Fed chairman Jerome Powell may not believe that the US is not currently in a recession, but BlackRock experts think it’s just a matter of time, cheery news.

The investment banking giant last week warned investors to brace for a bumpy ride with little chance of a soft landing to cushion the coming challenges. ‘We see a pivot later this year when a recession we flagged in early March comes knocking,’ said BlackRock in its weekly market analysis. ‘We expect the Fed to change course only next year, when the economic effects of rate rises become clear.’

The market agrees. Rate projections now show the Fed cutting rates in 2023.

So, while attention had turned to Congress speaker Nancy Pelosi’s visit to Taiwan amid fears of escalating conflict between the US and China, BlackRock’s thoughts may curb the enthusiasm of predictions of a new bull market. Investors have so far responded optimistically to the release of economic data revealing better than expected growth for the US services sector, which might have suggested inflation could be close to peaking.

Some analysts are speculating that we could be reaching the end of the 2022 bear market. ‘The technical improvement up to this point is more akin to a new cyclical bull market than a bear market rally,’ Ned Davis Research analysts said in a note. Glass half empty, or half full?

TESLA

Tesla (TSLA:NASDAQ) has won the backing of shareholders to split its stock again, an incoming 3-for-1 division that will be its second in two years, as the world’s most valuable automaker looks to make its stock more affordable to retail investors.

Tesla first announced the proposed 3-for-1 stock split in June 2022 as a way to make the stock more affordable to millions of small investors. At the time, the shares were trading at around $700, a hefty outlay for the average saver, and the stock has rallied to since then.

Tesla performed a 5-for-1 stock split in August 2020, and its shares have increased 31% since then. They closed on 4 August at $925.90. Based on that price, the new share price would be around $309.

Tesla has not yet announced the date of the split.

STARBUCKS

Starbucks’ (SBUX:NASDAQ) shares frothed higher after the coffee roaster and retailer served up robust third quarter results (2 August) in the face of rising costs and macroeconomic uncertainties.

The coffeehouse colossus’ adjusted earnings for the third quarter ended 3 July fell to $0.84 (84 cents per share) from $0.99 a year earlier, but this beat the $0.77 called for by Wall Street analysts.

The Seattle-based giant’s revenues rose 9% to a quarterly record $8.2 billion as Starbucks’ global customers continued to spend on their daily caffeine fix despite high inflation. North America comparable store sales increased by 9% with a boost from price hikes, though international comparable store sales decreased 18%, dragged down mainly by Covd restrictions in China.

‘We have clear line-of-sight on what we need to do to reinvent the company, elevate our partner and customer experiences and drive accelerated, profitable growth all around the world,’ enthused founder and recently returned (interim) CEO Howard Schultz.

‘The Q3 results we announced today demonstrate the early progress we have made in just four short months.’ Due to ongoing economic headwinds and Covid-19 uncertainties, the company’s guidance for the rest of the financial year remains suspended.

UBER TECHNOLOGIES

This past week saw ride-hailing firm Uber Technologies (UBER:NYSE) pass a major milestone as it reported its first ever quarterly operating profit, sending its shares soaring over 20%.

For the three months to June, the firm posted revenues of $8.1 billion, up 105%, while adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) swung from a loss of $509 million to a profit of $364 million.

‘Last quarter I challenged our team to meet our profitability commitments even faster than planned, and they delivered’, said chief executive Dara Khosrowshahi.

He added: ‘This marks a new phase for Uber, self-funding future growth with disciplined capital allocation, while maximizing long-term returns for shareholders.’

DISCLAIMER: AJ Bell is the owner and publisher of Shares. Tom Sieber owns shares in AJ Bell.

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Issue Date: 05 Aug 2022