Author: Consultant

The Nasdaq Composite dropped for a second day Thursday as Wall Street continued its rotation out of technology stocks.

The Nasdaq Composite fell 1.5%, while the S&P 500 declined 0.6%. The Dow Jones Industrial Average rose 130 points. The Russell 2000 gained 1% as investors continued their rotation into small caps.

Investors ditched some of 2024′s winning tech names for a second day, dragging down the S&P 500′s information technology 2%. Communication services dropped 1.3%. Nvidia slumped 6%, while Super Micro Computer declined about 5%. The VanEck Semiconductor ETF shed 3.6%. Megacap stocks Meta Platforms, Microsoft and Alphabet fell 2% each.

Investors also assessed a second-quarter GDP report that showed the economy grow 2.8%, and much more than expected. Economists surveyed by Dow Jones had anticipated growth of 2.1%.

Wednesday’s trading session saw intense declines for the S&P 500 and the Nasdaq Composite, driven by disappointing quarterly reports from Alphabet and Tesla. Both the broad-market index and the tech-heavy benchmark posted their worst session since 2022, while the Dow shed roughly 504 points.

Investors have come to view the recent declines as a sign of an overdue correction in an overbought market, which is now seeing a rotation away from megacap tech into small-cap stocks and more cyclical areas.

Truist’s Keith Lerner believes there is more room to run in this corrective phase, despite a favorable view toward the tech sector.

“This choppier market action of late is consistent with our expectations and is set to continue,” he said in a note to clients. “Our base case is that the longer-term bull market remains intact, but it’s often two steps forward, one step back.”

Ford Motor shares tumbled 16% after the company’s second-quarter earnings came in much lower than analysts expected. Chipotle slipped 3% despite topping earnings and revenue expectations, while ServiceNow popped 11% on stronger-than-expected earnings.

Cryptocurrencies fell one day after a reversal in technology stocks pushed the S&P 500 and Nasdaq Composite to their worst day since 2022.

Bitcoin was lower by 2% at $64,299.18 early Thursday, according to Coin Metrics. Disappointing quarterly earnings from from Alphabet and Tesla late Tuesday weighed on the rest of the tech sector as investors rotated out of high-risk assets, including cryptocurrencies.

“It’s quite clear the setbacks are more about bigger picture macro forces, with global financial markets in turmoil,” said Joel Kruger, market strategist at LMAX Group. “Concerns around the health and outlook for the global economy have intensified amidst softer economic data, downbeat US earnings, and ineffective accommodative central bank moves. Consequently, there has been nowhere to hide, with most major assets across currencies, commodities and stocks relenting to traditional safe havens.”

The market is also still in the throes of an ongoing Mt. Gox repayment schedule that has resulted in a persistent round of bitcoin selling pressure this month, he added.

Meanwhile, ether fell 6% to $3,172.59 as newly-launched ether exchange-trade funds traded for a third day. The Grayscale Ethereum Trust (ETHE), which converted to an ETF, saw $484 million in outflows in the previous session.

“What is happening is the same as when spot bitcoin ETFs were launched back in January,” said Yuya Hasegawa, crypto market analyst at Japanese bitcoin exchange Bitbank. “Grayscale’s Ethereum trust had been trading at [a] discount for a long time, so traders may have bought some shares of the trust and are now selling spot ETH for arbitrage — this is also what happened for bitcoin when the ETFs started trading.”

https://www.cnbc.com/2024/07/25/crypto-market-today.html

• Real gross domestic product increased at a 2.8% annualized pace in the second quarter, above the 2.1% forecast.
• The personal consumption expenditures price index, a key measure for the Fed, rose 2.6% for the quarter, down from the 3.4% move in Q1. Core PCE prices were up 2.9%, down from 3.7%.
• However, the report also indicated that the personal savings rate continues to decelerate, at 3.5% for the quarter, compared with 3.8% in Q1.
• Initial jobless claims declined by 10,000, while durable goods orders unexpectedly plunged.

https://www.cnbc.com/2024/07/25/us-gdp-q2-2024.html

Grocery and drugstore retailer Loblaw Cos. Ltd. reported its second-quarter profit decreased compared with a year ago.

The parent company of Loblaws and Shoppers Drug Mart says it earned a profit available to common shareholders of $457 million or $1.48 per diluted share for the quarter ended June 15.

The result was down from $508 million or $1.58 per diluted share in the same quarter last year, which Loblaw attributed primarily to charges related to the settlement of class action lawsuits. On Thursday, the grocer announced it and parent company George Weston Ltd. have agreed to pay $500-million to settle a class-action lawsuit regarding their involvement in an alleged bread price-fixing scheme.

Revenue for the quarter totalled $13.95 billion, up from $13.74 billion a year earlier.

Food retail same-stores sales rose by 0.2 per cent, while drug retail same-store sales increased by 1.5 per cent, with front store same-store sales down 2.4 per cent and pharmacy and health-care services same-store sales up 5.4 per cent.

On an adjusted basis, Loblaw says it earned $2.15 per diluted share in its latest quarter, up from an adjusted profit of $1.94 per diluted share a year earlier.

FirstService Corp. (FSV) on Thursday reported second-quarter earnings of $35.1 million.

The Toronto-based company said it had profit of 78 cents per share. Earnings, adjusted for amortization costs and non-recurring costs, were $1.36 per share.

The results beat Wall Street expectations. The average estimate of four analysts surveyed by Zacks Investment Research was for earnings of $1.26 per share.

The property services provider posted revenue of $1.3 billion in the period, also topping Street forecasts. Four analysts surveyed by Zacks expected $1.28 billion.

 Waste Connections Inc. (WCN) on Wednesday reported second-quarter earnings of $275.5 million.

On a per-share basis, the Ontario, Ontario-based company said it had net income of $1.07. Earnings, adjusted for one-time gains and costs, were $1.24 per share.

The results surpassed Wall Street expectations. The average estimate of 11 analysts surveyed by Zacks Investment Research was for earnings of $1.18 per share.

The solid waste services provider posted revenue of $2.25 billion in the period, which also beat Street forecasts. Nine analysts surveyed by Zacks expected $2.22 billion.

West Fraser Timber Co. says it earned US$105 million in the second quarter, up from a loss of US$131 million a year earlier.

The Vancouver-based company says it saw sales of US$1.7 billion, up from US$1.6 billion during the same quarter last year.

Diluted earnings per share were US$1.20, compared with a loss of US$1.57 last year.

President and CEO Sean McLaren says the company continued to experience demand softness in its North American lumber business.

However, he says the quarter also benefited from relative strength in new home construction demand carrying over from the first quarter.

McLaren says the company continues to realize the benefits of the recent closures of some higher-cost lumber mills, and plans to continue focusing on optimizing its asset portfolio to lower costs.

This report by The Canadian Press was first published July 24, 2024.

Teck Resources Ltd. is cutting its copper production forecast and hiking its costs just weeks after the Canadian miner’s focus narrowed significantly to rely only on metals.

Vancouver-based Teck on Thursday lowered its full year copper forecast by seven per cent to about 468,000 tonnes as it rolled out its second quarter financial results. The company also reduced its molybdenum forecast by 19 per cent.

Teck increased its copper cost forecast by two per cent to roughly US$2.10 a pound.

Teck’s copper issues stem mainly from challenges in the ongoing ramp up of its giant QB2 mine in Chile. The company is experiencing grade problems because it isn’t able to access certain areas of QB2 because of geotechnical issues and pit dewatering.

Teck put the copper mine in the high mountains of northern Chile into production last year after an arduous and expensive construction period. Teck’s costs ended up spiralling to about US$8.7-billion, or 85 per cent higher than a 2019 estimate.

Teck earlier this month closed the US$6.9-billion sale of 77 per cent of its metallurgical coal business to Glencore PLC of Switzerland. Teck had earlier sold the other 23 per cent of its coal segment to Japan’s Nippon Steel and South Korea’s POSCO.

Despite generating billions in free cash flow every year, over time fewer investors were willing to put money into Teck any more because of its exposure to coal. That’s because of ESG mandates that forbids many big investors from investing in fossil fuels. By focusing solely on metals such as copper, which doesn’t have the same dirty image as coal, Teck hopes to appeal to a wider class of investors.

The company’s B shares closed at an all-time high in May of $73.22 a share but have since pulled back by about 15 per cent. On Wednesday the shares were trading down by about 1.2 per cent in early trading on the Toronto Stock Exchange.

Glencore originally proposed buying all of Teck early last year, including the company’s copper and zinc mines, in a US$23.1-billion transaction. But Teck repeatedly rejected Glencore’s advances. Controlling Teck shareholder Norman B. Keevil said he was opposed to Glencore buying all of Teck, telling The Globe that “Canada is not for sale.”

Earlier this month, as Federal Industry Minister François-Philippe Champagne approved the Glencore takeover of Teck’s coal business, he sent a stern message that essentially echoed Mr. Keevil’s comments.

From now on, Mr. Champagne said he will only approve the acquisition of Canadian miners with significant critical minerals operations under the most exceptional of circumstances. That means that Teck and other big Canadian critical minerals miners are essentially takeover-proof.

 Rogers Communications Inc. reported its second-quarter profit rose to $394 million from $109 million a year ago, in part due to lower restructuring and acquisition costs related to its purchase of Shaw Communications last year.

The company says the profit amounted to 73 cents per diluted share for the quarter ended June 30, up from 20 cents per diluted share in the same quarter last year.

Revenue totalled $5.09 billion, up from $5.05 billion a year earlier, helped by growth in its wireless and media businesses.

Rogers says wireless revenue totalled $2.47 billion in the quarter, up from $2.42 billion a year earlier, while media revenue rose to $736 million from $686 million a year ago.

On an adjusted basis, Rogers says it earned $1.16 per diluted share in its latest quarter, an increase from its adjusted profit of $1.02 per diluted share in the same quarter last year.

President and chief executive Tony Staffieri says Rogers’ strong results for the quarter come amid the backdrop of a growing market and healthy competition in the telecommunications sector.

This report by The Canadian Press was first published July 24, 2024.