AIMSTAR FINANCIAL INSIGHTS – February 9, 2024

Your Weekly Guide to Financial Insights and Market Trends

Vikki Zhao and Olena Li

PUBLISHED Fri, Feb 09, 2024, 12:37 PM EST. 6 min read.

Market Overview

The January Barometer suggests a positive outlook for 2024’s equity market, as the S&P 500’s 1.6% increase in January hints at a likely upward trend for the year. This is based on historical data since 1929, where a positive January has led to a higher market by year-end 79% of the time. Additionally, being an election year, which traditionally favors the stock market, and the fact that January ended positively, aligns with historical instances (11 times before) that resulted in positive full-year market returns.

Opportunities for a wider market participation are still anticipated in 2024 despite a recent shift back to 2023’s successful large-cap stocks, with smaller companies showing less strength. This environment could benefit active investment strategies.

For a sustained positive momentum in the equity market, it’s crucial for both the economy and corporate earnings to continue their upward trajectory. Recent indicators like robust non-farm payroll numbers and an expanding ISM Services sector support the notion of a resilient economy. Additionally, the ongoing earnings season shows a healthy 75% of companies surpassing forecasts by an average of 3.2%, indicating potential for corporate profit growth in 2024. The progress of a tax package, which has passed the House and is now under Senate consideration, could further bolster GDP growth and mitigate economic downturn risks.

Technical Analysis

The S&P 500 remains positive as it consistently overcomes key resistance points. The index might encounter further resistance at 5014 followed by 5085, while support could be found at 4809 and 4710. Given the S&P 500’s impressive surge of over 20% from its October lows and the Relative Strength Index (RSI) nearing overbought territory, a short-term pause might be anticipated to allow the market to adjust to its recent advances, especially as we enter the typically slower month of February.

Caution may be advisable in the immediate future as signs of potential market correction are starting to appear, including a lower RSI peak for both the S&P 500 and NASDAQ 100, a slowdown in the percentage of stocks trading above their moving averages for these indices, and a lack of broad market leadership.

However, for those investing with a long-term perspective, any market pullback should be seen as an opportunity to buy, as the ongoing momentum in the stock market suggests that any downturn is likely to be short-lived.

Weekly Stock Market

S&P 500 Aims to Close Above 5,000

On Friday, the stock market traded predominantly in the green, signaling a potential record-setting session. Investors were pleased with the revised December inflation data, indicating it was lower than initially reported. The S&P 500 index rose by 0.2%, nearing its first-ever close above 5,000 points; however, the Dow Jones Industrial Average fell by roughly 0.2%, while the tech-heavy Nasdaq Composite index led the gains, rising by 0.7%. Despite fewer economic updates this week, a series of well-received quarterly earnings reports supported the market, albeit with some fluctuations due to their significance for Federal Reserve policy considerations. Consequently, investors paid closer attention than usual to Friday’s revisions to the Consumer Price Index. Federal Reserve officials emphasized the need to confirm whether price pressures are genuinely abating before considering interest rate cuts. PepsiCo’s performance took the spotlight on Friday, with shares slipping nearly 3% due to sales falling short of Wall Street estimates.

Canadian Stock Marke S&P/TSX Composite Index Up 0.05%

The Canadian stock market closed higher on Wednesday, with the S&P/TSX Composite Index up by 0.05%. Leading the gains were sectors such as IT, investment trusts, and industrials. Top performers included Birchcliff Energy Ltd (TSX:BIR), which surged by 9.68%, Advantage Oil & Gas Ltd (TSX:AAV) rose by 5.87%, and Shopify Inc (TSX:SHOP) climbed by 4.29%. However, stocks like Finning International (TSX:FTT), NovaGold Resources Inc (TSX:NG), and Africa Oil Corp (TSX:AOI) performed weaker. Among the individual stocks on the Toronto Stock Exchange, decliners outnumbered advancers. Additionally, the S&P/TSX 60 VIX, measuring implied volatility of the S&P/TSX Composite Index options, fell by 4.21%. In futures trading, gold for April delivery edged down by 0.09%, while WTI crude oil futures for March delivery rose by 1.05%, and Brent crude oil futures for April delivery increased by 0.98%. The CAD/USD exchange rate remained relatively unchanged at 0.74, while the CAD/EUR rate held steady at 0.69. Meanwhile, the US dollar index futures declined by 0.15%, settling at 103.92.

Arm Stock Surges, Disney Pops

IBD Leaderboard stock Arm Holdings gapped up more than 50% in huge volume after the chip designer beat its fiscal third-quarter earnings and sales expectations. The recent IPO stock reached an all-time high on the move. Its quarterly profit grew 32% on 14% sales growth. Arm supplies chip designs to big names including Apple, Qualcomm (QCOM) and Nvidia.

Dow Jones stock Walt Disney (DIS) gapped around 10% after the entertainment and media company reported higher-than-expected fiscal first quarter earnings. The excitement came from Disney’s 2024 adjusted earnings projections, which topped views. Disney stock was on track for its largest one day increase since Dec. 11, 2020, when it rose 13.6%, according to Dow Jones Market Data.

Qualys (QLYS) trimmed losses after it gapped down in heavy volume. The company reported better-than-expected fourth-quarter earnings and a slight miss on sales. But management gave full-year adjusted earnings and revenue guidance below analysts’ forecasts. The cloud security software stock fell further below its 50-day moving average and had already triggered a sell signal.

PayPal (PYPL) gapped down nearly 10% after the digital payments provider topped fourth-quarter profit and sales estimates but gave a full-year 2024 adjusted earnings forecast below analysts’ views.

Everything China’s Doing to Rescue Its Battered Stock Market

Chinese stocks have staged a nascent recovery from a $7 trillion rout, thanks to intensifying rescue efforts as authorities seek to prevent the market from slumping for a fourth straight year.

Chinese stocks have staged a nascent recovery from a $7 trillion rout, thanks to intensifying rescue efforts as authorities seek to prevent the market from slumping for a fourth straight year. The benchmark CSI 300 Index has gained 5.2% so far this week. The rebound came after a quickening drumbeat of policy support, which included replacing the market regulator and wider trading curbs as well as state buying of major bank stocks. News that regulators planned to brief President Xi Jinping on markets also fueled optimism.

Weekly Business News

BCE Inc. announces financial report, plans layoffs.

BCE Inc. announced a decline in its fourth-quarter profits compared to the previous year,  but countered this setback by raising its quarterly dividend. Alongside this financial adjustment, the parent company of Bell Canada revealed plans to implement significant workforce reductions, targeting approximately 9% of its employees, equating to around 4,800 positions. Concurrently, BCE intends to divest 45 of its 103 regional radio stations. These strategic maneuvers align with the company’s broader agenda of transitioning away from regulated segments towards new avenues of growth.

CEO Mirko Bibic emphasized the necessity of aligning costs with revenue potential across various business segments. These decisions indicate ongoing challenges in the regulatory landscape, particularly within the telecommunications sector.

Lightspeed Commerce Q3: Loss Narrows as Revenue Surges 27%

Lightspeed Commerce Inc. reported a Q3 loss of US$40.2 million alongside a 27% increase in revenue compared to the previous year. The Montreal-based e-commerce technology company’s revenue for the quarter reached US$239.7 million. On an adjusted basis, it recorded a profit of US$11.8 million. Looking forward to its full 2024 financial year, Lightspeed expects revenue of about US$895 million to US$905 million, with adjusted earnings anticipated to be break-even or better.

Cineplex Q4: $9M Loss Despite Revenue Uptick

Cineplex Inc. reported a $9 million Q4 loss, contrasting with a $10.2 million profit a year ago, despite slightly higher revenue. The loss per diluted share was 14 cents, down from a 16-cent profit last year. The company also announced a refinancing plan for improved financial flexibility.

Boeing Faces New 737 Concerns, Delivery Delays Possible

Boeing’s stock fell as new concerns surfaced regarding the 737 aircraft, potentially leading to delivery delays. Company President Stan Deal acknowledged issues with two holes on the aircraft but assured that flight safety isn’t compromised. However, about 50 undelivered planes may need rework. Since a recent incident involving a door seal failure on an Alaska Airlines-operated 737 Max 9, scrutiny over Boeing’s aircraft safety has heightened. Boeing refrained from providing a fiscal year 2024 financial forecast, focusing on rebuilding trust with regulators and passengers, stating, “there’s much left to demonstrate.

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