Philippe Pratte comments:
Dear customers,
It was a particularly busy week on Wall Street, especially in the techno sector, as well as geopolitical developments and key corporate announcements. It was a week in which US bonds, and specifically 10-year bonds, were the main factor influencing stock market index movements for the majority of sessions.
1. Stock market :
- Stock market indices responded well to recent economic data, with a notable rally on the techno side on Friday, buoyed by strong performances from Amazon and Intel.
- Amazon, up 8%, was the leader among megacapitalizations.
- The S&P 500 was fairly stable, flirting with its lowest levels since May.
- JPMorgan Chase & Co. fell following the announcement that its CEO, Jamie Dimon, had sold shares worth approximately $141 million.
2. Economy and interest rates
- U.S. short-term inflation forecasts rose in October, reaching a five-month high. This increase, coupled with higher pump prices and Fed inflation data, is raising concerns.
- More than two-thirds of S&P 500 stocks are trading below their 200-day moving averages, indicating significant pressure on share prices
3. Geopolitical developments :
- Investors kept a close eye on recent geopolitical developments, including talks on a ceasefire and hostage agreement, facilitated by Qatar.
4. Strategy and outlook :
- Our quantitative approach, focused on quality and robust earnings growth, should enable us to navigate the markets well. Our ability to identify the right opportunities is essential in this environment. However, with the current market environment and the reduction in liquidity caused by anti-inflation monetary policies, we are seeing increased volatility.
In conclusion, despite the challenges presented by the market, particularly in terms of inflation and interest rates, opportunities remain. It's crucial to remain vigilant, analyze the available data and make informed investment decisions in this ever-changing environment.
Best regards,
Philippe Pratte
Monday
-Wall Street: a mixed session
The New York Stock Exchange began the week on a mixed note. After opening lower, the indices closed mixed. Bond yields, which had reached a 16-year high at the start of the session, finally retreated. Here are the performances of the main indices:
Dow Jones: -0.58% to close at 32,936.41 points.
NASDAQ: +0.27% to close at 13,018.33 points.
S&P 500: -0.17% to end at 4217.04 points.
The S&P 500 closed at its lowest level since May, suffering its fifth consecutive session of decline. Yields on ten-year US Treasuries briefly breached the 5% threshold at the start of the session, a level not seen since 2007. By the close, however, they were at 4.84%, down 1.34%. These movements were influenced by better-than-expected US economic data and geopolitical tensions in the Middle East.
-Stockss in brief
Chevron (-3.70%): The company announced the acquisition of oil and gas producer Hess for $53 billion.
Hess Corporation (-1.04%): Despite a positive opening, the share finally declined.
Walgreens (+3.29%): The pharmacy chain benefited from a positive rating from JPMorgan.
Tuesday
- Wall Street: under an avalanche of results
The New York Stock Exchange enjoyed a rebounding session on Tuesday, boosted by a series of positive corporate results, notably from Alphabet (Google) and Microsoft, announced at the close. Wall Street's main indices broke with their recent negative trend:
Dow Jones: +0.62% to close at 33,141.38 points.
NASDAQ: +0.93% to close at 13,139.88 points.
S&P 500: +0.73% to close at 4247.68 points.
Ten-year US bond yields remained stable at 4.81%, after briefly reaching 5% on Monday, a level not seen in 16 years. The majority of companies reporting quarterly results exceeded expectations. Notable companies such as Coca-Cola, General Electric, Verizon and others outperformed forecasts.
- Stockss in brief
Spotify (+10.36%): The music platform posted excellent operating profits in Q3, and now has 574 million active users.
General Motors (-2.31%): Despite better-than-expected results, the stock was hit by the announcement that Cruise, its autonomous vehicle subsidiary, had its license suspended, and by a prolonged strike led by the UAW union.
Barclays Plc (-2.7%): The British bank opened the earnings season for UK banks by lowering its lending profitability forecasts.
-Microsoft: Robust growth driven by cloud and AI
Microsoft posted impressive revenues of $56.5 billion for the three months to September, marking a 13% increase on the same period last year, beating analysts' forecasts of $54.5 billion. This growth was attributed to the strength of its cloud and PC businesses. Growth in its cloud business was particularly noteworthy, with an increase of 24%. More specifically, Azure, Microsoft's flagship cloud platform, grew even faster, by 29%.
- Alphabet: Solid advertising revenues despite disappointing cloud sales
Alphabet, Google's parent company, reported revenue growth of 11% in the third quarter, mainly thanks to a rebound in advertising. It recorded sales of almost $77 billion for the period, up 11% on the previous year. However, despite these impressive figures, Google's cloud business slightly disappointed with revenues of $8.4 billion for the quarter, although this represents an increase of 22% year-on-year. YouTube's advertising revenues also exceeded expectations, coming in at $7.95 billion. Alphabet CEO Sundar Pichai highlighted the rapid growth of Shorts, YouTube's competitor to TikTok, which now boasts 70 billion daily views.
Wednesday
-Wall Street: Alphabet disrupts the markets
The New York Stock Exchange had a difficult day, mainly due to Alphabet's disappointing results. The market's dependence on a few technology stocks also played a role in the decline. The S&P 500 ended lower, marking its eighth decline in ten days. Big Tech stocks suffered the heaviest losses, leading the NASDAQ to its second biggest fall of the year. Here are the performances of the main indices:
Dow Jones: -0.32% to close at 33,035.93 points.
NASDAQ: -2.43% to end at 12,821.22 points.
S&P 500: -1.43% to close at 4,186.77 points.
Alphabet fell by 9.60% after missing analysts' expectations for its cloud computing business. Although this business accounts for just over 10% of the group's sales, it is seen as a key growth driver.
Treasury yields also put pressure on the stock market. The 10-year yield climbed to 4.94%, from 4.82% on Tuesday, impacting the majority of stocks on Wall Street.
-Stockss in brief
Microsoft (+3.07%): Up after reporting better-than-expected summer profits and revenues.
Amazon (-5.58%): Sharp decline, contributing to pressure on the S&P 500. The cloud champion's results are due on Thursday.
Meta (-4.17%): Another major technology company that suffered a notable decline as its results are due at the close of trading on Wednesday.
Broadcom (-3.57%), Nvidia (-4.31%), AMD (-5.52%), Intel (-5.09%) and Qualcomm (-4.21%): Semiconductor manufacturers were also hit, with notable declines for all of them.
Snap (-5.36%): Down despite a return to 5% growth. The company continues to post heavy losses and has warned that many advertisers have suspended their ad spending following tensions between Israel and Hamas.
-The Bank of Canada maintains its key rate at 5%.
The Bank of Canada has decided to maintain its key rate at 5%, marking the second time in a row that it has made this decision. This comes after the bank raised its key rate ten times since the start of 2022. Recent data, from GDP to jobs to inflation, have shown signs of an economic slowdown. Inflation, which peaked at 8.1% in June 2022, fell back to 3.8% in September 2023. The Bank of Canada expects the economy to continue to cool, bringing inflation back to its 2% target by 2025. However, it does not rule out the possibility of another rate hike if necessary.
-Meta reports robust growth in Q3 2023
The company posted sales of $34.15 billion, up 23%, and net income more than doubled to $11.58 billion, from $4.4 billion at the same time a year ago. These figures beat Wall Street forecasts, underlining the company's robust recovery from year-on-year revenue declines.
The company succeeded in improving its advertising business while investing heavily in artificial intelligence and virtual reality. Third-quarter sales reached $34.2 billion, exceeding analysts' average estimate of $33.5 billion. In addition, Meta reduced its expenses, helping to widen its operating margins to 40%, compared with 20% in the same period last year.
Despite these impressive figures, Meta also faced challenges. The company's Reality Labs division, which manufactures smart glasses and headsets, posted an operating loss of $3.7 billion on sales of $210 million. However, the figures show that Meta is well on the way to strengthening its market position, not least thanks to its strategic investments in artificial intelligence and virtual reality.
Thursday
- Wall Street under pressure: Tech giants and high Treasury yields weigh on markets
US stock markets were strongly influenced by the performance of technology giants and high Treasury yields. Investors paid particular attention to quarterly results and interest rate movements, which had a significant impact on the main indices.
Dow Jones: -0.8% to 32,784.3 points
S&P 500: -1.2% to 4,137.23 points
NASDAQ: -1.8% to 12,595.61 points
The NASDAQ suffered the biggest percentage decline, mainly due to the disappointing performance of the top seven technology stocks, often referred to as the "magnificent seven". These stocks were affected by uncertain earnings forecasts and expectations of higher interest rates for an extended period.
- Stockss in brief :
Meta (-3.7%): Despite better-than-expected quarterly revenues, Meta shares fell 3.7% on concerns about its Reality Labs division, which posted a loss of $3.7 billion.
Alphabet/Google (-2.65%): Alphabet shares fell by 9.5% after the release of results on Wednesday, mainly due to disappointing performance in its cloud business. Shares continued to fall on Thursday, losing a further 2.7% the following day.
Microsoft (-3.75%): Despite better-than-expected quarterly revenues and earnings, Microsoft shares fell by 3.8%.
IBM (+4.9%): IBM shares rose by 4.9% after exceeding quarterly expectations, buoyed by strong demand for its software solutions.
-Economic outlook :
US GDP rose by 4.9% in the third quarter, exceeding expectations and marking the fastest growth in almost two years. This robust growth fuelled investor concerns about a more restrictive monetary policy on the part of the Federal Reserve. In addition, mortgage rates continued to rise, with the 30-year fixed rate reaching 7.79% at the end of October.
Friday
- Wall Street: Technology sector rebounds
The New York Stock Exchange ended the week with contrasting performances, mainly driven by the technology sector. After a difficult week, the NASDAQ Composite showed signs of recovery, mainly thanks to Amazon, which boosted technology-related stocks with solid quarterly results. Here are the performances of the main indices:
Dow Jones: -0.10
NASDAQ: +0.93%.
S&P 500: +0.42
The NASDAQ tried to make up for some of the week's heavy losses, while the Dow Jones fell back slightly. Amazon shares rose by 5% after far exceeding analysts' revenue and earnings expectations for the third quarter. Other tech giants, such as Alphabet and Microsoft, followed suit. However, despite the rebound in the tech sector, some companies, such as Ford (-5%) and Chevron (-4%), struggled.
