US markets were back on the front foot this week with the technology-heavy Nasdaq Composite index leading the charge, gaining 1.5%, and the Dow Jones Industrials scaling to a new high.
Brent Crude oil prices briefly rose above $80 per barrel after President Trump announced an end to the ceasefire with Iran.
Minutes from the last Federal Reserve interest rate meeting showed a deep divide among policymakers, with some arguing for hikes and others calling for a rate cut.
Chip stocks led the gains in the US with Dell Technologies rising 14% after President Trump urged people to go out and buy a Dell computer.
Technology stocks were buoyed by news that Korean chipmaker SK Hynix was listing its ADRs (American Depository Receipts) on the US stock market at $149 per share, raising $26.5 billion.
ADRs are certificates issued by a U.S. bank that represent shares of a foreign company’s stock.
SK Hynix shares have risen 636% over the last year buoyed by huge demand for its specialised AI memory chips.
Any concerns that the chipmaker’s listing had come too late to capitalise on the AI boom were quicky extinguished with demand outstripping the 177.9 million shares offered by seven times.
At the other end of the performance spectrum, Paramount Skydance shares fell 10% on concerns of a delay to closing its acquisition of Warner Bros, which could cost the company hundreds of millions of dollars.
Pepsico – flags higher input costs
The snacks and beverages giant Pepsico flagged rising second half commodity costs after second quarter revenues came in slightly ahead of analysts’ forecasts while earnings per share missed estimates.
The maker of Doritos and Walkers crisps said it is expecting higher input costs for packaging and logistics as the war in Iran keeps oil prices high.
Nevertheless, the company maintained its annual projection for organic sales growth of between 2% and 4% and earnings per share growth in a range of 4% to 6%.
In the US, Pepsico cut prices of snack brands such as Lay’s to lure cost conscious consumers who are increasingly shifting toward cheaper alternatives and smaller packet sizes.
Pepsico’s international operations were a relative bright spot with organic revenues growing 7% and the food and drinks divisions achieving volume increases of 4% and 5%, respectively.
The shares fell 3% on 9 July and continue to trade close to 12-month lows.
Netflix
Streaming giant Netflix is scheduled to report second quarter results on 16 July after the market close.
The shares have been on the back foot this year after a disappointing first quarter which missed analysts’ estimates amid growth concerns and intensifying competition.
Netflix has traditionally favoured organic growth over acquisition-led expansion, so investors will be seeking assurance it can draw a line under the failed attempt to buy Warner Bros and get back to basics.
There will inevitably be questions on how management intends to deal with the competitive threat from the Warner Bros/Paramount Skydance combination.
Analysts are looking for revenues of $12.58 billion, representing 14% year-on-year growth and earnings per share growing by a tenth to $0.70.
The swing factor for how the shares might react could be the fast-growing advertising segment with Netflix expecting to double annual revenues to $3 billion, driven by a 70% increase in the advertiser base to over 4,000.
US banks – positive tailwinds
The second quarter earnings season kicks off on 14 July with banking giant JPMorgan expected to deliver double digit earnings growth underpinned by continued recovery in loan growth and buoyant capital markets activity.
With new Federal Reserve chair Kevin Warsh establishing his inflation fighting credentials and the war in Iran dragging on, interest rates look to be on hold, which should be a net positive for banks.
Global mergers and acquisitions activity accelerated in the second quarter and are tracking towards the highest volumes on record according to Morgan Stanley, which should be positive for investment banking fees.
While the labour market looks steady and the corporate sector remains healthy, investors will be sensitive to commentary around private credit exposures and signs of stress related to software and data centre operators.
Going into the numbers the one year forecast PE (price to earnings) ratio for JPMorgan is 14.2 times which is towards the high end of the historical range, leaving little room for disappointment.
Martin Gamble: Shares and Markets Writer
Martin Gamble is Shares and Markets writer at AJ Bell. He was previously the Education Editor of Shares Magazine. He has been with the business since 2019.
Martin graduated from the University of Kent in...
