The Market Sum: Cook’s Apple

Stocks Rally to Records on Economic Optimism

U.S. equity markets rolled on to new records again with the S&P 500 and the Nasdaq closing at all-time highs as investors continue to lean back into the recovery trade. As COVID-19 case rates appear to be peaking or turning in some areas, investors are leaning back into energy, transportation, and hospitality stocks.

After the close, the U.S. House of Representatives passed a $3.5 trillion budget resolution and advanced a $1 trillion bipartisan infrastructure bill. The vote paves the way for Democrats to write and approve the $3.5 trillion spending package without Republicans and puts the Senate-passed infrastructure plan on a path to final passage in the House of Representatives.

Oil prices continued to climb on economic optimism, with crude oil futures rising 3% on the day, bringing oil stocks along for the ride. U.S. Treasury yields also climbed, with the yield on the 10-year note inching up to 1.29%. Bitcoin and other major cryptocurrencies sold off today after rallying through the weekend.

Tim Cook’s Decade

Tim Cook celebrated ten years as the CEO of Apple (AAPL) today, and it’s hard to overstate how key his leadership has been to the company’s continued success. Sometimes CEOs just have good timing, but Cook proved that he could lead the company through tumultuous times, and has been an important voice for social justice and civil rights in the process.

Cook’s stewardship has also been very rewarding for Apple shareholders. He steered the company to a $2.47 trillion market cap that generates nearly $275 billion in annual sales. AAPL is among the most widely held stocks among individual and institutional investors, ETFs, mutual funds, pension funds, foreign investors, and hedge funds. For those who have remained invested in the company under Cook’s stewardship, the returns have been exceptional.

Up, Up, and Away

Add Wells Fargo to the list of companies that anticipate the current bull market will keep running hot through the end of 2021.

Wells Fargo now expects the S&P 500 to rise another 8% this year, with a price target of 4,825. That would be a one-year gain of 28%.

Analyst Christopher Harvey said in a note to clients that historically when the index was up double-digit percentages the first eight months of the year, the average return for the next four months has never been below 8%. The S&P 500 is almost 20% higher in 2021.

Harvey pointed out another reason for their bullish call is that so far S&P 500 companies have boosted their earnings per share forecasts by 21%, and the trend shows no sign of abating.

The T-Word

Harvey warned, however, that a pullback in the Federal Reserve’s bond-buying program would slow the advance. He noted, “if and when the Federal Reserve does finally utter the T-word (taper), we would expect the market to take a step back.” He added Wells Fargo expects the index to decline in 2022. 

Goldman Sachs, JPMorgan Chase, UBS, and Oppenheimer all recently raised their targets for the S&P 500 this year.

Walmart’s Last Mile Move

Walmart is commercializing its home delivery service by offering drop-off packages for other businesses.

The giant retailer has launched GoLocal, which will have Walmart’s drivers, who currently only handle its products, pick up and deliver items from a range of retailers.

Tom Ward, senior vice president of the company’s last-mile delivery program, said Walmart has worked hard to develop a reliable last-mile operation, and it will now use those capabilities to serve local merchants. He added the service would help a small bakery or national auto supplies retailer get their products to customers without the hassle of having their own delivery systems.

Research has shown that more than half of the expense incurred for deliveries comes from last-mile costs.

Competitive Pricing

Walmart didn’t give data on what customers would pay, saying only GoLocal would provide businesses with Walmart’s nationwide coverage at “competitive pricing.”

The company said it already has a number of contractual agreements with national and enterprise retail clients and is looking to add more.

Walmart rival Target has a similar service called Shipt.

Pumping Up Sales

Fall doesn’t officially begin in the Northern Hemisphere for another month, but that hasn’t stopped Starbucks (SBUX) from introducing one of its most popular products of autumn—the Pumpkin Spice Latte (PSL).

The rollout of the drink came a day earlier than last year and the earliest it’s hit the market since it first became available 18 years ago. Starbucks is also out with its Pumpkin Cream Cold Brew, and a new offering, the Apple Crisp Macchiato.

Earnings Catalyst

In the fiscal fourth quarter of 2020, the company set a record for average daily unit sales of its pumpkin products, led by the Pumpkin Cream Cold Brew. CEO Kevin Johnson said those drinks were a “catalyst” for the company’s stronger-than-expected results and an important part of Starbucks’ recovery from the COVID-19 outbreak, which had forced many locations to close. 

Rival Dunkin’ Donuts released its version of PSL earlier this month. Panera plans to put out its pumpkin drink on Sept. 1.

Top S&P 500 Gains

Shares of Best Buy rose by over 8% after the consumer electronics company posted Q2 earnings results that beat analyst estimates. Casino and resort stocks, including Las Vegas Sands, Wynn Resorts, Caesars Entertainment, and Penn National Gaming, rose today amid investor optimism following a drop in delta cases and associated hospitalizations in nine previous “hotspot” states in the U.S.

Top S&P 500 Losses

Pharmaceutical and biotech stocks, such as Moderna and Pfizer, fell today as investors cashed out following yesterday’s gains. Shares of Nielsen fell by 3.5% after NBCUniversal announced that it’s reviewing proposals for a possible alternative to the global marketing research firm’s rating system.

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