market report
After quiet trading, U.S. stock indexes ended unevenly with small swings. As tech stocks continue to take a beating, investors are looking for new sectors.
The stock market’s leading index, the Dow Jones Industrial Average, ran out of money over the weekend after a satisfying week. Still, the index rose for a tenth straight day — and even with a daily gain of 2.51 points, or 0.01%, to 35,227, it was hard to get any tighter.
That means the biggest winning streak in six years continues even as investors take profits, especially in late trading ahead of the weekend. The single-day high of the Dow was 35,340 points. Price gains for blue-chip heavyweights such as UnitedHealth, Merck, Goldman Sachs, Chevron and Procter & Gamble provided support. Heavyweight companies such as Microsoft and Apple, which are also Dow components, have given way.
For the Dow, that resulted in a weekly gain of nearly 2.1%. A day earlier, the index hit its highest level since April last year. Recently, the index also managed to cross the 35,000 mark. The market-wide S&P 500 closed little changed at 4,536, up slightly.
Most importantly, investors’ newfound joy in pharmaceutical and financial stocks defined today’s trade. Paul Nolte, market strategist at financial services firm Murphy & Sylvest, noted that health care and banking sectors are undervalued compared to technology stocks, which have been the focus in recent months.
Hopes that the Federal Reserve may pause rate hikes also supported prices. For next week’s rate meeting, analysts expect an average rate hike of 25 basis points. Most experts at Helaba expect the Fed to end its rate cycle by then.
Meanwhile, the Nasdaq fell slightly after a sharp drop the day before, certainly a huge disappointment. Because after the technology index recorded its biggest one-day drop since March yesterday, there is no question of a strong reaction. The Composite Index closed down 0.2%, while the Nasdaq 100 closed down 0.26% at 15,425.
Investors are increasingly concerned about whether valuations are justified. “The market is seriously overbought,” said Patrick Spencer, an equity researcher at financial services firm Baird. “If you’re not in this market, you’re missing out.”
As of Monday, the dominance of a handful of giants among Nasdaq 100 companies will be eroding. In addition to Tesla, Apple, Microsoft, Alphabet, Amazon, Nvidia and Meta are among the “Big Seven”, which now account for more than half of the index’s weight. As a result, portfolios of index funds or ETFs that track the index may make final adjustments on Friday.
Standing out amidst today’s scarce corporate data is American Express, one of the nation’s leading credit card companies and financial services companies, but it hasn’t been well received. The company disappointed investors by “just” keeping its annual forecast unchanged despite strong quarterly numbers. Earnings rose 12% to $15 billion, but that missed analysts’ expectations.
As card payments hit a record high in the second quarter, the company tripled its provision to $1.2 billion to cover potential defaults. This is necessary because, unlike its competitors, Amex not only processes payments but also originates the loans itself. The credit card giant’s reluctance to raise its full-year EPS forecast to $11.40 from $11.00 sent the Dow down 3.9%.
Investors were hesitant to make bigger decisions today after a flurry of fresh quarterly results, mostly from the U.S., rattled stocks. The DAX closed at 16,177, down 0.17% on the day.
The domestic leading index traded in a tight range between 16,103 and 16,181, closing nearer the session high. On a weekly basis, that would result in a modest gain of 0.4%. The mid-cap index MDAX was little changed at 28,253, up 0.1 percent.
While the agenda for today’s new report is manageable, markets continue to grapple with sobering results from two of the US giants, Tesla and Netflix. But German software giant SAP’s meager quarterly results were also a talking point of the day.
Among the DAX index, SAP fell the most, down about 4.2%. Europe’s largest software maker cut its forecast for the future business it announced. The DAX heavyweight revised its yearly target after XETRA closed yesterday following weaker-than-expected cloud revenue.
Thomas Altmann of QC Partners said that both the figures and the outlook for SAP’s key cloud business fell short of expectations. Even a surprisingly strong rise in profits last quarter failed to reassure investors.
While business numbers are expected to remain strong in the week ahead, interest rate decisions by central banks will also be back in focus. So the peace of summer is out of the question.
Next week, the Federal Reserve and the European Central Bank will decide on future interest rates. Investors are currently confused on both sides of the Atlantic about how many rate hikes are likely to occur this year.
Meanwhile, speculation about massive support measures for the Chinese economy was driving oil prices higher over the weekend. In the afternoon, the price of Brent crude oil in the North Sea rose by 1.1% per barrel, and the price of WTI light oil in the United States also rose by the same amount.
The euro was little changed in late U.S. foreign exchange trade on Friday. The common currency was last at $1.1128 in US trade, so it was only slightly higher than the European currency late in trading.ECB set reference rate at 1.1123 (Thursday: 1.1197) USD
Yesterday, a stronger dollar put pressure on the euro, which fell 1 cent. Among other factors, strong data on the U.S. labor market has increased speculation that the Federal Reserve will continue to raise interest rates to combat high inflation. The prospect of higher interest rates usually supports the price of a currency.
Sartorius shares rose sharply during the afternoon analyst meeting. She shrugged off losses and was up about 7.7 percent at the top of the DAX. Stockbrokers referred to analyst calls. Management said weakness in orders received by drug and laboratory suppliers has bottomed out and may now have a confidence-building effect.
The stock had previously fallen on negative quarterly data. Because in the first half of the year, after the new crown epidemic, customers’ willingness to consume decreased, and inventory decreased instead. The pharmaceutical and laboratory equipment supplier’s sales fell by about 16%, and operating results (EBITDA) fell by as much as 26%. One trader complained that the market was worried about weak data, but it wasn’t that weak.
U.S. pharmaceutical company Pfizer expects to shut down production at a major U.S. pharmaceutical plant for weeks after a devastating tornado damaged the plant. The plant is one of the largest injectable drug production facilities in the world. Products produced there include anesthetics, pain relievers and anti-infectives. According to Pfizer, nearly 25 percent of sterile injectable drugs used in U.S. hospitals come from the facility.
Shares in German rival Fresenius rose sharply after Pfizer first reported tornado damage on Thursday. Stockbrokers expect Fresenius subsidiary Kabi to benefit from the bottleneck.
BASF Chemicals Group and Chinese energy company Mingyang Group are forming a joint venture for offshore wind farms in southern China. The two companies announced that Ming Yang will hold a 90% stake and BASF will hold a 10% stake. Most of the electricity generated will be used at BASF’s integrated site in Zhanjiang, which will be powered entirely by renewable energy.
BMW has officially started production of the new 5 Series in Dingolfing, including the new i5 electric model. The Munich-based automaker announced today that it is the third all-electric BMW vehicle to start production at its Lower Bavarian plant in the past two years. According to BMW’s largest plant in Europe in Dingolfing, the proportion of production of purely electric vehicles is expected to increase to more than 40 percent next year.
BMW launched an electric car, the i3, in early 2013. Since the i3 was expensive for a small car and sold poorly in its first few years, no new electric models hit the market in subsequent years. At the same time, given the competition from Tesla and China, there are concerns that the entire German auto industry may have missed the train of the times, while BMW, like other German manufacturers, has started to catch up.
Volkswagen subsidiary Audi is in talks with Chinese joint venture partner SAIC to jointly develop electric vehicles, according to the company. Zu Sijie, chief engineer of SAIC, told reporters that SAIC has reached an agreement with Audi to jointly accelerate the development of electric vehicles. He gave no details. Audi said that it is discussing the future development direction of its business in China with its partners.
MDAX and SDAX took an unexpected turn after American financial investor Silver Lake acquired 84% of Software AG. As index provider Stoxx announced on the German stock exchange late in the evening, the Darmstadt-based company will be removed from the MDAX and replaced by Regensburg-based automotive supplier Vitesco. Bundesliga club Borussia Dortmund has a place in SDAX. Therefore, the changes will take effect on Tuesday.