Stocks higher on Friday morning as investors waited for developments from Washington, D.C. on the debt-ceiling deliberations and digested the latest corporate earnings as a new wave of AI optimism boosted tech stocks.
Near 10:45 a.m. ET, all three major indexes were up more than 1% with the Nasdaq pacing gains.
The S&P 500 (^GSPC) was higher by 1.1%, the Dow Jones Industrial Average (^DJI) rose more than 300 points, or 1%, while the technology-heavy Nasdaq Composite (^IXIC) gained more than 1.6%.
The Nasdaq and S&P 500 were both on pace to log weekly gains with Friday’s rally.
On Friday morning, Reuters reported that President Joe Biden and Speaker of the House Kevin McCarthy are “closing in on a deal” to extend the government’s debt ceiling for two years.
“Negotiators appear to be closing in on an agreement,” Goldman Sachs’s economic research team led by Jan Hatzius wrote in a note to clients on Thursday night.
“While it is hard to predict when an announcement could come, we think the odds are highest that a deal is announced late Friday (May 26) or on Saturday (May 27). If so, this would likely allow a House vote late Tuesday (May 30) or Wednesday (May 31). The Senate also needs to pass the deal, though procedural obstacles there are unlikely to be what prevents timely enactment,” they added.
FILE – President Joe Biden listens as he meets with House Speaker Kevin McCarthy of Calif., to discuss the debt limit in the Oval Office of the White House, May 22, 2023, in Washington. (AP Photo/Alex Brandon)
Earnings continued to move stocks on Friday morning as well.
Marvell Technology (MRVL) stock rose more than 25% on Friday as the chipmaker joined Nvidia in sharing positive artificial intelligence news. Marvell believes its revenue attributable to AI could double in the next year.
“AI has emerged as a key growth driver for Marvell,” Marvell CEO Matt Murphy said in the company’s earnings release. “While we are still in the early stages of our AI ramp, we are forecasting our AI revenue in fiscal 2024 to at least double from the prior year and continue to grow rapidly in the coming years.”
Chip names including Broadcom (AVGO), Ambarella (AMBA), Skyworks (SWKS), and Micron (MU) were all up more than 3% on Friday. The PHLX Semiconductor Index (^SOX) was also up more than 3.5% on Friday.
Elsewhere on the earnings front, Gap (GPS) stock rose more than 10% after the apparel retailer posted a surprise profit late Thursday. Meanwhile, shares of Ulta Beauty (ULTA) fell nearly 10% after the company warned of slowing growth trends, even though the beauty store chain beat Wall Street’s revenue and earnings per share expectations for the first quarter.
“Category growth is healthy but moderating as we lap two years of unprecedented growth. And as category growth normalizes, promotional activity is increasing,” Ulta CEO Dave Kimbell said on the company’s earnings call.
On the economic data side, the PCE price index — the Federal Reserve’s preferred inflation measure — came in hotter than expected and flipped market expectations for the central bank’s next policy announcement on June 14.
Core PCE rose to 4.7% over last year in April, more than the 4.6% increase expected by economists and an acceleration from the 4.6% annual jump seen in March. Data from the CME Group as of Friday morning showed investors placing a 58% chance on the Fed raising rates by another 0.25% next month following this release.
“We will be sticking with the forecast for the Fed to keep rates unchanged through the remainder of this year,” Ryan Sweet, chief US economist at Oxford Economics, wrote on Friday. “However, odds are rising that we will be altering the forecast for the fed funds rate in 2024, reducing the number of rate cuts.”
Data on personal income and spending also showed consumers remained resilient in April with spending rising 0.8% last month, more than the 0.3% increase expected by economists. Durable goods orders also delivered a surprise with April’s preliminary reading showing an increase of 1.1% last month; economists had expected this data to show a 1% drop.
Consumer sentiment data for May from the University of Michigan, however, showed the debt ceiling standoff has dampened the economic outlook for many Americans, with sentiment dropping 4 points rom April.
“Consumer sentiment slid 7% amid worries about the path of the economy, erasing nearly half of the gains achieved after the all-time historic low from last June,” said Joanne Hsu, director of the survey of consumers.
“This decline mirrors the 2011 debt ceiling crisis, during which sentiment also plunged. This month, sentiment fell severely for consumers in the West and those with middle incomes. The year-ahead economic outlook plummeted 17% from last month.”
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
