Bank of England sends the market to new highs

Tickergeek market update:

Today’s big headlines:

• Bank of England sends the market to new highs

• Factset demonstrates resilient growth

• Apple’s woes compounded by DoJ Investigation

• Nike reminds us why its the top dog

• Lululemon beats, but falls on weak guidance

Bank of England sends the market to new highs📈

What’s happening? In a significant development on Thursday afternoon, the Bank of England (BoE) declared its decision to uphold the prevailing interest rate at 5.25%. This announcement follows a substantial decline in the Consumer Price Index (CPI) inflation, which was unveiled earlier this week. The inflation for February was reported at 3.4%, marking a decrease from January’s 4%.

Andrew Bailey, the Governor of the BoE, commented on the situation, stating, “We have not yet reached a juncture where a reduction in interest rates is feasible, but the current trends suggest a positive trajectory.”

The Prime Minister, Rishi Sunak, expressed his endorsement of the BoE’s resolution. He asserted, “As I previously mentioned, with the inflation rate falling to 3.4%, and the rise in real wages coupled with the beginning of a decline in mortgage rates, there are tangible indications that the economy is recovering from the upheavals of recent years.”

Market reaction: The FTSE 100 index soared to new heights, closing the day with an almost 2% increase, a relatively uncommon phenomenon for British equities.

Factset demonstrates resilient growth💪

What’s happening? On Thursday morning, FactSet Research Systems (FDS) unveiled its fiscal second-quarter earnings results, surpassing analyst predictions in an impressive demonstration of resilience. Despite this robust growth, the company’s shares plummeted by over 6%, pushing the stock into negative territory for the year.

Factset’s earnings results:

In addition to the earnings reported, management disclosed margin expansion, with the company’s GAAP operating margin witnessing an improvement of approximately 50 basis points, reaching 33.3%.

Forward outlook? Management reaffirmed their guidance for the full year of 2024, expressing confidence in achieving the lower end of their previously forecasted ranges.

Apple’s woes compounded by DoJ Investigation😩

What’s happened? On Thursday, Apple Inc.'s (AAPL) shares experienced a continued decline, triggered by emerging news that the Department of Justice (DoJ) is in the process of initiating an antitrust lawsuit against the renowned smartphone manufacturer.

What’s the basis of the lawsuit? In essence, it’s anticompetitive conduct. The case, which seems to be the climax of years of escalating allegations, charges the company with suppressing competition through a blend of restrictive App Store terms, exorbitant fees, and an unwavering adherence to its “walled garden” strategy of hardware and software integration.

At the core of the legal proceedings are Apple’s contentious practices. The company’s enforcement of a substantial 30% commission on the majority of App Store sales has elicited extensive criticism.

market reaction? In response to this news, Apple’s shares traded down by over 4%, pushing the stock’s annual performance into a 7% decline.

Nike reminds us why its the top dog👟

What’s happening? On Thursday evening, Nike Inc. (NKE) disclosed its fiscal third-quarter earnings, surpassing analyst predictions and propelling the stock price to ascend by 4% in after-hours trading.

This robust performance stands in stark contrast to the pessimistic outlook presented by its fellow apparel brand, Lululemon, and its German rival, Adidas. Nike managed to outperform the market’s expectations significantly.

Nike’s earnings results:

The surge in revenue was primarily attributed to its North America and China markets.

Lululemon beats, but falls on weak guidance👁️

What happened? On Thursday evening, Lululemon Athletica Inc. (LULU) disclosed its fiscal fourth-quarter earnings results, a period that encompasses holiday sales, surpassing analyst expectations on both the bottom and top lines. Despite this double beat, the stock experienced a sharp decline of over 10% in after-hours trading, largely due to forecasts provided by management that fell short of expectations.

Lulu’s earnings results:

The main concern? The shift in consumer discretionary spending has been notable, with consumers increasingly opting to allocate their funds towards experiences rather than apparel. The North America region, in particular, holds significant importance for Lululemon.

In the fourth quarter, sales in the Americas rose by 9%, a slowdown from the 29% growth observed in the previous year. However, international sales witnessed a rapid growth of 54%, largely attributable to the impressive 78% growth observed in the Chinese market, and a 36% increase from the rest of the international markets.

The reason for the drop? The precipitous drop in the stock can be attributed to the forward guidance, which fell short of expectations. For the upcoming full fiscal year, Lululemon’s management anticipates revenue to be between $10.7 billion and $10.8 billion, falling below expectations. However, the expected earnings per share of $14-$14.20 are roughly in line with estimates.

Additional market-moving events🌎

• CHIP Stocks rocket higher: On Wednesday evening, Micron (MU) reported their second quarter fiscal earnings, massively exceeding expectations, largely thanks to AI-driven revenue. This sent shares of many CHIP stocks such as Broadcom (AVGO) and Super micro computer (SMCI), significantly higher during Thursday market hours.

• Sky-high AI startup valuations: Cohere, an AI startup, is currently in talks over potentially raising $500M in a private round of fundraising, at a valuation of around $5B. The company was previously valued at $2.2B, and has a partnership with cloud-provider Oracle (ORCL).

• Switzerland cuts rates: On Thursday morning, The Swiss National Bank (SNB) caught many economists off guard by making the surprise decision to cut interest rates by 23 basis points, down to 1.5%. This is the first rate cut we’ve witnessed since the pandemic subsided, in any of the world’s ten most-traded currencies.

• Accenture gets pummelled: Accenture (ACN) reported its fiscal earnings, revenue of $15.8 billion, EPS of $2.63, and a 15% dividend increase. Additionally, management reported weak guidance of growth of only 1% to 3%. Shares dropped over 8% following the announcement.

• FedEx the cannibal: FedEx reported stellar earnings results, with EPS of $3.86 above estimates, while revenue of $21.7 billion fell just shy. The real reason for the surge in share price? a new $5 billion share buyback program was announced.

Notable earnings next week💵

• McCormick & Company (MKC) will report Tuesday. Analysts estimate $1.56B in revenue (-0.35% YoY) and $0.58 in earnings per share (-1.69% YoY).

• Cintas (CTAS) will report Wednesday. Analysts estimate $2.39B in revenue (+9.13% YoY) and $3.58 in earnings per share (+14.01% YoY).

• Paychex (PAYX) will report Wednesday. Analysts estimate $1.46B in revenue (+5.72% YoY) and $1.37 in earnings per share (+6.20% YoY).

• Carnival Corporation (CCL) will report Wednesday. Analysts estimate $5.42B in revenue (+22.29% YoY) and -$0.18 in earnings per share.

Our selections performance👾

Last week Monday, we released our “two superperformers” stock picks which we believe will provide significant outperformance compared to the S&P 500.

Here’s how the two stocks have performed since then:

• Evolution AB: 1,374.60 SEK (📈+4.70%)

• Hims & Hers Health: $15.66 (📈+15.62%)

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