Weekly market update - 27th of February 2024
Written and accurate as at: Feb 27, 2024 Current Stats & Facts
In a relatively subdued week for global markets, a remarkable quarterly performance by AI chipmaker Nvidia sparked a surge in the S&P 500, propelling it to its most substantial daily gain in over a year and driving major US indices to unprecedented highs. The S&P 500 closed the week up 1.7%, with the NASDAQ not far behind at a 1.4% increase.
Australian Market Dynamics:
Contrary to the bullish sentiment in the US, the S&P/ASX 200 remained essentially flat, edging up by just 0.1%. This marginal movement occurred amidst a backdrop of mixed earnings outcomes and a decline in iron ore prices.
Corporate Earnings and Market Sentiment:
Aggregate domestic earnings in Australia have fallen approximately 6% short of expectations thus far, with heightened share price volatility. Despite this, companies have demonstrated commendable discipline in cost control, with shareholders rewarding strong cost management efforts. However, persistent cost pressures, highlighted by a significant annual wage growth of 4.2% for the December quarter, indicate ongoing vigilance from both the Reserve Bank of Australia (RBA) and corporate management.
Key Market Drivers:
The week began with global markets experiencing a downward drift, only to be revitalized by Nvidia's spectacular earnings beat. The company's valuation skyrocketed by an impressive US$300 billion, solidifying its position as the third most valuable entity globally. This surge contributed to the S&P 500 achieving its most robust daily gain since January 2023.
Macro and Economic Newsflow:
In the macroeconomic arena, releasing the January FOMC minutes provided insights into the US policy rate trajectory, suggesting a cautious approach to rate adjustments until inflation trends convincingly move towards the 2% target. Similarly, the RBA's February minutes hinted at a finely balanced decision regarding interest rates in Australia.
Upcoming Economic Data:
Market watchers await the release of crucial economic indicators, including the January Core PCE inflation data in the US and the second-quarter GDP estimate. Additionally, attention will be on durable goods data for January and ISM manufacturing conditions for February.
Earnings Snippets
BHP Group: In-line performance with critical drivers in iron ore and copper.
Santos: Underlying profits fell short of consensus due to oil price changes. However, a dividend increase and growth plans offered promise.
Woolworths: Underwhelming results led to the CEO's retirement. Trading updates indicated slowing growth and rising costs.
Brambles: Strong performance across the board with higher pricing, better margins, and improved cash flow, leading to guidance upgrades.
CSR Limited (+23.4%): Saint-Gobain's acquisition offer spurred positive momentum.
A2 Milk (+16%): Strong earnings and upgraded revenue guidance ignited positive sentiment.
Lendlease Group (-18.7%): Revised guidance and lower near-term returns outlook.
Westpac Banking Corporation (+5.6%): Q1 trading results showed positive momentum.
Woolworths (-8.9%): Softening sales, regulatory inquiries, and CEO resignation.