vestact posted: " Market Scorecard US markets dropped last night, wiping out the good gains made on Wednesday. Stocks are now at their lowest levels of the year, and at roughly the same level as they were in November 2020. For the moment money managers are down in " Vestact - Money with a dash of funny
US markets dropped last night, wiping out the good gains made on Wednesday. Stocks are now at their lowest levels of the year, and at roughly the same level as they were in November 2020. For the moment money managers are down in the dumps, worrying that inflation will remain high forever, and the Federal Reserve will go on hiking interest rates forever. That's obviously not true, right? We seem to be the last optimists left standing!
In company news, Nike was down 9.36% in after-hours trade because it reported soft results. The manufacturer of the iconic Jordan sneakers and Alphafly running shoes noted that inventories were too high, so they plan to offer some margin-busting discounts. Michael goes into more detail below. Elsewhere, used vehicle retailer CarMax was the biggest laggard on the S&P 500, down 25% after a wide earnings miss.
At the end of the trading day, the JSE All-share was lower by 0.85%, the S&P 500 gave up 2.11%, and the Nasdaq was whacked by 2.84%.
Our 10c Worth
One Thing, From Paul
Friday advice time. When you need to get across something important, look a person in the eyes.
Ok, it's true that for a tricky conversation you might want to take someone for a drive in a car, or a walk, because you'll more have time to get the message across. But remember to mix that up with some eye contact.
According to a blog post I read, children learn to read eyes from as early as three years old. They figure out that when an adult looks at something, they are concerned with that thing. So, when we focus on a child, we are telling them that they are the centre of our attention.
In the same way, teenagers should be taught that when they are introduced to an adult, they should stand up, look up and say hello properly, with a handshake or a fist bump or a hug. This rule is particularly important these days, because they like to look at their phones so much.
Michael's Musings
Nike's quarterly results are out of sync with the rest of the market; they don't come out in the usual earnings season. Last night they released their latest set of numbers, beating Wall Street's profit and revenue estimates. Unfortunately, the share price is down in after-hours trade due to weak guidance for the next few months. China's Covid lockdowns and supply-chain snafus continue to plague the company.
The strong Dollar significantly impacted revenue given that Nike has more than half their sales outside of the US. Over the next year, management estimates that the firmer Dollar will cost them $4 billion in sales. In the previous quarter, Nike grew revenues by 4%, which would have been 10% at constant currencies.
Another notable point from the results is a 44% increase in inventories. Due to supply-chain issues, the amount of stock manufactured but still waiting to go to customers has swelled. Retailers have apparently placed their orders early for the upcoming season, which makes the net position a bit worse. As it stands, Nike is sitting with stock from three seasons - last, current and upcoming. They plan to sell products at a discount to clear them all out, which will hurt profits in coming quarters.
We have probably reached a point of "peak pessimism" for this company. Their current headwinds will take a few quarters to work their way out of the system. Most importantly though, Nike is still enjoying strong sales growth, reflecting the strength of its brand. We will hold this one.
Bright's Banter
Palantir has been awarded a broad deal by the US Defense Department, worth up to $229 million over a one-year period. They will develop and deliver artificial intelligence and machine learning capabilities for the US Special Forces, the Joint Staff and all branches of the US armed services.
This deal is part of a program previously known as Project Maven, which made headlines in 2018 after employees of Google objected to working for the Defense Department. When Google ditched the contract, Palantir stepped up and deployed its machine learning and video recognition software. These tools are used to increase the accuracy of drone strikes and other actions.
Palantir has also renewed its contract with the US Department of Homeland Security, working closely with the Immigration and Customs Enforcement (ICE) service. This is a $95.9 million contract over five years.
While this share is not for everyone, given the nature of its activities, Palantir has made good on its promise to grow revenue at a 30% clip annually. I hope to see the share price recover.
Asian markets other than Hong Kong are down this morning, in the wake of the weakness on Wall Street last night. In overall terms, the region's equities are set for a seventh straight week of losses, their longest losing streak since 2015.
The Bank of Japan boosted its planned bond-buying program. Prime Minister Fumio Kishida instructed his government to come up with an economic stimulus package by the end of October.
German inflation topped 10% and the country agreed to energy caps that could add to inflationary pressures.
US equity futures are actually higher in early trade. That's promising, perhaps we can close the week on a more positive note. The Rand is trading at around R17.90 to the greenback.
Keep your chin up, and have a solid weekend. When you come back to work next week, it will be October.
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