Top stocks: Tesla, Apple gain in trading
In a very choppy trading session on Monday, Wall Street’s main indexes ended slightly higher, with top stocks such as Tesla and Apple surging. Tesla shares jumped almost 13% as the electric vehicle giant cleared a major hurdle for its autopilot software in China.
The consumer discretionary sector rose 1.8%, driven by Tesla shares.
Top stocks: Apple soars 3.5%
Apple stock rose 3.5% after reports that it was back in talks with OpenAI to use the AI company’s technology. This came after Bernstein upgraded the stock to ‘outperform’.
The broader US stock market had closed the previous week up by a wide margin, buoyed by mild inflation readings and upbeat performances by the titans of technology, Alphabet and Microsoft, even as tensions eased between Israel and Hamas in Cairo peace talks, dampening down fears of a wider conflagration in the Middle East.
Attention is also turning to the interest rate decision by the Federal Reserve on Wednesday and the next jobs report, due out on Friday and also likely to influence markets as the recovery progresses.
Top stocks: Money markets
Now, money markets expect around 35 basis points of cuts this year, down from a peak forecast of 150 basis points, according to LSEG data.
In morning trade, the Dow Jones Industrial Average climbed 86.82 points, or 0.23%, the S&P 500 gained 6.08 points, or 0.12%, and the Nasdaq Composite rose 10.48 points, or 0.08%.
The communication services sector fell 1.3%, with big losses in Alphabet and Meta Platforms shares, which fell more than 2% each.
As the US corporate earnings season cranks up, Domino’s Pizza rose 3.3% after first-quarter same-store sales beat estimates due to a loyalty programme and other promotional activities.
So far, 229 companies in the S&P 500 have reported first-quarter results. Of those, 77.7% have exceeded analyst expectations compared with a long-term average of 66.7%, according to Thomson Reuters data.
Top stocks: Paramount global
Other major gainers included Paramount Global, up 5.6% after reports of concessions being made by the Redstone family and the chief executive officer of the movie company Skydance Media, David Ellison, to facilitate a change in control of the streaming company.
On the downside, lower bitcoin prices weighed on cryptocurrency-related stocks, with the crypto miners Riot Platforms and Marathon Digital down 4% and 8% respectively, and Coinbase Global dropping 4%.
With 1,917 advancing issues and 1,407 decliners, the market’s mood was upbeat, even if much of the optimism was overshadowed by declines in the final half hour of trading.
The Nasdaq seesawed back and forth, finally closing down 0.7%.
The NYSE’s closing bell extended the rally, but with only 20 minutes left to trade, the momentum of the market at that point felt more like a faded breeze.
Even so, it was a bullish start to the week.
On Monday, as investors awaited more euro zone economic data and a Federal Reserve monetary policy decision, European stocks clocked in a two-week peak, extending the strong gains from the previous week.
By 0837 GMT, the pan-European STOXX 600 had risen 0.3%, building on a gain of 2.4% for the week through Friday.
After heavy losses, triggered by higher US interest rates, Middle East tensions and the policy stance of the European Central Bank, in April, the STOXX 600 this year had notched its fifth straight monthly gain.
They will have to wait this week for euro zone inflation figures at the end of Tuesday and the US Federal Reserve’s hotly anticipated rate decision at the end of Wednesday — not to mention the usual rush of earnings.
The US Fed is widely expected to cut rates for only the second time in more than a decade.
All this means that, as the analyst Michael Field, European market strategist at Morningstar, puts it: ‘There’s far more focus from an investor perspective on the forward looking guidance, especially if rate cuts are delivered during the next earnings season.
Within the sectors, the best performers were basic resources, up 0.8% to their highest level since February 2022; and healthcare, rising 0.3% to a more than one-month high.
Anglo American added 1.7% in the wake of reports that Australia’s BHP Group is planning to make an improved offer for the miner.
Philips gained 33.8% after agreeing to pay a settlement of $1.1 billion in the US over claims that its breathing devices were responsible for hundreds of deaths following their recall in 2021.
The settlement brings an end to a period that saw Philips’ market value plummet by almost two-thirds over the past three years, pushing its shares to more than a two-year high on Friday, sending the healthcare sector higher by more than a one-month peak.
Atos shares surged 14.9% after the French government made an offer to take control of some of the IT company’s key units.
Shares in Deutsche Bank fell 5% after the German lender stated it would make provisions for litigation costs relating to the takeover of Postbank as profitability for the second quarter and for the full year would be lower than originally anticipated. Porsche shares fell 2.8%, after the carmaker reported that first quarter operating profit had dived 30%.
Further afield, Norway’s Public Property Invest, 75% owned by the financially stricken Swedish real-estate giant SBB, lost 7% in its debut on Euronext Oslo; and the Spanish market was modestly weaker as well as the country’s regional benchmark stocks index fell 0.2% as the country’s Prime Minister Pedro Sanchez weighed his options: staying in his post or walking away from the chaos.
Britain’s FTSE 100 rose to a record high again on Monday as a series of positive corporate moves, including reports that mining giant BHP Group was considering a sweeter takeover offer for Anglo American.
The blue-chip FTSE 100 index added 0.4% or 32.7 points to 8,185.59 points by 0828 GMT, having already logged gains in seven out of the past eight sessions.
The UK market looks like it might decouple from the US, not only because of rate cuts, but also because traders are attuned to different signals.
UK stocks have shown new vigour after months of languishing behind global counterparts, on tentative signs of a slowdown in inflation, a weakening pound and signs that the UK economy has bottomed out. Investors are optimistic that the BoE will move before the US Fed. A rate cut could be on the way in August.
The biggest gainers in the index included Anglo American, up 1.7% after Reuters reported that BHP Group was reviewing its process in the wake of a rejected $39 billion bid. ‘The feeling is that the offer’s too low. Either BHP has to pay up or they won’t get Anglo at this price.’ Cumming added.
There were also promising updates from large moves in other sectors, with the prudential insurer Prudential up 3.1% as its Hong Kong-based peer AIA Group posted encouraging numbers, and AstraZeneca up 0.7% reported progress in its pipeline of two treatments for breast cancer.
Hipgnosis Songs Fund rose 2.1% after Blackstone agreed to buy the music rights firm in a deal worth up to $1.57 billion, outbidding a prior offer from Concord.
The mid-cap FTSE 250 also rose, adding 0.3% to more than two-week high. On the downside, Petrofac crashed 23.8% to an all-time low after offering a $300 million credit line from noteholders and delaying its full-year results to 31 May.
Just look at Germany’s largest lender, Deutsche Bank (DBKGn.DE), whose number one stock in the financial sector took a 9% hit on Monday due to word that an ongoing lawsuit forcing it to pay more than it’d previously assumed for its acquisition of the huge Postbank division could cost up to 1.3 billion euros ($1.39 billion).
Top stocks: Deutsche bank under fire
The news is a blow to the giant bank, which earlier this month reported better-than-expected earnings, sending its stock surging. The Postbank lawsuit is the latest in a string of problems to emanate from the division, which has been the source of litigation, regulatory trouble, union strife and, now, hefty financial obligations.
JPMorgan and RBC, two of Deutsche Bank’s leading financial analysts, lowered their target prices on the bank, while maintaining an ‘overweight’ and ‘outperform’ rating, respectively. The shares declined further throughout the day.
‘It is regrettable that good business and positive market perception are excluded by a litigation legacy from several years ago,’ analysts at RBC wrote in a client memo.
Deutsche Bank bought Postbank, a lender with millions of customers that originated from the former German postal system, as part of the 2008 global financial crisis, to shore up its presence in its home market, which had been flooded with new businesses from years of international expansion. But Postbank has instead brought headaches to Deutsche more often than help.
Late on Friday, Deutsche Bank announced it was reserving provisions to cover claims from the suit in a delicate statement issued after oral arguments were heard earlier that day.
The bank disputes claims that it underpaid Laborers’ Pension Fund, but didn’t say how much it had reserved, only that the claims were for around 1.3 billion euros. ‘This provision will likely have a negative impact on our profit for the second quarter of 2022 and the full year,’ the bank added.
In a statement released late on Sunday, Deutsche Bank said the provision would ‘probably’ reach 1.3 billion euros in the second quarter and announced that it would ‘carefully consider’ whether to agree to a settlement.
The bank also said it would ‘continue to evaluate’ its plans for another share buyback in 2024; analysts at KBW say it is likely that the buyback will not be conducted at all.
Despite these headwinds, Deutsche Bank’s shares have been climbing steadily since double-digit percentage tumbles last spring in the wake of banking crises in Switzerland and the United States. The stock is up 26% this year as is among the best-performing top stocks in the sector.
Shares of Fulton Financial (FULT.O) shot up on Monday after the company bought the deposits and assets of Republic First in a deal engineered by regulators after the US bank’s collapse became the first U.S. bank failure of 2024.
In doing so, Fulton Financial became one of the top stocks for tomorrow. It took on Republic Bank, which had been unable to file annual reports with the US SEC, fought off multiple activist investors since 2021, and suffered from liquidity problems.
Banks in focus
Republic Bank, with $6 billion in total assets and $4 billion in deposits, was shuttered by the Pennsylvania Department of Banking and Securities Friday and its receiver appointed by the Federal Deposit Insurance Corporation (FDIC).
An $35 million capital infusion due to come in from an investor group including several well-known individuals had fallen through.
Regional banks are also struggling to retain deposits as customers move their money to banks that are considered ‘too big to fail’, while rising interest rates are pressuring the value of their loan books. ‘Banking has become inherently riskier,’ says Russ Mould, investment director at the London-based investment platform AJ Bell.
He notes that, thanks to internet banking, deposits can move much faster and news travels much faster than it once did. ‘So if a bank loses depositor confidence, that can turn into a contagious disease.’
Since the early 2023 collapse of Silicon Valley Bank, First Republic and Signature Bank, this concern has mounted, as the global financial system teetered, banks across the world saw their stocks sell off dramatically, and regulators turned up the heat.
According to Fulton Financial, its acquisition of the top stock will ‘markedly increasing [its] presence in the Philadelphia market’.
The management of the top stock will hold an investor conference call to provide details and discuss the implications of the deal. In conjunction with the acquisition, Fulton also announced the offering of common stock to the public.
Top stocks: Plans to sell
The company plans to net roughly $250 million from the sale of about 16.7 million shares issued at $15 each.
The proceeds from the common stock offering will be used for general corporate purposes and capitalising on ‘new opportunities’ expected to stem from the acquisition.
From the looks of it, analysts at Jefferies anticipate a seamless merger of the acquisition into Fulton’s business: a welcome development considering that this was the largest deal the bank has struck since the onset of the Great Recession.
After news of the purchase broke, Fulton’s stock price rose 10% in morning trading, signalling investor enthusiasm for its strategic expansion, and perhaps also heralding the solidification of its rank among the top 20 stocks in the banking sector.
The FDIC estimated that the failure of Republic Bank would cost the Deposit Insurance Fund $667 million.
HCLTech, the third-largest software services firm in India, saw its shares fall as much as 6.3% on Monday, its steepest drop in nearly 17 months after the company projected fiscal year 2025 revenue growth that missed market expectations.
By midday, HCLTech had recovered some ground but was still trading down 5.62% at 1,392.05 rupees. It was the top loser on the Nifty IT index (.NIFTYIT), which itself was down 0.2%.
On the whole, HCLTech’s shares have fallen 5.2% so far this year, versus a 6% drop for the broader IT index.
The shares of Infosys (INFY.NS), another big company in the sector, fell 7.3%, whilst the shares of the market leader, Tata Consultancy Services (TCS.NS), rose 2.1%.
The Noida-based company said last Friday it expected revenue growth of 3-5% for fiscal 2025.
Macro economic overhang, specifically expected to stifle demand for much of the fiscal, was cited by the company as a key challenge. Brokerage analysts, who had expected better numbers, called the company’s revenue outlook a ‘key negative surprise’. Jefferies.
The brokerage Nirmal Bang pointed out that the mid-point of this target implies a slowdown over the 5% the company grew at in fiscal 2024 HCLTech management said the reason for the muted guidance was the continued uptick in the trend of offshoring and the ripple effects of its State Street deal.
At the same time, Tata Consultancy Services, despite missing revenue forecasts, ‘maintained an optimistic outlook for FY23 on the back of a healthy deal pipeline’. In the wake of HCLTech’s disappointing guidance, no fewer than 18 analysts lowered their target prices (LSEG data showed the median price target slid to 1,532.50 rupees, vs 1,635.50 a few days before).
This is an adjustment reflective of a broader sentiment in the markets, as everything from slowing macro-economic conditions to a reshuffling of industry dynamics puts pressure on formerly high-flying stocks such as HCLTech.