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Morning Research Notes - 18.07.24
The Dow Jones Industrial Average closed higher on Wednesday, as investors rotated out of tech into energy and financials, over fears of chip bans by the US government. Brent (oil) traded 1.4% higher, with the current price per barrel sitting at $84.89. Spot gold also fell 0.6%, with the current price per ounce standing at $2455.24. Volatility, as measured by the VIX index, increased by 9.8% to $14.48.
On Wednesday, the Dow Jones Industrial Average climbed 243 points (0.6%) to a new closing high of 41,198.08, while the S&P 500 dropped 1.4%, and the Nasdaq plummeted 2.8% amid a sharp retreat in tech stocks led by Nvidia, which fell over 6% on concerns of a deepened U.S. chip ban to China. Geopolitical tensions were further exacerbated by former President Donald Trump's remarks about Taiwan, causing Taiwan Semiconductor Manufacturing to fall nearly 8%. Major tech companies like Apple, Netflix, and Meta also saw declines. In earnings news, Johnson & Johnson rose nearly 4% after surpassing Wall Street estimates, whereas Spirit Airlines and JB Hunt fell due to disappointing financial results. Discount retailer Five Below dropped 25% following the CEO's departure and weak guidance. Federal Reserve officials indicated that rate cuts might be approaching, citing moderate economic growth and declining inflation pressures.
The ASX 200 increased by 0.73% on Wednesday, with Materials (0.08%), Utilities (0.55%), Health Care (0.51%), Info Tech (1.24%) and Financials (0.96%) all closing higher. Commodity markets ended the day broadly lower, with Zinc (-1.47%), Iron ore (-2.2%), Copper (-0.34%), Aluminium (-0.59%) and Nickel (-0.40%) all seeing gains..
In other news, Telix Pharmaceuticals lifts sales guidance, ANZ tips first NZ rate cut in November, Domino’s see flat store growth in FY25.. (Source: AFR)
Chart of the day
Today's chart shows McDonald's adjusted share price compared to its profits from 1967 to 1981. McDonald's saw steady profit growth over the period going from under $50 million in 1967 to nearly $250 million by 1981. However, its share price did not exactly correlate with this earnings growth, seeing substantial (almost unwarranted) gains in 1972 & 1973, that was not represented in its earnings growth. Mcdonald's then saw a sharp decline in share price over 1974, which again was not reflected in its earnings. The moral being that share price does not always correlate with company earnings.
Source: FactSet, Company Accounts, Livewire
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