Taking Stock - US stocks fell sharply on Wednesday.

In todays taking stock, we look at how US stocks fell sharply on Wednesday amid disappointing earnings, while concern about heightened speculative trading activity deepened.

article image

MARKET COMMENTARY

SOUTH AFRICA

Local stocks continued their retreat from record highs reached earlier in the week. Locally listed gold shares fell 1.47% after global bullion prices were dented by a firmer dollar. The Johannesburg All-Share index fell 1.78% after hitting an all-time high on Monday. The Top-40 index declined 1.83%. Harmony Gold fell 2.60%, Gold Fields closed 1.88% lower, and AngloGold Ashanti ended 0.71% weaker.

 

 

EUROPE

European stocks closed lower on Wednesday, echoing an uncertain trend seen in other global markets as investors monitored vaccine rollouts and earnings. The pan-European Stoxx 600 slid 1.1%, with basic resources falling 3.4% to lead losses while telecoms bucked the downward trend to add 1.5%. The lacklustre sentiment in Europe reflected investor uncertainty amid the ongoing coronavirus pandemic.

 

 

US

US stocks fell sharply on Wednesday amid disappointing earnings, while concern about heightened speculative trading activity deepened. Heavily shorted names, including GameStop and AMC Entertainment, continued to be pushed higher by amateur day traders in online chat rooms. Some investors are worried about mounting losses by hedge funds spilling over to other areas of the market as those funds sell other securities to raise cash. The Federal Reserve failed to stem the market sell-off even as it said it would keep interest rates unchanged near zero, while maintaining an asset purchasing program with at least $120 billion buying a month.

 

 

ASIA

Shares in Asia fell this morning following an overnight plunge on Wall Street that wiped out the S&P 500′s 2021 gains and left it in negative territory for the year. Japan’s retail sales declined 0.3% year-on-year in December, according to data released by the country’s Ministry of Economy, Trade and Industry. That compared against a median market forecast for a 0.4% decline, according to Reuters.

 

 

 

 

CURRENCIES

The rand weakened on Wednesday, with caution ahead of the outcome of the U.S. Federal Reserve's monetary policy meeting for market cues and indications of rate cuts by the European Central Bank (ECB) curbing risk-taking by investors. At the close, the rand traded at R15.27 against the US dollar, 1.33% weaker than its previous close. The local currency was trading around R15.31 to the dollar this morning.

 

 

COMMODITIES

Gold prices edged lower this morning as investors opted for the safety of the dollar after the US Federal Reserve flagged concerns about the pace of recovery in the world’s largest economy. The Fed on Wednesday left its key overnight interest rate near zero and made no change to its monthly bond purchases. Oil prices slid in early trade today on fresh worries about weakened fuel demand, after England clamped down on travel and China, the world’s second-largest oil consumer, also sought to limit Lunar New Year trips to stem a surge in Covid-19 cases.

LOCAL COMPANIES

Life Healthcare (LHC) -1.5%

Life Healthcare Group Holdings Ltd said on Wednesday revenue for the quarter ended December 31 rose by 5% as compared with the same period a year ago, as non-emergency hospital visits surged in October and November. However, in December the company once again saw a drop in hospital visits as a second wave of coronavirus gripped its South African business and parts of international operations, it said. It did not disclose the expected change in net profit or revenue.

 

Lewis Group (LEW) +5.0%

The strong customer demand experienced by Lewis Group since the reopening of its stores at the beginning of June after the hard lockdown continued for the balance of 2020, with the group delivering a robust trading performance in the third quarter to December 2020. Despite the ongoing pressure on consumer spending arising from the Covid-19 pandemic and lockdown restrictions, the group delivered strong sales growth of 16.6% for the third quarter to December 2020, supported by another buoyant Black Friday performance. Cash sales for the quarter grew by 35.9% while credit sales increased by 2%. Merchandise sales for the nine months to December 2020 increased by 4%. Excluding the lockdown months of April and May 2020 when stores were closed, sales grew by 18.3%. Comparable stores grew sales by 15.0% for the quarter and 2.4% for the nine months.

INTERNATIONAL COMPANIES

Facebook (fb) -3.5%

Facebook stock was up in after-hours trading on Wednesday after the company reported its fourth-quarter earnings. The company warned the looming changes in Apple’s iOS 14 and a reversal in pandemic trends could hurt its advertising business. Earnings came in at $3.88 per share vs $3.22 per share forecast, while revenue was reported at $28.07 billion vs $26.44 billion forecast. Facebook CEO Mark Zuckerberg said that the company is now considering steps to reduce the amount of political content that users see in their News Feed. This announcement comes in the wake of the insurrection at the US Capitol on January 6th. “One of the top pieces of feedback that we’re hearing from our community right now is that people don’t want politics and fighting to take over their experience on our services,” Zuckerberg said. Facebook said it counts 3.30 billion monthly users across its family of apps, compared to 3.21 billion in the previous quarter. This metric is used to measure Facebook’s total user base across its main app, Instagram, Messenger and WhatsApp.

 

Download full report here.

Share now
About the Author
avatar

Research Team

Media, Sasfin Wealth

Related Articles
articles image

Taking Stock - US Treasury yield topped 1.4%.

By Research Team

articles image

Taking Stock - Local main indices hit another all-time peak.

By Research Team

©2019 Sasfin. All right reserved. Financial Services Provider (FSP) 23833 and Registered Credit Provider NCRCP22

;