To The Moon

Last Fri, 11 Oct 2024 US market staged a recovery of sort despite the less-than-ideal Producer Price Index (PPI) inflation results.

By the time trading ended for the week: (see above)

• DJIA: +0.97% (+409.74 to 42,863.86). Hit all time closing high.

• S&P 500: +0.61% (+34.98 to 5,815.03). Hit all time closing high.

• Nasdaq: +0.33% (+60.89 to 18,342.94).

The major indexes have recorded weekly gains for 5 weeks consecutively, boosted by optimism about the outlook for the US economy & corporate earnings.

Producer Price Index (PPI) - Sept 2024.

US manufacturer’s index mirrors the consumer price index (CPI) released a day earlier, where the core Annual YoY data rose higher.

Headline PPI

• MoM : was 0.0% vs estimates 0.1% vs August data of 0.2%. Cooling.

• YoY: was 1.8% vs estimates 1.6% vs August data of 1.9%. Marginal 0.1% YoY improvement. Cooling.

Core PPI

• MoM : was 0.2% vs estimates 0.2% (inlined) vs August data of 0.3%. Met expectations. Cooling.

• YoY : was 2.8% vs estimates 2.7% vs August data of 2.6%. Rose +0.2% against August’s data. The slight acceleration was anticipated due in part to unfavorable “base effects,” where (a) the year-ago period experienced sharper disinflation as well as (b) strong demand.

Analyst’s observation.

Nationwide Financial, Market economist, Oren Klachkin said:

• The latest CPI and PPI data do not disrupt the disinflation narrative.

• It is a reminder that US economy’s ride down will not be a smooth glide slope to 2%.

• Less inflation would give the Fed breathing room to cut interest rates in a month’s time.

• The drop, due largely to a decrease in energy costs, suggests consumer price increases could be relatively small in the coming months.

Investors will continue to keep a close tabs on inflation data to have a peace of mind that US economy’s soft landing is still on track.

At the same time, they are also looking for clues whether the Fed will cut interest rate {at all} come November and what quantum? 

Banks - US Market Saviours?

Last Friday also saw the following US big banks released their Q3 earnings results:

• $JPMorgan Chase(JPM)$. Shares rose 4.4%, leading Dow gainers

• $Wells Fargo(WFC)$.jumped 5.6%

Their credible performances helped lift US market higher despite another mixed US manufacturer’s inflation report, following Thursday’s consumers inflation report.

JP Morgan Chase.

JPMorgan Chase posted Q3 2024 results that topped estimates for profit & revenue as it generated more interest income than expected.

According to LSEG, the bank’s report card:

• Earnings per share (EPS) : $4.37 a share vs. $4.01 estimate vs $4.33 (Q3 2023). YoY gain of +0.92%.

• Revenue: $43.32 billion, vs. $41.63 billion estimate vs $40.69 billion (Q3 2023). YoY gain of +6.46%.

• Net income (profits): $12.9 billion vs $13.15 billion (Q3 2023). YoY loss of -1.9%.

• Net interest income: $23.5 billion vs $22.82 billion. YoY gain of +3.0%.

• Thanks to its healthy earnings report, the stock rose by +4.44% to close at its highest to date price.

• YTD, the #1 bank in the US has gained +29.18%.

• Its rate of returns has outperformed S&P 500;s +22.61% (as of 11 Oct 2024).

Wells Fargo.

According to LSEG, the bank’s report card:

• Earnings per share (adjusted): $1.52 vs. $1.28 expected vs $1.39 (Q3 2023). YoY gain of +9.35%.

• Revenue: $20.37 billion vs $20.42 billion expected vs $20.86 billion (Q3 2023). YoY loss of -2.35%.

• Net income (profits): $5.11 billion vs $5.77 billion (Q3 2023). YoY loss of -11.44%.

• Net interest income: $11.69 billion vs $13.11 billion (Q3 2023). YoY loss of +-10.83%.

Wells Fargo shares surged +5.6% Friday, after its Q3 2024 earnings were released.

• WFC stock is consolidating with a $62.55 buy point.

• On 04 Oct 2024, Wells Fargo rebounded above its 50-day and 200-day moving average.

• However, the respective moving averages have since “fallen” below due to Friday’s surge.

• YTD, the stock is up about +23.64%.

Earnings This Week.

Remaining US “big” banks (see below) will announce their earnings this week:

• $Bank of America(BAC)$. Tue, 15 Oct 2024.

• $Goldman Sachs(GS)$. Tue, 15 Oct 2024.

• Citigroup Inc (C)$. Tue, 15 Oct 2024.

• Morgan Stanley (MS)$. Thu, 17 Oct 2024.

In addition, one of FAANG will also be announcing its quarterly earnings:

$Netflix(NFLX)$. Thu, 17 Oct 2024.

Despite surpassing subscriber targets in Q2 2024:

• Netflix provided a cautious outlook for Q3 2024.

• It indicated that its advertising business is not expected to become a primary revenue driver until 2026 (earliest).

Forecast.

Netflix is expecting fewer new subscribers in Q3 2024 compared to last year. This is because this time last year, Netflix managed to crackdown the account sharing issue.

For Q3 2024, Refinitiv thinks Netflix will get about 13.8% more subscribers, a decrease from the previous rate of 16.5%.

According to the options market, market participants expect a sizable swing in NFLX stock after earnings are announced, with a possible implied stock price movement of 7.9% in either direction.

In the last 90 days, profit estimates have been revised upward 29x, reflecting growing confidence among analysts.

Q3 2024’s earning per share (EPS) is estimated to be $4.53 per share, jumping +37% YoY from $3.11.

Meanwhile, revenue is forecast to increase +14.3% YoY to $9.76 billion.

Only two downward revisions have been noted, underscoring Wall Street’s bullish sentiment toward Netflix.

The company’s (a) recent cost-cutting measures, along with (b) its ability to drive subscriber growth, have positioned it as a dominant player in the streaming space.

On Fri, 11 Oct 2024, NFLX hit a new all-time high of $736 before closing at $722.79. (see above)

At current levels, Netflix has a market cap of $310.2 billion.

YTD, Netflix has risen +48.4%.

Netflix is facing challenges in growing its customer base quickly. This is because the market is changing, and Netflix is also changing.

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• Do you think US banks will be able to drive US market higher this week ?

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