🔬 International Index Investigation, Chip Chatter, and Much More
🔬 International Index Investigation, Chip Chatter, and Much More
"When you’re confused, it’s a good time to stop and relook at the basics"
- Julian Robertson
“I choose a lazy person to do a hard job. Because a lazy person will find an easy way to do it”
- Bill Gates
Mediocre day for the big US markets with the S&P 500 +0.08% and Nasdaq +0.36%.
5 of 11 sectors closed positive, with Energy in pole position (+1.4%) following a solid day in the oil markets (WTI crude +1.0%). Materials and Utilities were at the bottom (-1.4%).
Microsoft traded above the $3 trillion market cap threshold for a bit before closing below (only the second company after Apple to do so). While Meta’s rally continued as it broke $1 trillion for the first time two years.
As a follow up to my long-list of companies doing layoffs yesterday, eBay announced it’s cutting 9% of its workforce and SAP announced a restructuring to the tune of 8k jobs.
Street Stories
International Market Update
Given we’re almost a month into the year, I thought it would be worthwhile to check in on the rest of the world and see how their markets are doing. The two obvious stand-outs are China (-8.5% YTD) and Japan (+8.4%). Yes, this is basically the opposite of how this normally works.
Super accommodative rate policies (still negative interest rates), a weak (they prefer ‘export friendly’) currency, and some high hopes about an economic resurrection continue to buoy Japan, while economic and social data coming out from China seems to be getting worse by the day.
The Freedom Indices (S&P & Nasdaq) are off to a good start but Europe is lagging under soft economic output expectations.
Bolts, Blunders, and Boeing: A Turbulent Tale of Loose Screws and Grounded Dreams
There use to be an old aviation phase ‘If it ain’t Boeing, we ain’t going’. Not sure that carries as much weight anymore. Alaska Airlines' inspection of its Boeing 737 Max 9 fleet revealed numerous loose bolts, following a mid-flight incident involving a decompression caused by a lost blanking plate. This led to an FAA Emergency Airworthiness Directive grounding the model and an audit of Boeing's production line, amid broader concerns about Boeing's focus on cost-cutting over engineering excellence, highlighted by past fatal crashes involving the 737 Max. Both Alaska and United Airlines expressed frustration, with United reconsidering a significant order, as Boeing apologizes and commits to addressing these safety and quality issues.
More Chip Stuff (sorry)
Following TSMC’s important results last week (which I covered in-depth on Monday), semis are again the big news story of the day. ASML, the company with an effective monopoly on photolithography (basically the fancy laser etching that makes the chips) and another bellwether for the chip industry, reported strong results yesterday. The guidance for 2024 was pretty mild (flat YoY revenues) but basically called for a banner year in 2025, which turned a lot of heads.
ASML Highlights:
- Sales: €7.2 billion vs. Wall Street €6.9 billion [+4.3% Beat]
- Net Income: €2.01 billion vs. Wall Street €1.86 billion [+8.1% Beat]
AMD also got another upgrade from NewStreet Research (Hold to Buy), as well as an impressive update on its gaming GPU business. While on the other end of the spectrum (and other end of the market), Texas Instruments was down after it reported blaise Q1 guidance. Texas Instruments is primarily focused on the less cutting-edge, industrial chip market and their weak forecast cast some dark shadows over the sub-sector.
Texas Instruments Highlights:
- Q1 Revenue Guidance: $3.45 billion to $3.75 billion vs. Wall Street ave. of $4.01 billion.
- Q1 Profit Guidance: $0.96 cents to $1.16 a share vs. Wall Street calling for $1.42.
Tesla’s Q4
Not a terrible quarter for Tesla. Just not good:
- Revenue: $25.17 billion vs. Wall Street consensus estimate of $25.87 billion [-2.7% Miss]
- EPS: $0.71 vs. Wall Street at $0.73 [-2.7% Miss]
The big issue, however, was that they guided that 2024 deliveries will 'be ‘notably lower’ than in 2023 (Street forecasting +16%). As it stands, the stock is off 7.8% in after hours trading.
SPAC-tacular Bust: SEC Tightens the Reins on Wall Street's Blank-Check Bonanza
The SEC, led by Chair Gary Gensler, has voted to adopt new rules aimed at ensuring greater transparency for investors in SPACs (special-purpose acquisition companies), which caused a speculative Wall Street bubble bubble in 2020 and 2021. These rules, which will take effect in about five months, are expected to further dampen the once-booming SPAC market, known for its market froth and regulatory loopholes. Despite opposition from Republican commissioners Hester Peirce and Mark Uyeda, Gensler emphasized the need for robust investor protections, even for companies using alternative methods to go public.
If you’re new to the crazy SPAC story, check out this beginner friendly explainer I did a few weeks back.
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Joke Of The Day
Manager: ‘We need somebody for this role who is responsible.’
Employee: ‘Not a problem, sir. Every time something went wrong in my old job, my manager told me I was always responsible!’
Hot Headlines
Reuters | Nearly all US Senate Democrats back two-state solution for Israel and Palestinians. 49 of 51 members supported an amendment supporting a negotiated solution.
Bloomberg | Bank of Canada holds key rate at 5%, signals it's done with rate hikes.
Reuters | Bruised by stock market, Chinese rush into banned Bitcoin as safe haven. Crypto trading and mining has been banned in China since 2021, and many purchase crypto through the grey-market, such as rural commercial banks.
Jalopnik | Tesla claims it will launch a new entry-level model in 2025. Says the company is targeting a $25k car. So, based on the Cybertruck and Model 3, it will be $45k and launch in 2030. 🫢
Business Insider | China doesn't have the military power to successfully invade Taiwan, the majority of 52 US experts said in a survey. Fingers crossed.
Trivia
This week’s trivia is on technological firsts.
Which company invented the first jet airplane?
A) Rolls-Royce
B) Heinkel
C) General Electric
D) Pratt & Whitney
Which company created the first commercially successful computer mouse?
A) IBM
B) Apple
C) Microsoft
D) Logitech
Who is credited with inventing the assembly line?
A) Andrew Carnegie
B) Henry Ford
C) Alfred Sloan
D) John D. Rockefeller
(answers at bottom)
Market Movers
Winners!
ASML Holding (ASML) [8.9%]: Q4 performance exceeded key metrics with record bookings, mainly from EUV technology. Highlights include strong installed base growth and margin benefits. 2024 seen as transitional, with significant revenue growth expected in 2025.
Textron (TXT) [7.8%]: Exceeded Q4 earnings and operating margin, though revenue was below expectations. Improved performance in Bell and Industrial divisions, with higher revenues and margins. Positive FY24 EPS guidance, noting near completion of restructuring in H1.
Spirit AeroSystems (SPR) [7.0%]: Seattle Times reported BA's error in installing a fuselage piece on a 737 MAX 9, not SPR's fault, affecting an Alaska Airlines flight earlier this month.
SAP (SAP) [6.9%]: Q4 saw revenue increase, driven by Cloud, backlog, and free cash flow. EBIT met expectations; 2024 revenue and EBIT outlook positive, though impacted by restructuring, which enhances FY25 prospects. Strong growth dynamics in Cloud sector noted.
Losers!
DuPont de Nemours (DD) [-14.0%]: Preannounced Q4 revenue fell short of consensus, citing lower volumes and additional channel inventory destocking. Weak demand in China also impacted results. Q1 guidance remains below expectations despite emerging cost savings from restructuring.
Kimberly-Clark (KMB) [-5.5%]: Reported Q4 earnings, revenue, and operating margin below expectations. Organic growth was overall stable, but Consumer Tissue and K-C Professional segments saw weaker results due to lower volumes. Announced an increase in quarterly dividend.
Market Update
Trivia Answers
B) Heinkel invented the first jet aircraft…too bad it was for the Nazis.
B) Apple invented the mouse after it ‘borrowed’ the idea after Steve Jobs’ trip to Xerox PARC.
B) Henry Ford.
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