US flag with fireworks in background
US markets enjoyed a strong November / Image source: Adobe

Swashbuckling gains were clocked up in November as investors bet that falling inflation, a firm jobs market, and mostly better than expected corporate earnings bode well for the US economy into 2024.

The Dow Jones Industrial Average added 1.8% over the past week, and while the S&P 500 and Nasdaq Composite rose more modestly, it’s still been a hell of a month for US stocks.

 

 

The Dow Jones Industrial Average rose 8% in November, its best month since October last year, while the broad-based S&P 500 was up nearly 9% in November. The tech-heavy Nasdaq jumped 10.7%, with both latter indexes delivering their best monthly performances since July 2022. 

PASSING OF AN INVESTMENT GIANT

This was also a week in which investors came out in force to pay respects to Charlie Munger, who died aged 99. Warren Buffett’s long-term sidekick, Munger and Buffett will surely go down as investment’s greatest ever double-act at Berkshire Hathaway (BRK.B), clocking up enormous gains for shareholders over the decades.

 

 

 

He would have presumably been chuffed to know that his long-term investment thesis remains as popular with investors as ever, Berkshire stock still among the most popular with AJ Bell investors over the past week.  

October Core PCE inflation, which the Fed believes is a more accurate gauge of underlying inflation, slowed to a 3.5% pace from 3.7% the prior month. The slowing pace of inflation comes even as the labour market appears stronger than expected as initial jobless claims climbed by less than expected.   

But Treasury yields shrugged of the signs of slowing inflation, with the yield on the 10-year Treasury up 7.1 basis points to 4.339%. 

FARFETCH

IPO-flop Farfetch (FTCH:NYSE) fell 35.5% to $1.10 this week after the indebted e-tailer delayed its third quarter results and warned previous guidance ‘should no longer be relied upon’.

The sharp share price shock of London-based Farfetch, the loss-making luxury fashion marketplace whose shares have plummeted since an ill-starred 2018 flotation, has led to murmurs that its founder and CEO José Neves is reportedly considering delisting the indebted business which is struggling amid the broader luxury slowdown.

Cartier-owner Richemont (CFR:SWX), which has a deal in place to sell Farfetch a 47.5% stake in its Yoox-Net-a-Porter online fashion and accessories business, said it won’t be injecting any cash into Farfetch and is ‘carefully monitoring the situation’.

Richemont reminded shareholders it has ‘no financial obligations towards Farfetch’, though what a Farfetch delisting would mean for the Yoox-Net-a-Porter deal is anyone’s guess.

 

 

GENERAL MOTORS

General Motors (GM:NYSE) sprang a triple surprise on investors this week, first by reinstating its earnings guidance, then by raising its quarterly dividend by a third and finally by announcing a share buyback worth up to $10 billion or a quarter of its market cap.

The firm had only just signed a deal with the United Auto Workers union to raise wages by 25% after an industry-wide strike which saw thousands of assembly-line staff walk out and cost the firm over $1 billion in operating earnings.

GM shares soared nearly 10% to $31.60 in response to the buyback, which chief executive Mary Barra said ‘demonstrates our confidence in our strategy and ability to grow, generate cash flow as well as strong margins’.

Although the new labour deal means an additional $9.3 billion in costs over four years, Barra said the price was ‘higher than we anticipated, but not significantly’.

The Detroit-based company, which owns iconic brands including Buick, Cadillac, Chevrolet and GMC, was the world’s largest carmaker for almost eight decades until it was overtaken by Toyota in 2008.

FOOT LOCKER

Shares in Foot Locker (FL:NYSE) surged 16% on 29 November to a new six month high after third quarter earnings beat Wall Street estimates and the shoe and apparel retailer gave an upbeat sales outlook.

Foot Locker’s revenues fell 8.6% year on year to $1.99 billion, beating consensus estimates of $1.96 billion while same stores sales fell 8% compared with the 10% fall analysts were looking for according to LSEG data.

After a better-than-expected boost over Thanksgiving the company revised its full year projection for sales to drop by 8% to 8.5% compared with a prior forecast which called for a decline of 8% to 9%.

Chief executive Mary Dillon said the company was making good progress with its turnaround initiatives and the holiday season had got off to a strong start.

The company lowered the upper range of its full year adjusted earnings per share guidance to $1.30 to $1.40 from $1.30 to $1.50.

The shares are down 25% year to date compared a 19% gain for the S&P 500.

 

 

 

 

 

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Issue Date: 01 Dec 2023