A wave of corporate deals and generally positive quarterly earnings competed with gloomy news developments in Ukraine and Gaza for attention this week, but ultimately prevailed to lead US stocks higher.
For the week, the Dow Jones Industrial Average gained 156.37 points (0.92 percent) to finish on 17,100.18, while the broad-based S&P 500 rose 10.65 (0.54 percent) to 1,978.22 points and the tech-rich NASDAQ Composite Index added 16.66 (0.38 percent) to end at 4,432.15.
The week’s gains came despite twin crises that emerged on Thursday when a Malaysia Air jet carrying 298 people crashed in Ukraine in a disaster that US officials say was likely caused by a missile shot from an area of Ukraine controlled by pro-Russia separatists.
Only hours after the plane crashed, Israel launched a ground operation in Gaza, lifting the Palestinian death toll to 296 on Friday, the 11th day of assault that Israel argues is needed to counter Hamas’ “terrorist efforts.”
US stocks nose-dived on Thursday, but surged the next day even as the US sharpened criticism of Russia’s actions in Ukraine and as Israel warned of a wider Gaza assault.
“The negativity is being shrugged off for the most part,” said Michael James, managing director of equity trading at Wedbush Securities, adding that the market is showing “tremendous amounts of resilience.”
“Investors are continuing to embrace risk and buy every dip,” Kjolen Capital Management portfolio manager David Levy said.
The market is giving greater weight to positive economic news than to geopolitical threats like Ukraine, where the economic implications are murky and there is little obvious potential for a “prolonged impact on corporate America,” according to Levy.
“The economy is continuing to show signs of improvement,” Levy said. “We’re seeing strong corporate profitability, as well as strong merger and acquisition activity. That’s why the market is able to shrug off geopolitical news.”
Major deals this week included a plan unveiled by US tobacco giant Reynolds American Inc to acquire rival Lorillard Tobacco Co for US$27.4 billion and sell cigarette brands including Salem and Winston to British firm Imperial Tobacco Group PLC for $7.1 billion.
In other deals, US pharmaceutical giant AbbVie sealed a US$54 billion takeover of Dublin-based Shire Pharmaceuticals PLC, which had opposed earlier bids, Whiting Petroleum Corp announced plans to acquire Kodiak Oil & Gas Corp for US$6 billion and Abbott Laboratories sold its branded generic drugs for developed markets to generic drugmaker Mylan Laboratories Inc for stock valued at US$5.3 billion.
Rupert Murdoch rocked the media world when his entertainment company, Twenty-First Century Fox Inc, offered US$80 billion for Time Warner Inc. Time Warner turned down the bid, but Murdoch is “determined to buy Time Warner,” a person familiar with the matter said.
Technology giants IBM Corp and Apple Inc, while avoiding show-stopping mergers, announced what they called a “landmark” partnership to collaborate on applications for Apple’s iOS system, which will employ IBM’s supercomputing analytics.
Analysts were also smiling at the early results from earnings season.
Standouts included Dow component Intel Corp, which raised its profit forecast and announced US$20 billion in additional share repurchases; Google Inc, which notched a 22 percent increase in revenue behind a surge in “paid clicks;” and Goldman Sachs, which reported US$4.10 per share in earnings, beating expectations by more than US$1.
“It’s been a very good earnings season,” Meeschaert Capital Markets president Gregori Volokhine said. “There were lots of doubts about it earlier.”
Through Friday afternoon, 84 companies on the S&P 500 reported earnings, with 56 beating analyst expectations, 15 missing and 13 meeting projections, according to S&P Capital IQ.
Next week’s earnings calendar is also busy and includes giants like Apple, Microsoft Corp, Boeing Co, Facebook Inc, McDonald’s Corp and American Airlines Inc.
The schedule of economic indicators includes reports on existing-home sales, new home sales and durable goods orders.
WASHINGTON’S INCENTIVES: The CHIPS Act set aside US$39 billion in direct grants to persuade the world’s top semiconductor companies to make chips on US soil The US plans to award more than US$6 billion to Samsung Electronics Co, helping the chipmaker expand beyond a project in Texas it has already announced, people familiar with the matter said. The money from the 2022 CHIPS and Science Act would be one of several major awards that the US Department of Commerce is expected to announce in the coming weeks, including a grant of more than US$5 billion to Samsung’s rival, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), people familiar with the plans said. The people spoke on condition of anonymity in advance of the official announcements. The federal funding for
HIGH DEMAND: The firm has strong capabilities of providing key components including liquid cooling technology needed for AI servers, chairman Young Liu said Hon Hai Precision Industry Co (鴻海精密) yesterday revised its revenue outlook for this year to “significant” growth from a “neutral” view forecast five months ago, due to strong demand for artificial intelligence (AI) servers from cloud service providers. Hon Hai, a major assembler of iPhones that is also known as Foxconn, expects AI server revenues to soar more than 40 percent annually this year, chairman Young Liu (劉揚偉) told investors. The robust growth would uplift revenue contribution from AI servers to 40 percent of the company’s overall server revenue this year, from 30 percent last year, Liu said. In the three-year period
LONG HAUL: Largan Energy Materials’ TNO-based lithium-ion batteries are expected to charge in five minutes and last about 20 years, far surpassing conventional technology Largan Precision Co (大立光) has formed a joint venture with the Industrial Technology Research Institute (ITRI, 工研院) to produce fast-charging, long-life lithium-ion batteries for electric vehicles, mobile electronics and electric storage units, the camera lens supplier for Apple Inc’s iPhones said yesterday. Largan Energy Materials Co (萬溢能源材料), established in January, is developing high-energy, fast-charging, long-life lithium-ion batteries using titanium niobium oxide (TNO) anodes, it said. TNO-based batteries can be fully charged in five minutes and have a lifespan of 20 years, a major advantage over the two to four hours of charging time needed for conventional graphite-anode-based batteries, Largan said in a
Taiwan is one of the first countries to benefit from the artificial intelligence (AI) boom, but because that is largely down to a single company it also represents a risk, former Google Taiwan managing director Chien Lee-feng (簡立峰) said at an AI forum in Taipei yesterday. Speaking at the forum on how generative AI can generate possibilities for all walks of life, Chien said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) — currently among the world’s 10 most-valuable companies due to continued optimism about AI — ensures Taiwan is one of the economies to benefit most from AI. “This is because AI is