Market Retreats After Record Highs: After achieving record highs last week, Wall Street indexes have seen a decline this week. Traders, adopting a cautious stance, are in search of clearer indicators regarding inflation trends and the possibility of interest rate reductions.
Economic Indicators Offer Mixed Signals: The session is poised for a turnaround following the release of U.S. durable goods orders data on Tuesday, which exceeded expectations and suggested a robust economy. Additionally, business investment in equipment hinted at an early recovery stage, and consumer confidence levels remained stable. With scant economic data available on Wednesday, attention turns to Federal Reserve Board Governor Christopher Waller’s scheduled speech at the Economic Club of New York.
Anticipation Builds for PCE Price Index Data: Investors are bracing for Friday’s unveiling of the PCE price index data, the Federal Reserve’s preferred inflation metric. This comes at a time when the financial markets will be on a hiatus for Good Friday. Adding to the anticipation, top Federal Reserve officials, including Chair Jerome Powell and committee member Mary Daly, are expected to provide further insights into the central bank’s rate cut strategy for 2024, despite prevailing inflationary pressures.
Pharmaceutical and Tech Stocks in the Spotlight: In company news, Merck’s shares surged nearly 5% after the FDA approved its treatment for a rare lung disease, marking a potential record high for the pharmaceutical giant. In the tech sector, Trump Media & Technology Group saw a notable increase of over 13% following its impressive Nasdaq debut. Meanwhile, Robinhood Markets experienced a 6.6% uptick after announcing a new credit card to bolster its presence in the personal finance market.
GameStop Faces Challenges: Conversely, GameStop’s shares plummeted by 20% in the wake of underwhelming earnings for the crucial holiday quarter. The company also disclosed job cuts as part of its cost-reduction strategy, amid challenges from digital platforms and reduced consumer spending.
Medical Device Makers Attract Attention: Shockwave Medical’s stock climbed 1.2%, continuing its ascent after a previous 10% surge on reports of potential acquisition talks with Johnson & Johnson.
Oil Prices Decline Amid Surging U.S. Inventories: The oil market experienced a sharp downturn following a report from the American Petroleum Institute indicating a significant build in U.S. crude inventories, contrary to the anticipated drawdown. This has prompted reassessment of the U.S. crude market’s tightness, especially as oil production remains at historically high levels.
$TSLA- Morgan Stanley noted that Bloomberg reported earlier this week that Contemporary Amperex Technology Co. Ltd., or CATL, is working with Tesla on faster charging batteries, which follows news that CATL is supplying machinery to Tesla’s Giga Nevada factory. China’s CATL is effectively barred from selling into the U.S. directly, but is able to license battery tech to partners and charge a royalty fee, noted the analyst, who notes that the U.S. is an under-penetrated EV market in need of high quality, cheap battery tech and that China is a highly penetrated EV market with an oversupply of batteries. The firm, which believes a Tesla-CATL partnership “could be a game changer” for the U.S. electric vehicle market, has an Overweight rating and $320 price target on Tesla shares.
$NFLX- Wedbush analyst Michael Pachter removed Netflix from the firm’s Best Ideas List but keeps an Outperform rating on the shares. The analyst continues to see drivers for the company to expand revenue, earnings, and free cash flow “at least to the high expectations out there right now.” However, it will be much harder for Netflix to impress investors in 2024 versus 2023, and some of its growth drivers have been fully priced in, such as the password-sharing crackdown, the analyst tells investors in a research note. Wedbush still sees Netflix’s advertising tier being a growth driver in 2025.
$BABA-Â JPMorgan keeps an Overweight rating on Alibaba with a $105 price target after the company announced the withdrawal of its logistics subsidiary Cainiao’s initial public offering application. Given the challenging capital market environment, pushing the IPO at this time might not be able to achieve the initial purpose of unlocking shareholder value, the analyst tells investors in a research note. In addition, the firm says cross-border e-commerce now is gaining strong traction, and Alibaba intends to further integrate Cainiao’s logistics business with its AIDC group to provide a better user experience for global consumers. With Cainiao likely to step up its infrastructure investment, JPMorgan believes Alibaba shares may see near-term pressure considering most investors value the company on an earnings basis. However, given the fast growth of the cross-border ecommerce business, such investment should pay off in the long run, says the firm. It believes the IPO withdrawal is natural to negative in the short-term but a long-term positive.
$DIS- UBS analyst John Hodulik raised the firm’s price target on Disney to $140 from $120 and keeps a Buy rating on the shares. The firm remains bullish on Disney shares and sees multiple sources of potential upside within the model that should drive earnings estimates higher over the next several quarters, yielding a 25% three-year compound annual growth rate, the analyst tells investors in a research note. The firm expects free cash flow of $9B in 2024 and $14B in 2026, supporting dividend growth, ramping buybacks, and incremental investments.
$AAPL- Developers and regulators battling Apple over how its grants access to its active devices continue to find themselves at odd with Phil Schiller, Aaron Tilley and Kim Mackrael of The Wall Street Journal reports. Schiller, who was previously the company’s Chief Marketing Officer, has emerged as the most ardent public defender of the company’s ecosystem, a vision of devices working seamlessly together and protect user security. Apple’s vision has increasingly come under attack, from regulators in the Justice Department, European Union, and rivals, arguing the company’s fees are excessive and its control of external software is oppressive. In defense of the company’s vision, Schiller recently told Fast Company, “I have no qualms in saying that our goal is going to always be to make the App Store the safest, best place for users to get apps.”
JPMorgan says concerns around Apple’s iPhone units in the China market increased with data from CAICT for the month of February showing that iPhone shipments declined sharply at 33% year-over-year and 56% month-to-month to track at 2.4M units in the month. The decline in February puts the year-to-date decline for iPhone units at down 37% year-over-year in China, the analyst tells investors in a research note. The firm says the data points to a digestion in the broader market in relation to sell-in volumes on account of higher inventory in the channel. While an analysis of the data limits concerns around iPhone share relative to domestic players like Huawei, it does raise concerns about the sustainability of the sequential recovery for the China market that was evidenced through 2023, says JPMorgan. The firm has an Overweight rating on Apple.
Hey OP! Great job on the OP Wire plan yesterday as DIS puts paid huge after the open. I’ll be looking to take a new swing trade position of PUTS in DIS today after the opening pop.
See you all in chat
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