Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for January 17, 2020.
The major US indices once again posted a record breaking day, with the Nasdaq Composite leading the way with a 1.1% gain as post-trade deal optimism kicked in. The positive day for markets included a major milestone, with Google parent company Alphabet becoming the fourth firm to pass the $1trn market cap level, joining Apple, Amazon and Microsoft. Alphabet has come out of the blocks in 2020 and the near 7% rise has seen it join the trillion club.
The Nasdaq itself has now risen by 4.3% in 2020 so far. Of the 100 largest Nasdaq firms, media giant Fox, orthodontics company Align Technology and hard drive firm Western Digital led the way on Thursday with 4.4%, 4% and 3% share price gains respectively. The S&P 500 and Dow Jones Industrial Average also had big days, gaining 0.8% and 2.7%. Leading the 30 stocks in the Dow was telecoms giant Cisco, with a 2.2% share price gain.
- S&P 500: +0.8% Thursday, +2.7% YTD
- Dow Jones Industrial Average: +0.9% Thursday, +2.7% YTD
- Nasdaq Composite: +1.1% Thursday, +4.3% YTD
British Airways flying after lifting restrictions on investors
British Airways’ parent company, International Consolidated Airlines, has lifted an almost year long restriction on non-EU investors purchasing the stock, in turn this has seen shares rally by more than 5% this morning. The concern was over the percentage of non-EU ownership, which has now dropped to such a level that management have decided to lift the cap. The company also owns Iberia, Vueling and Aer Lingus. Shares had a mixed 2019, losing over 30% of their value from highs, only to stage a remarkable recovery going into Q4, paring all its losses and closing the year positively. The price is currently 8% shy of the record high reached in June 2018.
Banks top and tail the S&P 500 on mixed results
In US stocks, the S&P 500 was topped and tailed by two large banks after their Q4 earnings reports. Morgan Stanley led the S&P 500 with a 6.6% share price pop that was driven by a substantial earnings beat, with profits of $1.30 a share more than 30% above analyst estimates. Q4 profit was up 46%, and the firm’s investment management division almost doubled its revenue year-over-year. At the bottom of the S&P 500 was BNY Mellon, whose share price sank by 7.8% after the bank reported disappointing expense growth and a hit from lower interest rates.
Banks have delivered mixed results this week, with billion dollar plus legal bills hurting Goldman Sachs and Wells Fargo, middling figures from Bank of America and blockbuster results for JPMorgan Chase and Morgan Stanley. The US financial sector posted a solid 2019, with the iShares Dow Jones US Financial ETF delivering a 31% return.
Disappointing results sees FTSE lag behind its counterparts
Publisher Pearson who we mentioned yesterday was the biggest faller in the FTSE 100, losing 8.9% from its share price after warning that the costs of its switch to a digital focus would remain a pain point in 2020. It was followed by hotel and restaurant operator Whitbread, which sank by 5.2% after delivering disappointing quarterly sales figures. The FTSE 250 just managed to eke out a positive day, but still lags the FTSE 100 in 2020 so far. Tullow Oil’s rollercoaster week continued; after sinking by close to 20% on Wednesday the firm’s share price jumped 11.1% on Thursday. Aberdeen-headquartered oilfield services firm Wood Group took second place in the FTSE on Thursday, climbing by 7.6% after the firm announced that it expects its core earnings figures to rise.
- FTSE 100: -0.4% Thursday, +0.9% YTD
- FTSE 250: +0.04% Thursday, -0.7% YTD
Stocks to watch
Schlumberger: After a finance heavy week, $54bn market cap oilfield servicing company Schlumberger will report its latest set of quarterly results on Friday morning. The stock has had a rough 12 months, losing more than 6% over a period that has included swings of more than 20% in either direction. Over the past five years, the company – which is seen as a bellwether for the sector – has lost more than half its value. In Q4, analysts are predicting an earnings per share figure of $0.37, in line with what it posted the same time last year. Wall Street analysts are bullish on the prospects for the stock, with 24 rating it as a buy, three as an overweight, five as a hold and one as an underweight.
State Street: Analysts will be watching closely for the impact of lower interest rates on State Street’s earnings, after rival BNY Mellon (the firms are the two biggest asset custodians in the world), reported that lower rates had dented its earnings. State Street stock sank by a third in the first half of 2019, but has been on a tear since, gaining more than 60% since the start of August. The company has beaten earnings estimates in the last three quarters, and analysts have an average 12-month price target of $85.83, versus its $81.14 Thursday close.
Fastenal Company: Distribution firm Fastenal delivered a volatile 2019, but a profitable one for investors who held on, as it finished 2019 with a more than 40% share price rise. The company sells industrial and construction supplies, operating in the US and abroad. Fastenal will report its Q4 earnings on Friday morning, which will be an interesting look into the health of the industrial sector. Analysts favour a hold rating on the stock, and the average 12-month price target is around 7% lower than where the shares are currently trading.
Crypto corner
Bitcoin’s impressive year-to-date rally shows no sign of slowing down, with the cryptoasset testing the $9,000 mark this morning. $9,000 is seen as a key resistance level, both from a technical and psychological point of view, we may also see the price challenge the current 200 day moving average (in green), which could be viewed as a bullish signal.
Smaller peers Ethereum and XRP are also surging. Ethereum is now at a year-high of $169.9, having surged by a third year-to-date, whilst XRP is up almost 25%, trading at $0.24 today
All data, figures & charts are valid as of 17/01/2020. All trading carries risk. Only risk capital you can afford to lose.
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