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Posts Tagged ‘Stocks’

The trillion‑dollar club: technology stocks

Posted by hkarner - 16. Januar 2020

Date: 15‑01‑2020

Source: The Economist

Amazon, Apple and Microsoft have already done it. And this week Alphabet, Google’s parent, is, for the first time, also flirting with a $1trn market capitalisation.

Big Tech shares keep soaring after a banner 2019, which saw the quartet outpace America’s frothy stockmarket.

Add Facebook, and America’s five biggest companies have gained a cumulative $1.8trn since the start of last year.

Surely, this cannot go on. Or can it? Although the Sino‑American trade war has spilled over into tech and controversies rage at home over abuses of user privacy and market power, the giants keep printing money.

After years of sacrificing profits for investment, even Amazon (poised to rejoin the $1trn gang soon) has generated billions in free cashflow.

Investors reckon more of this will be returned to shareholders, starting with Alphabet. A new chief executive, Sundar Pichai, took over from Google’s founders in December. He is expected to be more shareholder‑friendly—and less dividend‑wary.


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Technology Stocks Head Toward Best Year Since 2009

Posted by hkarner - 20. November 2019

Date: 19-11-2019
Source: The Wall Street Journal

Regulatory scrutiny and mixed earnings aren’t stopping the group from rallying

Shares of chip maker Applied Materials have soared 90% this year.

Technology stocks are racing toward their best year in a decade, underscoring
investors’ interest in companies offering everything from memory chips to social-media platforms.

Investors have favored shares of rapidly growing, relatively pricey companies over their more low-valued counterparts for much of the more-than-decadelong bull market.

Although the latter group has rebounded over the past three months, technology stocks remain the market’s leaders: The S&P 500 technology sector’s 41% gain for the year has put the group well above the S&P 500’s 25% climb and on course for its biggest one-year advance since 2009.

That is even as investors have had to grapple with issues including controversies over how big tech companies have handled users’ data, antitrust probes and trade tariffs targeting consumer devices.

To many money managers, the gains reflect confidence that technology companies will be able to continue delivering robust sales and earnings growth even as the broader economy shows signs of cooling.

“This is where the growth is over the long term, so you’re always going to get a pretty good bid” for technology shares, said Katie Nixon, chief investment officer of Northern Trust Wealth Management.

Among the biggest gainers in the sector are semiconductor manufacturers, as well as the companies that create devices to make chips. Applied Materials Inc. has soared 90% this year, Tokyo Electron Ltd. has jumped 85%, ASML Holding NV has risen 81% and Lam Research Corp. has more than doubled.

“They are the companies that are enabling the semiconductor manufacturers to make denser chips with more transistors on them,” said John Freeman, vice president of equity research at CFRA. “They hold the keys, so they hold the pricing power at this point.”

Shares of companies focusing on electronic payments also have done particularly well—something investors have attributed to the technology’s growing presence around the world.

“If you would have told me 20 years ago I was going to pull out my Visa card to pay a one-dollar parking meter on a square in Madison, Wis., I’d have said you’re nuts, but now that’s the only compensation they accept,” said Tom Plumb, president and portfolio manager at Plumb Funds.

Mr. Plumb said his firm’s largest holding is Visa Inc., which has risen 36% this year. The firm also holds shares of Mastercard Inc., which are up 49%. Both companies reported better-than-expected earnings in October for their latest quarters, buoyed by higher spending on credit and debit cards.

To be sure, after a big rally, some investors say they believe parts of the technology sector may have run up too far. Nearly one in three fund managers believes the most crowded trade in markets is betting on a rise in U.S. technology shares and other rapidly growing companies, according to a Bank of America survey conducted earlier in November.

And in a field that is particularly reliant upon innovation, some companies will be better investments than others.

“Just because you’re sitting on top of the world, doesn’t mean you’re going to stay there,” Mr. Freeman said. For instance, Oracle Corp. —up 24% for the year—is one of the biggest software companies in the world, but it could still be at risk because it was late to cloud computing, he said.

Then there are earnings: Among the S&P 500’s 11 sectors, technology companies actually posted among the steepest declines in profits for the third quarter, according to FactSet. The sector reported a roughly 5.3% drop in earnings from the year-earlier period, compared with a 2.3% decline for the broader S&P 500.

Within the past few months, a handful of technology-driven companies have reported momentum slowing. Amazon.com Inc. posted its first earnings decline in more than two years and Netflix Inc. missed its subscriber-growth target for a second consecutive quarter.

But money managers say technology stocks have been able to continue rising anyway in part because expectations were low heading into earnings season. As of June 30, analysts had expected the technology sector to report a 9.4% drop in third-quarter earnings, according to FactSet.

Technology executives managed to temper investors’ expectations heading into the second half of the year, Ms. Nixon said, making even the relatively weak earnings better than feared.

That has helped money managers justify buying technology shares that have grown to look pricey.

The S&P 500 technology sector trades at roughly 21 times its next 12 months’ projected earnings, according to FactSet. In comparison, the broader index trades at 18 times.

“This is an environment where we’re finding opportunities,” said Eric Wiegand, investment portfolio manager for the private wealth team of U.S. Bank, which has emphasized software and service companies within technology holdings.

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As Stocks Hover Near Highs, Past Pullbacks Worry Investors

Posted by hkarner - 29. Oktober 2019

Date: 28-10-2019
Source: The Wall Street Journal

Muted moves in S&P 500 highlight investor fears that stock market’s gains could be limited

The possibility of another round of tariffs in December continues to fuel investor caution, offsetting some of the optimism about lower interest rates around the world.

Stocks are flirting with record territory but have been stuck in a narrow trading range since the beginning of last year, leaving investors grasping for a fresh driver that could propel the decadelong bull market to even greater heights.

The S&P 500 made a run at its all-time high of 3025.86 Friday but came up just short, closing up 0.4% at 3022.55. Hopes for lower interest rates and a resolution to the long-simmering trade dispute between the U.S. and China have pushed the broad equity gauge up 21% for the year.

But most of the index’s gains came in the first four months of 2019, following a brutal selloff in last year’s fourth quarter. Stocks have treaded water lately, averaging a daily move of 0.4% or less in five of the past seven weeks. Den Rest des Beitrags lesen »

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This Year’s Hottest Trade: Buying Everything

Posted by hkarner - 23. Oktober 2019

Date: 22-10-2019
Source: The Wall Street Journal

Stocks, bonds, gold and oil have staged a rare concurrent rally

The New York Stock Exchange. The S&P 500 has risen 20% this year, even as Treasurys have rallied.

Stocks and bonds have staged a rare simultaneous ascent, logging the best performance in a quarter-century.

The S&P 500 has advanced 20% in 2019, while Treasurys have rallied. The last time the benchmark stock index rose more than 10% while the Treasury yield fell more than a percentage point in the first three quarters of the year was in 1995, according to Dow Jones Market Data.

That trend continued as the fourth quarter kicked off. Government bonds and gold notched gains last week as the S&P 500 hovered within 1.3% of its record reached in July and clinched its second straight week of gains. Den Rest des Beitrags lesen »

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nvestors Rush Into Quality Stocks

Posted by hkarner - 10. Oktober 2019

Date: 09-10-2019

Source: The Wall Street Journal

Economic uncertainty has pushed investors into stocks that may be better able to withstand a downturn

What is ‘quality’ when it comes to stocks? It’s in the eye of the beholder.

As uncertainty mounts over the direction of the economy and financial markets, investors are flooding into exchange-traded funds focused on so-called quality stocks.

Quality stocks are those of companies with higher and more reliable profits, low debt and other measures of sustainable earnings. Presumably, these are the stocks that can withstand an economic downturn better than others, and advisers see exposure to quality as a way to reduce risk at a time when stock valuations are still high.

This year through September, some $4.6 billion has poured into ETFs focused on quality stocks, according to data from Bloomberg. That is more than the $3.5 billion that was invested in the strategy for all of last year and is the highest amount ever in any calendar year, says Todd Rosenbluth, who heads ETF and mutual-fund research at CFRA, a New York financial-data provider. Den Rest des Beitrags lesen »

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Stocks Drop as Trade Battle Intensifies

Posted by hkarner - 6. August 2019

Date: 05-08-2019
Source: The Wall Street Journal

Chinese yuan depreciates to new low, following escalation in U.S.-China trade dispute

U.S. futures and global stocks started the week with sharp declines and the yuan depreciated to a new low as President Trump’s threat to impose more tariffs on Chinese goods continued to rattle investors.

The Stoxx Europe 600 was down 1.9%, led by losses in the basic resources sector, which dropped more than 3%.

“Trump escalating the rhetoric and tariffs puts pressure back on the Fed to do another rate cut,” said Christopher Peel, chief investment officer at Tavistock Wealth.

In the U.S., S&P 500 futures were down 1.5%. Futures don’t necessarily predict moves after the opening bell.

Government-bond yields continued to plumb new depths Monday on concerns about the global economy being hit by the U.S.-China trade conflict.

The German 10-year bund yield reached a record low at minus 0.573%, and was recently at minus 0.552%. The U.K 10-year gilt hit an intraday record low yield of 0.492%, but has since recovered slightly to 0.506%.

U.S. 10-year Treasurys yields fell to 1.783%, from 1.864% Friday. Bond yields and prices move in opposite directions. Den Rest des Beitrags lesen »

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About to Retire? Check Your Stock Exposure—Quickly

Posted by hkarner - 6. August 2019

Date: 05-08-2019
Source: The Wall Street Journal

We ran a simulation showing how various portfolio allocations performed for someone who had retired in 2000—and it was revealing

There are a lot of people thinking of retiring now because the bull market has boosted their 401(k)s.

But they may need to re-evaluate their allocations. And quickly.

Over the past decade, the S&P 500 has returned more than 13% on an annualized basis. And studies show that this is exactly when a lot of people choose to retire—the height of a bull market, when their portfolio is plump.

But those same studies show that people who retire at bull-market peaks have a higher chance of running out of money. That is because they wrongly assume big returns will continue to pile up—and then they lose a big chunk of cash when bear markets arrive.

So, investors about to retire may want to re-evaluate how their money is allocated. To assist in that effort, we ran a simulation showing how various portfolio allocations performed for someone who had retired in 2000, the beginning of a bear market, followed by another later in the decade. Den Rest des Beitrags lesen »

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Beneath the dull surface, Europe’s stockmarket is a place of extremes

Posted by hkarner - 18. Mai 2019

Date: 17-05-2019
Source: The Economist: Buttonwood

The gap between value and quality stocks has widened into a chasm

It would be hard to tell a story about America’s stockmarket without mention of at least one company that listed this century—Google or Facebook, say. Europe is rather different. Its bourses are heavy with giants from the age of industry but light on the digital champions of tomorrow. It is telling, perhaps, that its character can be captured in the contrasting fortunes of two companies, Nestlé and Daimler, with roots not even in the 20th century, but in the 19th.

Nestlé began in 1867 when Henri Nestlé, a German pharmacist, developed a powdered milk for babies. The firm, based in Switzerland, is now the world’s largest food company. It owns a broad stable of well-known brands, including Nescafé and KitKat. Its coffee, cereals and stock cubes are sold everywhere, from air-conditioned supermarkets in rich countries to sun-scorched stalls in poor ones. Daimler was founded a bit later, in 1890. Its Mercedes-Benz brand of saloon cars and suvs is favoured by the rich world’s professionals and the developing world’s politicians. Den Rest des Beitrags lesen »

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Stocks Post Their Worst Day in Months on Trade Anxiety

Posted by hkarner - 15. Mai 2019

Date: 14-05-2019
Source: The Wall Street Journal

Dow drops more than 600 after China says it will raise tariffs on some U.S. imports

Stocks posted their biggest drop in months Monday after officials in Beijing and the White House exchanged fresh threats in a trade fight that many observers fear could crimp growth.

The Dow Jones Industrial Average fell 617.38 points, or 2.4%, to 25324.99 and the S&P 500 dropped 69.53 points, or 2.4%, to 2811.87, with both indexes posting their biggest one-day losses since Jan. 3. The Nasdaq Composite declined 269.92 points, or 3.4%, to 7647.02 in its worst showing since December.

The moves showed investors that one of the biggest assumptions many had held this year could be in danger of falling apart. Many money managers had credited the stock market’s 2019 rally to a combination of easy monetary policy, steady growth in the U.S. and signs of progress in trade negotiations.

There is still time for the U.S. and China to carve out a trade agreement, analysts said, noting the two countries’ increased tariffs won’t hit goods in transit immediately. And U.S. indexes are still up solidly for the year: The S&P 500 and Nasdaq are up by double-digit percentages in 2019, rebounding from a fourth-quarter rout. Stocks pared some of Monday’s losses after President Trump said he would meet with Chinese President Xi Jinping at the coming G-20 summit.

Still, investors and analysts say a breakdown of trade talks risks damaging business and consumer confidence, potentially crimping spending at a time when growth is already widely expected to moderate.

UBS analysts estimate U.S. growth could drop by 0.75 to 1 percentage point and stocks could fall by double-digit percentages if the U.S. hits all Chinese exports with 25% tariffs. Den Rest des Beitrags lesen »

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Stock Markets in Europe Break Records for Calm and Quiet

Posted by hkarner - 2. Mai 2019

Date: 01-05-2019
Source: The Wall Street Journal

A leading European stock index has barely budged for 17 trading days in a row, breaking the previous streak set in 1993

In Europe, markets have hit their summer lull early—very early. As with markets in the U.S. and elsewhere, this very stability could be a dangerous thing for investors desperately hunting for returns.

One illustration of the quiet: The Stoxx Europe 600 index of leading European shares set a record for apparent investor apathy on Tuesday with the 17th consecutive trading session when its price has moved by less than 0.5%. The last longest streak of such little variation was 16 straight days ending in May 1993.

This is part of a broader, multicountry pattern in financial markets driven by the near uniform turnaround in the attitude of major central banks, led by the Federal Reserve, which is expected to retain its supportive policies toward investors and the economy in its policy statement Wednesday.

Central banks “seem to think their job at the moment is to suppress volatility to encourage risk-taking”, James Athey, senior investment manager at Aberdeen Standard Investments. He says there are few sellers in equities, government debt or corporate bonds. “Who’s going to take the other side of the trade because you’re fighting the Fed?”

But just as in previous periods of calm, investors who trade options are hunting for yield by selling insurance against future price moves, which is a great source of extra income so long as markets stay quiet. But it can become a source of painful losses when sentiment turns—as it did last December and before that in February 2018.

In December’s volatility shock, French bank BNP Paribas suffered losses big enough in its equity derivatives business to drag down its fourth-quarter results. And last February, an even bigger spike caused turmoil among exchange-traded funds that bet against a rise in volatility, leading Credit Suisse to liquidate its popular VelocityShares Daily Inverse VIX Short-Term Exchange Traded Note.

Sébastien Galy, senior macro strategist at Nordea Asset Management, says similar yield hunting can be seen in another big build up of investors selling market insurance against large scale price moves in several asset classes.

The effects of this in U.S. and European stocks can be seen in the extremely low levels of the volatility indexes and investment products tied to them. The VIX index, which measures expected volatility in the S&P 500 over the next 30 days is at its lowest level since early October, while the VDAX, a popular European alternative that measures volatility in Germany’s DAX index, is at its lowest since January 2018.

“Investors are betting on range trading, on nonevents, and the way to do this is generally to bet against volatility,” Mr. Galy said. “Everyone thinks this isn’t going to end well but then they keep doing it anyway.”

While volatility can come from prices moving up or down, very low expected volatility readings on the VIX tend to occur when stock markets keep edging steadily higher. For Europe, even though economic growth remains disappointing, fears of political flare-ups that dominated headlines at the beginning of 2019 have receded: From spendthrift policies in Italy to the instability of Britain dropping out of the EU with no agreement on how to settle future ties.

For Daniel Morris, senior investment strategist at BNP Paribas Asset Management, this is all the more reason to expect that this period won’t last. “There are always bumps in the road,” he said.

Mr. Morris is cautious because of the range of things that could cause throw markets off track in the coming months, such as fresh U.S. tariffs targeting European car makers or signs that stimulus measures in China won’t help growth among Europe’s exporters, especially Germany.

Others are more optimistic about Europe, despite the general trend for investors to keep pulling money from equity funds that has continued all year so far.

“It’s fashionable to hate European stocks but it’s now appearing that the EU isn’t in such a bad state after all, so it is a slow melt-up,” said Gregory Perdon, co-chief investment officer at private bankers Arbuthnot Latham .

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