After a stumble at the market open, the S&P 500 climbed strongly throughout the day, closing 0.8% higher. That result takes the index into positive territory for 2020, after a 15% rally over the past three months. Tech shares led the day, with Amazon delivering its best day since late 2018 and Tesla’s market cap surging back past the $300bn mark. Amazon closed 7.9% higher, taking its market cap to $1.59trn, after analysts at both Goldman Sachs and Jefferies raised their price targets on the stock. Goldman’s analysts said that Amazon is positioned to benefit from broader growth in e-commerce driven by the pandemic. Per Business Insider, spending on Amazon’s platform is up more than 60% year-over-year since the end of April.
Another factor boosting sentiment was progress made towards a Covid-19 vaccine, with the University of Oxford reporting a highly promising set of results from a trial of more than 1,000 people. The trial found that the injection led to an immune response and appeared to be safe.
Chinese tech made headlines too on Monday, as Ant Group – a technology and financial services spin off of Alibaba that owns the Alipay mobile payments network – announced that it is planning initial public offerings in Shanghai and Hong Kong, ignoring Western options such as New York and London. The decision comes amid tensions between the US and China that have included threats to delist Chinese firms from US exchanges.
Nasdaq Composite up 20% year-to-date
Tech stock gains helped the Nasdaq Composite close 2.5% higher on Monday, with its year-to-date gain now at 20% and its 12-month gain at 31.2%. Beyond Amazon and Tesla, Microsoft, Adobe and chipmaker Advanced Micro Devices were among the large names that helped the Nasdaq higher. Microsoft was up 4.3%, clinging onto its market cap lead over Amazon.
Although tech stocks dominated the day, there were multiple pieces of M&A news from other sectors of the US economy. First up, oil behemoth Chevron has agreed to buy Noble Energy in a deal that values the firm at $5bn, but will cost Chevron $13bn including debt, according to the Financial Times. The deal is likely to be the first of many, as the well-funded oil giants take advantage of depressed oil prices to pick up smaller businesses, struggling to survive. Walmart also hit headlines, as the supermarket chain – America’s largest private employer – has reportedly relaunched a sale of its majority stake in UK grocer Asda Group for around $9bn. Last but not least, eBay is reportedly nearing its own $9bn deal to sell its classified advertising business to Norwegian firm Adevinta.
S&P 500: 0.8% Monday, 0.7% YTD
Nasdaq Composite: 2.5% Monday, 20% YTD
Dow Jones Industrial Average: 0% Monday, -6.5% YTD
FTSE 100 falters despite vaccine news, BofE top economist says recovery has been V-shaped
Despite the promising results from the University of Oxford vaccine trial, the FTSE 100 still sank on Monday, closing the day 0.5% lower. Stock wise, a mixture of names dragged the FTSE 100 lower. International Consolidated Airlines Group, British American Tobacco and Burberry Group all fell by more than 2%. Investors also had insight from Bank of England chief economist Andy Haldane to digest, after the policymaker told MPs that there has been a V-shaped bounceback in the UK economy. He told the Treasury Select Committee that around half of the 25% fall in economic activity between March and April has been won back since, with the economy growing by around 1% a week. “We have seen a bounceback. So far, it has been a V – that of course doesn’t tell us where we might go next,” he said. In other headlines, Royal Bank of Scotland – one of the UK’s largest employers – told its 50,000 staff that they would not be returning to the office until 2021, putting a dent in Prime Minister Boris Johnson’s hope to get workers back into offices faster to boost the economy.
FTSE 100: -0.5% Monday, -17% YTD
FTSE 250: 0.2% Monday, -20.6% YTD
What to watch
Novartis: Swiss pharmaceutical giant Novartis is dual-listed in Zurich and New York. The firm reports its second quarter earnings on Tuesday morning New York time, following a year that has seen the share price of its US listing slip by 7.1%. Novartis is involved in a variety of Covid-19 projects, including treatments and vaccines, but its CEO warned back in May that it may take until the end of 2021 for a vaccine to become available. That prediction is likely to be front and center of the firm’s earnings call. Currently, 14 Wall Street analysts rate the stock as a buy or overweight, six as a hold and two as a sell.
Coca-Cola Company: Following key rival PepsiCo’s earnings report last week, which was met with a tepid response from investors (Pepsi stock was down 1.3% last week), Coca-Cola will deliver its own Q2 update on Tuesday. Similar to Pepsi, the closure of restaurants and bars that sell its products will likely have hurt Coca-Cola during the quarter, and investors will be watching for any uptick in sales of drinks to consumers stuck at home. Coca-Cola’s business is highly global, and its results will not just be determined by the state of play lockdown wise in the US. Analysts at Morningstar noted that Coca-Cola management has already dampened expectations for Q2. The firm’s share price is down 16.7% year-to-date, and multiple analysts have shifted to a buy rating on the stock over the past three months.
United Airlines: While the broader market rallied on Monday, driven by Covid-19 vaccine hopes, that was not enough to boost United stock. The firm’s share price fell 4.7% and is now down 63.3% year-to-date – although it is 16.3% higher than it was three months ago. United has already warned staff that it may lay off close to half of its workforce once it is free of the restrictions that came attached to a federal bailout of the airline industry. The airline reports earnings after the market close on Tuesday, where analysts will be probing for any recent demand pickup the firm has seen, measures to control costs, and how capable it is of weathering another period of widespread lockdowns in the US. Analysts are anticipating a loss of $8.96 per share, around triple the loss posted in Q1. Price targets on the stock range from $25 to $61, with an average of $41.38, versus its $32.33 Monday close.
Other significant US-listed stocks reporting on Tuesday: Texas Instruments, Philip Morris, Lockheed Martin, Intuitive Surgical, Prologis, Snap, Capital One Financial, Paccar, Interactive Brokers, Synchrony Financial
Crypto corner: Mastercard partners with crypto firms for card programme
Mastercard is making access to its payments technology easier for firms in the cryptoasset space. It announced yesterday that requirements to its Accelerate programme are now more simple, so that partners can onboard within a matter of weeks.
Crypto companies who choose to onboard with Mastercard will now be given extra support by the payments giant to enter into the market, as well as benefiting from their cybersecurity expertise and market research, according to reports from CoinTelegraph.
Digital payments platform Wirex has become Mastercard’s first native crypto principal member, allowing it to issue crypto payments cards.
All data, figures & charts are valid as of 21/07/2020. All trading carries risk. Only risk capital you can afford to lose.