Global shares pull back as concern over US growth, Asia tech rout weigh on investor confidence

Traders work on the floor of the New York Stock Exchange
Traders work on the floor of the New York Stock Exchange

  • Global shares fell on Friday after US GDP and unemployment data came in weaker than expected.
  • Investor concern about Chinese regulatory crackdowns, especially in the tech sector, continued.
  • Higher-than-expected inflation readings undermined European markets, despite strong EU growth.
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Global shares fell on Friday after US GDP and unemployment data the previous day reflected slower economic growth than expected, while a looming threat of a Chinese regulatory crackdown on tech stocks continued to weigh on investor confidence.

US futures fell, with Dow Jones futures 0.34% down, S&P 500 futures down 0.7% and Nasdaq futures down by 1.16% at 5:43 am E.T.. The benchmark indices neared record highs on Thursday, leaving the S&P 500 less than 0.1% off an all-time peak.

Weaker-than-expected US economic growth in the second quarter and a slower fall in unemployment that many economist had forecast soured investor optimism over the outlook for recovery, analysts said.

Meanwhile, Amazon’s quarterly earnings fell short of expectations, as the e-commerce giant missed quarterly sales estimates for the first time since 2018, while sales and profit forecasts were below expectations, further worrying investors about the economic outlook. The company shares fell as much as 7% in pre-market trading.

Yields on 10-year Treasury notes were last at 1.251%, down by 1.8 basis points ahead of inflation and personal spending data.

Rising Covid-19 cases and Chinese regulatory pressure on tech stocks also weighed on markets. Earlier in the week, Chinese officials had said they would be more considerate of volatility when making regulatory decisions, but the calming words had little lasting impact.

“The fact the tech-heavy Nasdaq futures have led US index futures lower suggests that they, and China, Japan, and South Korean markets are suffering a dose of pre-weekend China regulatory risk jitters,” Jeffrey Halley, senior market analyst at OANDA, said.

Asian markets closed lower on Friday, with Tokyo’s Nikkei 225 falling 1.8%, the Shanghai Composite declining by 0.42% and Hong Kong’s Hang Seng index dropping by 1.28% as a surge in delta variant cases and regulatory concerns dominated sentiment throughout the region.

In Europe, London’s FTSE 100 was last down 0.93%, the EuroStoxx 50 had declined by 0.69% and Frankfurt’s DAX was last down 0.99%. A measure of eurozone inflation rose more than anticipated in July, coming in at 2.2% compared to an expected 2%. This was its highest since October 2018.

The impact of this could not be set off by a strong read of eurozone GDP, which rose 2% quarter-on-quarter in the the three months to June, breaking two straight quarters of contraction, despite initial difficulties with the vaccination rollout, rising delta variant cases and continuing supply-chain issues.

“Looking ahead at 3Q, we would note that the delta variant is causing some delays in the easing of restrictions and that supply chain problems continue to weigh on manufacturing production. Still, we expect growth to come in very strong – currently pencilled in at 2% quarter-on-quarter – as domestic and foreign demand remain very robust.” ING analysts said.

Oil prices fell on Friday, reversing some of the previous day’s losses. Slower economic growth and recovery could indicate lower demand for a longer than expected time. Brent crude was last down 0.31% at $74.87 per barrel, while WTI crude was last at $73.36, down 0.35%.

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US stocks tumble from record highs as tech shares drag indexes lower

Stock Market Traders
Traders work during the opening bell at the New York Stock Exchange (NYSE) on February 28, 2020 at Wall Street in New York City.

US shares slipped on Monday, falling from record highs last week as technology shares dragged indexes lower. Investors remain cautious over the slew of corporate earnings ahead as well as the ongoing vaccine rollout in the US.

Leading the downturn was Tesla, with shares falling as much as 6.5% following the fatal car crash in Texas Saturday, which left two people dead. The electric car maker was a big laggard on the S&P 500 and Nasdaq Composite Index.

The consumer and real estate sectors also weighed on the benchmark index trading as analysts and investors anticipate earnings from nearly 80 companies this week.

“Wall Street could be in for a few choppy trading weeks as more of the same strong earnings beats becomes the theme,” Edward Moya, senior market analyst at OANDA, said in a note. “The bar was set too low this earnings season, but then again no one really thought it was possible that the US would reach herd immunity by June.”

Moya said the financial markets will likely look to how the bond market is positioned, especially with no major economic data on the horizon. Given this, he expects the 10-year Treasury yield to rise towards the 1.70% level if economic recovery optimism remains strong, and to drop to the 1.53% level otherwise.

The 10-year Treasury yield climbed 3.2 basis points to 1.605% in the afternoon after rising to 1.617% Monday morning.

Bank of America said Treasury yields will likely climb to a two-year high this year despite recent stabilization.

“We think technical factors combined with revised expectations on US growth are mostly responsible for the recent stabilization in US rates,” said Bank of America in a note Monday. It added that the stabilization “subsequently justifies” a rally in emerging markets and US equities and a selloff in the US dollar.

Still, Ryan Detrick, chief market strategist for LPL Financial, is optimistic the stock market will come out of COVID-19’s shadows despite some concerns about the economy overheating.

“In the United States, vaccinations are increasing, the economy is expanding, unemployment is falling, and stimulus continues to flow through the economy,” he told Insider. “With the consensus crowding into an optimistic corner, many investors are wondering if sentiment may be running too hot.”

Here’s where US indexes stood at the 4:00 p.m. ET close on Monday:

Shares of GameStop rose 6% as the company announced that its CEO George Sherman will step down on July 31 or upon the appointment of a successor. Shares were already up even before the company’s announcement, boosted by the company’s progress in making major changes led by activist investor Ryan Cohen.

Nvidia shares sank as much as 4% after UK regulators said they will probe the company’s proposed $40 billion takeover of British chipmaker Arm over national security concerns.

Over the weekend, bitcoin slipped to 17% to its lowest since February but recovered on Monday, regaining some momentum to climb above the $55,000 level. Last week, the cryptocurrency hit an all-time high of over $64,000 on excitement over Coinbase’s direct listing.

But technical analyst Katie Stockton of Fairlead Strategies said bitcoin’s decline could set it up for further downside if a key technical support level is decisively breached.

“The 50-day (~10-week) MA is being tested, and we believe consecutive closes below it would increase risk of a test of support near $42,000,” Stockton said in a note.

China pivoted in its stance on bitcoin, calling the digital asset an “investment alternative” – a comment that Beijing insiders described as “progressive” – after years of cracking down on cryptocurrencies, CNBC first reported.

Oil prices steadied on Monday tempered by a weaker dollar, despite rising coronavirus infections globally. West Texas Intermediate crude rose 0.46% to $63.42 per barrel. Brent crude, oil’s international benchmark, climbed 0.43%, to $67.06 per barrel, at intraday lows.

Gold climbed as much as 0.39% to $1,770.94 per ounce.

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Paccar shares rise on deal with Amazon-backed Aurora for autonomous driving tech

Aurora Innovation truck

  • Paccar and autonomous driving startup Aurora have entered into a strategic partnership to develop self-driving trucks.
  • Paccar’s revenue fell significantly in 2020, although the stock managed to gain over 9% on the year.
  • The competition in the trucking industry is heating up with new entrants and industry veterans making waves.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Paccar shares jumped around 3% Wednesday after the semi-truck manufacturer announced a strategic partnership with the Amazon-backed autonomous driving start-up Aurora.

The two companies are looking to combine their respective expertise to develop, test, and sell semi-trucks powered by Aurora’s autonomous-driving technology.

“Paccar looks forward to partnering with Aurora because of their industry-leading autonomous driving technology and impressive team,” Preston Feight, Paccar’s chief executive officer, said in a press release on Tuesday. “This strategic partnership complements Paccar’s best-in-class commercial vehicle quality, technology, and innovation.”

Read More: GOLDMAN SACHS: Buy these 25 stocks best-positioned to juice profits in 2021 as stimulus and vaccine progress spur economic growth

The Bellevue, Washington-based Paccar is a global leader in the design and manufacture of high-quality light, medium, and heavy-duty trucks. The company also provides its clientele with advanced powertrains, financial services, information technology, and distributes truck parts.

Aurora, meanwhile, has been in the self-driving technology game since 2017 when former Google autonomous-driving engineer Chris Urmson, former Tesla self-driving director Sterling Anderson, and Carnegie Mellon’s Drew Bagnell came together to create the company.

Since 2017 Aurora has been making moves in an attempt to create the first fleet of self-driving semis.

In December, Aurora acquired Uber’s self-driving unit giving up 26% equity to do so. The company then expanded testing on public roads in California, Pennsylvania, and Texas, focusing on long-haul, commercial trips.

Now, Aurora’s technology will be paired with the Peterbilt 579 and the Kenworth T680 semi-trucks at Paccar.

Despite the bullish news, PACCAR and Aurora will face stiff competition going forward, and not just from the big names like Tesla.

Alphabet’s Waymo announced plans last year to develop semi-trucks with Daimler, and self-driving startup TuSimple announced it is joining forces with US truck manufacturer Navistar to create driverless big rigs by 2024.

Read More: The head of active equity at Wells Fargo’s $607 billion asset management arm shares how she worked her way up from the call center 29 years ago – and pinpoints 3 trends transforming the investment landscape today

The news of a strategic partnership with Aurora should be cheered by Paccar shareholders. The company’s revenue has taken a hit recently, falling some 24% year-over-year in the third quarter, according to its latest SEC filings.

Additionally, Paccar earned just $2.57 per share for the nine months that ended September 30, 2020, versus $5.34 per share during the same period in 2019.

Paccar currently trades around $92 per share and holds a $30 billion market cap.

The company boasts 10 “buy” ratings, 14 “neutral” ratings, and six “sell” ratings from analysts.

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Nvidia pares Thursday gains after spiking on Citi analyst’s strong outlook

Semiconductor manufacturing.
Nvidia semiconductor manufacturing.

  • Nvidia stock trimmed gains Friday after a strong showing on the back of Citigroup’s positive note on Thursday.
  • Analyst Atif Malik’s EPS estimates are 2%-5% ahead of street estimates, which implies Nvidia could post a $2.94 EPS figure when the company reports earnings on February 11.
  • Nvidia now boasts 30 Buy ratings, 5 hold ratings, and just 4 Sell ratings from analysts.
  • Visit Business Insider’s homepage for more stories.

Shares of Nvidia trimmed gains Friday after surging some 4.3% Thursday on a strong outlook from Citigroup. The stock was down around 1% early Friday afternoon. 

Citigroup analyst Atif Malik said in a note that Nvidia’s stock has lagged its chip manufacturing peers and could offer upside potential ahead of next week’s virtual CES conference.

Nvidia was added to Citi’s “Catalyst Watch List” and the bank maintained its $600 price target.

Malik noted Nvidia has fallen over 15% from its early November high of over $580 per share, while the iShares semiconductor index SOXX has gained over 24% during the same period.

Read more: Wall Street experts are calling Georgia’s runoff results ‘the first surprise of 2021.’ Here’s how 4 of them recommend positioning your portfolio for what could happen next.

Citi expects hyperscale-led data center demand recovery in the first half of 2021 and sustained PC gaming demand to drive an EPS boost.

Their analysts’ EPS estimates for Nvidia remain 2%-5% above street projections.

That’s worth noting, as Street analysts already expect Nvidia to grow its earnings by 48% in the January quarter to $2.80 per share. That’s on top of 55% year-over-year sales growth which will see Nvidia closing on the $5 billion revenue mark for the quarter.

Read more: Investing legend Terry Smith’s $30 billion equity fund returned 449% to investors over a decade – Here’s his 4-part strategy for success and 10 pieces of investing wisdom to take into 2021

This news comes just weeks after Wells Fargo boosted their price target for the chip manufacturer to $625 per share from $600 per share.

As of Friday, Nvidia boasted 30 Buy ratings, 5 Hold ratings, and just 4 Sell ratings from analysts, per MarketBeat.

Shares of Nvidia are down over 1% Friday afternoon, trading at $529.07 per share as of 12:55pm E.T.

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Apple’s market value grows by $102 billion after report says the company aims to produce electric cars by 2024

Tim Cook
Apple CEO Tim Cook.

  • Apple climbed as much as 4.7% on Tuesday following a Reuters report on Monday afternoon that said the tech giant aimed to produce electric cars by 2024.
  • The company wants to compete in the electric-vehicle market with battery innovations to improve vehicle safety, packaging, and range, according to the report.
  • The news, published less than an hour before markets closed, lifted Apple to a 1.2% gain on Monday.
  • Apple’s market cap grew by more than $102 billion at intraday highs.
  • Watch Apple trade live here.

Apple gained 4.7% on Tuesday following a Reuters report on Monday that said the iPhone maker planned to produce electric cars by 2024.

The tech giant aims to compete in the rapidly expanding electric-car market with new battery technologies to improve vehicles’ safety and range, according to the report. That could “radically” cut down on battery costs, a source familiar with the plans told Reuters.

Apple’s market value grew by more than $102 billion at intraday highs.

Read more: Brooke de Boutray beaten 99% of her peers over the last 5 years and runs a fund that is up 148% in 2020. She shared with us 4 stocks she’s most bullish on heading into 2021.

The report, published less than an hour before markets closed, lifted Apple shares to a 1.2% gain on Monday. Tesla, which would likely serve as Apple’s greatest competitor in the automotive sector, extended losses and closed 6.5% lower.

Sources told Reuters that Apple planned to partner with other companies for some vehicle systems. Suppliers of lidar sensors rallied in early trading. Apple developed its own lidar sensors for the iPhone 12 Pro and iPad Pro models.

The report revived discussions of Apple’s Project Titan automotive plan after layoffs and a leadership shakeup spurred rumors that the project had died.

The company plans to incorporate a “monocell” design to concentrate battery cells and create more space in battery packs by doing away with various storage pockets, Reuters reported. The layout would allow for denser battery units and a longer range than layouts with more loosely packed cells.

Apple is also experimenting with lithium-iron-phosphate battery chemistry, which could be less likely to overheat than lithium-ion batteries, Reuters reported.

Read more: BANK OF AMERICA: Buy these 16 medtech stocks with strong fundamentals that are set to soar post-pandemic

But even Apple’s expertise in handling massive supply chains would likely be tested by vehicle production. Tesla spent nearly two decades building cars before turning a steady profit. Apple would need to collaborate with a slew of partners and venture into manufacturing processes not used for its existing hardware.

“If there is one company on the planet that has the resources to do that, it’s probably Apple. But at the same time, it’s not a cellphone,” a person who worked on Project Titan told Reuters.

Apple closed at $128.23 on Monday, up 76% year-to-date. The company has 75 “buy” ratings, 18 “hold” ratings, and three “sell” ratings from analysts.

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JPMorgan rolls out a supercharged tech trade designed to amplify gains in stocks like Tesla, report says

Nasdaq exchange
  • JPMorgan is selling investment products that allow clients to augment their bets on high-flying tech stocks.
  • The notes track three exchange-traded funds from Ark Investment Management leveraged 1.5 times over a six-year period, Bloomberg reported Monday.
  • The underlying ETFs have all rallied at least 150% in 2020. Two reaped the benefits of Tesla’s 660% year-to-date surge.
  • The product’s rollout comes as investors shift out of tech stocks and into cyclical sectors amid hopes for a vaccine-fueled recovery.
  • Visit the Business Insider homepage for more stories.

Tech stocks have already led the stock market to several record highs in 2020. JPMorgan thinks investors want to double down on the sector.

The bank is letting investors in on a new trade that amplifies bets on three tech-focused exchange-traded funds, Bloomberg reported Monday. The product tracks three ETFs from Ark Investment Management leveraged 1.5 times over a six-year period. JPMorgan has already sold $589,000 of the notes.

The funds – Ark’s Innovation, Genomic Revolution, and Next Generation Internet ETFs – are among the year’s best performers. Large stakes in Tesla boosted the Innovation and Next Generation Internet funds in 2020, as the automaker’s shares have rallied more than 660% throughout the year.

The Genomic Revolution ETF is up 194% year-to-date. The Innovation and Next Generation Internet ETFs have rallied 154% and 153%, respectively.

Read more: JPMorgan unveils its 50 ‘most compelling’ stock picks to buy for 2021 – and details why each one will be a top performer

JPMorgan has debuted the product as investors begin to rotate out of tech stocks. The sector’s insulation from the virus fallout led them to outperform through much of the year, but hopes for a vaccine-fueled recovery in 2021 have prompted mass shifts into value stocks and previously neglected sectors. A prolonged rotation could drag tech stocks lower and weigh heavily on the new products’ gains.

The structured products also only track the worst-performing of the three ETFs, meaning one’s plunge would cancel out any gains across the other two funds. Still, those holding the notes are protected against the first 20% decline in any of the ETFs, Bloomberg reported.

Ark’s Innovation, Genomic Revolution, and Next Generation Internet ETFs trade under the tickers ARKK, ARKW, and ARKG, respectively. Though all three broadly track tech themes, the Genomic Revolution fund focuses on innovations in health care including CRISPR, gene editing, and agricultural biology.

Read more: ‘We are very confident that the stupid is currently alive and well in this market’: Jeremy Grantham’s heir apparent Ben Inker breaks down how GMO plans to profit from the growth bubble through a new long/short equity strategy

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