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Market Moves Yesterday
S&P 500 @ 5,495.52 ( ⬆️ 0.45%)
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Hey Scoopers,
Happy Wednesday! Are you ready to tackle the midweek mania?
👉 JPMorgan tanks over 5%
👉 Apple to pay $14 billion in tax fines
👉 Tech and healthcare to drive the S&P 500
So, let’s go 🚀
Market Wrap
The S&P 500 index recorded a second winning session on Tuesday as stocks remain volatile after a turbulent start to September.
Market bellwether Nvidia gained 1.5%, while shares of AMD and Microsoft also inched higher. Tech stocks have struggled in recent trading sessions, with the Technology Select Sector SPDR Fund (XLK) down 7% this quarter.
It indicates investors are moving away from high-flying tech names amid concerns over the state of the economy.
Data for August’s consumer price index will be released today, and economists expect the headline number to rise 2.6% year over year.
The CPI report would eventually determine the size of interest rate cuts. Analysts suggest a 69% chance of a 25-basis point rate cut, while the likelihood of a 50-basis point rate cut is 31%.
Trending Stocks 🔥
Petco Health & Wellness - Shares rose over 7% after the pet retailer posted fiscal Q2 earnings that were in line with estimates, while sales of $1.52 billion were below the forecast of $1.53 billion.
Dave & Buster’s Entertainment - The arcade chain’s stock is up 13% in pre-market after it reported earnings per share of $0.99, above estimates of $0.84.
Morgan Stanley - The bank stock is down following a downgrade to “neutral” from “buy” at Goldman Sachs.
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JPMorgan Chase stock fell over 5% after the bank’s president told analysts that estimates of net interest income (NII) and expenses in 2025 were too optimistic.
While JPMorgan expects an NII of $91.5 billion in 2024, the current NII estimates of $90 billion for 2025 may be too high, primarily due to a lower interest rate environment. The pullback in share prices made it the worst trading session for investors in more than four years.
JPMorgan is the largest U.S. bank by assets. In recent years, it has delivered market-beating returns to shareholders due to better-than-expected growth in NII, higher deposits, and an expanding loan book.
NII is the difference between the cost of deposits and the income earned on loans. So, when interest rates fall, additional loans made by the bank will result in lower interest income.
In Q3, JPMorgan estimates revenue growth to range between 0% and 2%, while investment banking sales are forecast to grow by 15%.
EU Takes Aim at Apple
Europe’s top court ruled against Apple on Tuesday in the tech giant’s 10-year court battle over its tax affairs in Ireland. The case stems back to 2016 when the European Commission ordered Ireland to recover up to 13 billion euros ($14.4 billion) in back taxes from Apple.
Apple said in a filing on Tuesday that it will incur a one-time income tax charge of about $10 billion in its fourth fiscal quarter ending Sept. 28, 2024.
The government noted it will now begin the process of transferring the assets in the escrow fund to Ireland.
In 2014, the European Commission opened an investigation into Apple’s tax payments in Ireland, the tech giant’s headquarters in the EU.
The commission in 2016 ordered Dublin to recover up to 13 billion euros ($14.4 billion) in back taxes from Apple, at the time saying that the tech company had received “illegal” tax benefits from Ireland over the course of two decades.
Apple and Ireland appealed the commission’s decision in 2019, and in 2020 the EU General Court sided with the U.S. tech giant. The EU’s second-highest court annulled the commission’s 2016 decision and said that the executive arm did not prove that the Irish government had given Apple a tax advantage.
The commission in turn appealed the General Court’s decision, sending the litigation up to the ECJ. The ECJ on Tuesday set aside the General Court’s decision and confirmed the commission’s original 2016 ruling.
This was not the last time that Apple found itself in the EU’s crosshairs. Most recently, the commission hit Apple with an antitrust fine of 1.8 billion euros in March for abusing its dominant position in the market for the distribution of music streaming apps.
Tech and Healthcare Will Drive Earnings
According to a research report from Strategas Securities, ambitious earnings growth forecasts for 2025 rely on strong results from companies in the technology and healthcare sectors.
Source: Investopedia
The two sectors are forecast to contribute around half of the 15% expected growth in earnings for companies part of the S&P 500 index.
Financials and communications services stocks are also expected to contribute significantly to next year’s profits, while consumer staples and consumer discretionary are forecast to boost profits by 10% in 2025.
It suggests the average net profit margin will stand at 13.9%, one percentage point higher than any point in the last 35 years.
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Source: Visual Capitalist
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DISCLAIMER: None of this is financial advice. The newsletter is strictly educational and is not investment advice or a solicitation to buy or sell assets or make financial decisions. Please be careful and do your own research.