Bull and S&P index button
The S&P 500 breached the 5,000 mark for the first time ever on 8 February / Image source: Adobe

It was another superb week for the major US indices with the S&P 500 breaching the 5,000 mark for the first time ever on 8 February, ending the session 0.1% to the good at 4,997.91 points, as a narrow set of America’s biggest companies continued to drive the market higher.

The Nasdaq Composite and Dow Jones Industrial Average indices also sustained their strong starts to 2024 amid a busy corporate earnings season.

Wall Street sentiment has been boosted by signs the Federal Reserve will begin cutting interest rates as well as optimism around corporate earnings and excitement surrounding the potentially transformative impact of AI (artificial intelligence).

Among this week’s biggest movers were chip designer Arm (ARM:NASDAQ), which surged on better-than-expected results and a strong forecast, and entertainment titan Disney (DIS:NYSE), which jumped on forecast-trouncing first quarter earnings and the acquisition of a $1.5 billion stake in Fortnite-maker Epic Games.

Also motoring higher was Ford (F:NYSE), which firmed 7% over the week after fourth quarter results beat forecasts and the Jim Farley-steered firm automaker announced a special dividend.

But Evan Spiegel-led Snap (SNAP:NYSE) tanked 35% after the social media outfit’s quarterly quarter sales missed estimates and it provided soft guidance.

 

 

ARM

For a company worth billions of dollars to surge nearly 50% in a single trading session is a rare feat, but that’s exactly what shares in UK-based Arm did this week, ending with a market cap of $116 billion.

This was Arm’s best day by miles since a $52 billion blockbuster market debut in September 2023, powered by strong forecasts on demand for its technology to design chips for artificial intelligence features.

The company reported a better-than-forecast 14% revenue increase in its December quarter revenues and now projects sales will rise as much as 20% for fiscal 2024 (to 31 March).The real kicker, in theory, was Arm’s reminder that AI-focused chipmakers will be using its blueprints, a development that’s predicted to pull revenue 15% above analysts’ expectations to roughly $900 million this year.

Beating forecasts and juicing the AI growth story is certainly one part of the equation but there’s perhaps more to the scale of this week’s jump.

Remember, last year’s IPO saw just 10% of Softbank’s stake listed, so stock available to buy on the open market remains relatively tight, which magnifies any movement up or down. Lockup restrictions on early shareholders expire next month, increasing the amount of stock that can be traded. That may be telling, and it’s not hard to imagine a number of those stakeholders top-slicing some of the 123% profit now on the table.

 

 

UBER

Ride-hailing and food delivery firm Uber Technologies (UBER:NYSE) delivered its first full-year profit with earnings beating analysts’ estimates.

The San Francisco-based company reported annual adjusted EBITDA (earnings before interest taxation depreciation and amortisation) of $1.28 billion, up 93% year-on-year and above the company’s earlier guidance of $1.18 billion to $1.24 billion.

CEO Dara Khosrowshahi was duly impressed with the results saying 2023 was an ‘inflection point for Uber’. Shares in Uber revved up 7% to $71.6 over the week and have doubled over the past year.

The outlook looks rosy too, with Uber expecting gross bookings of between $37 billion and $38.5 billion for the first quarter of 2024 and adjusted EBITDA of $1.26 billion to $1.34 billion, compared with the $1.26 billion expected by analysts.

Uber’s first full-year profit has given rise to market speculation of a future share buyback or a dividend, following in the footsteps of Meta Platforms (META:NASDAQ).

 

 

 

WALT DISNEY

Embattled media giant Walt Disney (DIS:NYSE) sprinkled some mouse magic on investors (7 Feb) after beating first quarter earnings forecasts, hiking the dividend by 50% and launching a $3 billion share repurchase programme.

The cocktail of positive news includes a taking a $1.5 billion stake in Epic Games to build virtual worlds in its hugely popular Fortnite game and launching a joint venture for live sports streaming with Fox Sports and Warner Bros. Discovery (WBD:NYSE) later this year.

While revenue was flat at $23.55 billion, adjusted EPS (earnings per share) came in more than 20% higher than Street estimates at $1.22. Losses in its streaming businesses narrowed to $216 million from $1.05 billion and the firm said it is on track to deliver at least $7.5 billion of cost cuts by the end of fiscal 2024.

Disney has been under pressure from activist investors Nelson Peltz and Blackwells Capital to reinvigorate the company’s fortunes and halt the fall in the share price. The shares jumped 10% on the earnings update narrowing the losses over the last 12-monts to 2% compared with a 21% gain for the S&P 500 index.

 

 

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Issue Date: 09 Feb 2024