Stock Market Update & Analysis for July 12th, 2024

Global Markets

Canada’s Main Stock Index:

Canada’s main stock index, the S&P/TSX Composite, advanced, buoyed by rising oil prices. The energy sector is a significant component of the Canadian economy, and higher oil prices typically boost the valuations of oil and gas companies. This positive momentum in the energy sector helped lift the overall market sentiment in Canada for Friday.

U.S. Markets:

In the United States, major stock indices, the S&P 500, the Nasdaq, and the Dow Jones Industrial Average rose sharply. Investors were closely evaluating the latest quarterly earnings reports from big banks, which provided insights into the health of the financial sector and the broader economy. The overall market sentiment was supported by optimism about the Federal Reserve’s monetary policy and hopes for a soft landing of the economy.

European Markets:

European shares also advanced, marking their second consecutive week of gains. The positive performance was driven by upbeat earnings updates from various companies across different sectors. Investors were encouraged by strong corporate performance, which helped offset concerns about economic slowdown and inflation. The broader European market sentiment was further bolstered by expectations of continued support from the European Central Bank.

Japanese Markets:

Japan’s Nikkei 225 index dropped by more than 2%. The decline was led by tech stocks. The technology sector is often highly sensitive to changes in investor sentiment, particularly regarding interest rates and economic outlook. The threat of currency intervention by Japanese authorities also contributed to the decline, as investors engaged in profit-taking ahead of a long weekend. The potential for government intervention in the foreign exchange market to support the yen added an element of uncertainty.

Currency Markets:

In currency markets, the yen steadied after strengthening rapidly on Thursday. The Bank of Japan’s data suggested that Japan may have spent up to 3.57 trillion yen in its recent intervention in the foreign exchange market. This intervention aimed to prop up the yen, which had fallen to 38-year lows against the U.S. dollar. The yen’s strength or weakness significantly impacts Japan’s trade balance and inflation, prompting government action to stabilize the currency.

The U.S. dollar was slightly lower against its major peers, reflecting a complex interplay of factors, including interest rate expectations, economic data releases, and geopolitical developments. A weaker dollar can benefit U.S. exporters by making American goods cheaper for foreign buyers.

Commodities:

Gold prices fell from a seven-week high reached in the previous session. Gold, often seen as a safe-haven asset, tends to rise during periods of economic uncertainty and fall when investor confidence improves. The recent decline in gold prices could be attributed to improved risk sentiment and a stronger outlook for the global economy, which reduced the demand for safe-haven assets. Additionally, movements in the U.S. dollar and interest rate expectations can also influence gold prices.

Corporate Stock News

• Axel Springer and KKR Breakup Talks: Axel Springer CEO Mathias Doepfner and private equity group KKR are discussing breaking up the media conglomerate, according to the Financial Times.
• Rio Tinto’s Serbian Court Ruling: Rio Tinto welcomed a Serbian court ruling overturning a 2022 government decision that revoked its initial planning permission to develop a lithium mine.
• Vivendi’s Canal+ Spin-Off: Vivendi is exploring a spin-off and potential London listing for its Canal+ TV unit, boosting the French media conglomerate’s shares.
• Imperial Oil’s Spill in Canada: Imperial Oil Ltd reported an oily water spill into the St. Clair River from a service line near its marine dock, which has been isolated.
• Rio Tinto and Teck Resources: Rio Tinto is considering takeover targets, including Teck Resources, after BHP’s bid for Anglo American collapsed.
• BNY Mellon’s Q2 Earnings: BNY Mellon reported a 10% rise in second-quarter net profit, with increased investment service fees offsetting lower interest income.
• JPMorgan Chase’s Profit Surge: JPMorgan Chase’s profit rose in Q2, driven by higher investment banking fees and an $8 billion accounting gain from a share exchange deal with Visa.
• Wells Fargo’s Profit Decline: Wells Fargo’s second-quarter profit declined due to higher costs to retain deposits amid stiff competition.
• Estee Lauder CFO Retirement: Estee Lauder’s CFO Tracey Travis will retire in June 2025 after 12 years in the role, with a successor to be named soon.
• Diamondback Energy’s Gas Prices: Diamondback Energy reported lower natural gas prices in Q2 due to high output and excess inventories.
• Apple’s Antitrust Win: Apple won a dismissal of an antitrust class action in California federal court, which accused the company of restricting app development technologies.
• AT&T Data Breach: AT&T reported that data from 109 million customer accounts was illegally downloaded, with the FBI investigating the incident.
• Boeing 737 Max Delays: Boeing notified customers of potential 3-6 month delays for 737 Max deliveries in 2025-2026 and is nearing a sale of 777X jets to Korean Air.
• Baltimore’s Climate Lawsuit Dismissed: A Maryland judge dismissed Baltimore’s lawsuit against energy giants like Exxon Mobil and Chevron for climate change-related damages.
• Bunge and Viterra Merger: Bunge and Glencore-backed Viterra offered concessions to win EU antitrust approval for their $34 billion merger.
• ConocoPhillips and Marathon Oil Merger: ConocoPhillips received a second request from the FTC for information on its proposed acquisition of Marathon Oil.
• Texas Power Outages: About 1 million homes and businesses in Texas remained without power due to Hurricane Beryl, with CenterPoint Energy working on restoration.
• Dollar General Safety Penalty: Dollar General agreed to pay a $12 million penalty for safety violations and to improve workplace safety across its stores.
• Enhabit Board Election: Institutional Shareholder Services recommended electing three new directors to Enhabit’s board, following a push by AREX Capital Management.
• Five9 Sale Urging: Anson Funds Management urged Five9 to consider a sale, following the company’s decision to reject a previous acquisition offer from Zoom.
• Intel’s Software Revenue Goal: Intel aims for $1 billion in cumulative software revenue by 2027, driven by its push into cloud computing and AI.
• Lockheed Martin’s F-35 Deliveries: Lockheed Martin will resume F-35 jet deliveries to the U.S. military without the complete TR-3 software upgrade.
• Martin Midstream Buyout Bid: Hedge funds Nut Tree Capital Management and Caspian Capital made a rival bid for Martin Midstream Partners, aiming to outbid its largest shareholder.
• Micron Technology’s Taiwan Investment: Taiwan President Lai Ching-te thanked Micron Technology’s CEO for continued investment in the island’s DRAM process technology.
• Microsoft’s G42 Investment Scrutiny: Republican lawmakers requested an intelligence assessment of Microsoft’s $1.5 billion investment in UAE-based AI firm G42, over concerns about technology transfer to China.
• Tesla’s New Model 3 Variant: Tesla launched a new rear-wheel drive variant of its Model 3 long-range vehicle at a lower price, helping mitigate cooling demand with price cuts and incentives.