of major banks and observed a decline in Treasury bond yields. The yield on the ten-year Treasury bill fell by over 11 basis points to 4.598%. The yield on the two-year Treasury bill also fell, to around 5.02%.
JPMorgan Chase and Wells Fargo opened the earnings season for major financial institutions with better-than-expected third-quarter profit and revenue figures. Shares in JPMorgan Chase and Wells Fargo rose by over 2% each. Citigroup was also up 2% after posting better-than-expected revenues. Here are the key index performances at the opening:
Dow Jones: +0.7
NASDAQ: +0.1%
S&P 500: +0.4
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