US market fell while tech giants and airline stocks rose as the market awaited employment data.
Airline stocks rebounded, sending a message to redefining value stocks.
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Thursday Market Recap
On Thursday, the US stock market declined as the three major indices closed slightly lower under the pressure of the upcoming non-farm payroll data to be released on Friday. Looking back at the past week, the US stock market performed strongly overall, with the main indices recording varying degrees of gains.
The $.SPX(.SPX)$ index rose by 1.27%, and the $.IXIC(.IXIC)$ increased by 3.36%. Historical data shows that December is often one of the best-performing months of the year. The market generally expects the strong bull market to continue until the end of the year, with the $.SPX(.SPX)$ and $.IXIC(.IXIC)$ indices likely to reach new highs.
Tech giants and airline stocks made a significant impact. The chip index fell nearly 2%, with $NVIDIA Corp(NVDA)$ rising 1% before turning lower. Tesla rose more than 3% to its highest level in two and a half years. $Apple(AAPL)$ , $Amazon.com(AMZN)$ , $Wal-Mart(WMT)$ , and $Netflix(NFLX)$ all hit new highs. $American Airlines(AAL)$ surged nearly 17%.
$Bitcoin(BTC.USD.CC)$ broke through $100,000, reaching close to $104,000 before pulling back, followed by significant volatility. "Bitcoin whale" $MicroStrategy(MSTR)$ rose nearly 10% before falling close to 5%. On December 5th, Trump announced the appointment of former PayPal COO David Sacks as the White House's head of AI and cryptocurrency affairs, marking the first time the US federal government has a dedicated position for cryptocurrency and AI policy.
Though he may stumble
Once upon a time...in 2016.
$Berkshire Hathaway(BRK.B)$ started gradually building its position in airline stocks in the third quarter of 2016, eventually becoming the largest shareholder of $Delta Air Lines(DAL)$ . By the end of 2019, Berkshire Hathaway had completed its investment in big 4 US airlines, holding 11% of Delta Air Lines, 10% of $American Airlines(AAL)$ , 10% of $Southwest Airlines(LUV)$ , and 9% of $United Continental(UAL)$.
Buffett's perspective also changed over time. He once thought that the airline industry was not a good business. However, with the mergers and bankruptcies of dozens of small and medium-sized airlines, the four major airlines controlled 75% of the market share. This monopoly brought excess profits, with load factors above 80%, fixed dividends, and buyback commitments, successfully attracting Buffett's attention.
As many of you may remember, the subsequent events were significant. The COVID-19 pandemic broke out in 2020, and Buffett painfully decided to sell in May and go away. In May 2020, Buffett publicly stated that he had sold "all of his holdings" in the four major US airlines.
The Big 4 - Steady and sound
In the past month, against the backdrop of global economic recovery, US airline stocks have experienced a comprehensive rebound.
• Demand Recovery: With the holiday season approaching, flight bookings have surged. According to data released by the Transportation Security Administration (TSA), on December 1st, US airport passenger traffic exceeded 3.08 million, reaching 3,087,392, setting a new record. This figure surpassed the previous record set on July 7th this year by over 70,000 passengers.
• Service Optimization: The 4 Airlines introduced flexible flight and customer service systems, improving customer satisfaction and accelerating the willingness of passengers to fly again.
• Positive Earnings Guidance: Earnings report indicates a significant profit rebound, and the market holds an optimistic outlook for its future.
On Thursday evening, thanks to strong travel demand enhancing the company's pricing power, $American Airlines(AAL)$ significantly raised its fourth-quarter earnings forecast.
$Delta Air Lines(DAL)$ , which has the largest fleet in the world, is also performing strongly.
$United Continental(UAL)$ currently operates the largest network of routes to mainland China among all US airlines and is the only US airline with direct flights from Los Angeles to mainland China, giving it a competitive edge.
$Southwest Airlines(LUV)$ in guidance predicts a year-over-year increase in unit revenue of 5.5%-7% for the fourth quarter, significantly higher than the previous expectation of 3.5%-5.5%.
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