Back to the complete issue
Monday, 25 July 2022

US equities are continuing to rally despite a poor earnings season

US shares are rallying this month despite weak 2Q earnings reports and gloomy economic outlooks, the Wall Street Journal notes. The S&P 500 climbed nearly 5% so far in July, after falling 17.4% YTD in 2022. Notably, the S&P’s performance comes after 26% of constituents have have reported earnings having missed analyst expectations, the WSJ reports citing figures from FactSet. Meanwhile, the Nasdaq, which is down 25.3% YTD, has seen its shares rally 7.4% so far this month despite an overall fall of 24% in earnings among those that have reported. Big issuers including Bank of America, Netflix and Tesla posted earnings misses, but saw their share prices rally in the day or two after they announced.

The latest of these was Twitter, which reported (pdf) on Friday that revenues slid 1% y-o-y to USD 1.18 bn, coming in 11% below analysts’ estimates in what was its biggest revenue miss ever. That said, its share price was up 0.81% when markets closed on Friday. In addition to the same economic headwinds that plagued other tech companies, Twitter also blamed Elon Musk’s buyer’s remorse for the decline.

What gives? For one, earnings season isn’t over yet, with reports from traditional top performers such as Apple, Amazon, and ExxonMobil still to come. Apple and Amazon will both report toward the end of this week. Analysts speaking to the WSJ suggest that the pervading sentiment of pessimism could have been exaggerated, with the earning shortfalls not falling to the “train wreck” levels that investors were predicting.

Could this rally be sustained? That depends on the Fed this week: The Federal Reserve is expected to go ahead with another 75 bps rate hike when it meets later this week, which analysts feel is necessary to get a grip on inflation, a major driver of lower-than-expected earnings.

The July rally is even extending to crypto stocks: Shares in crypto companies, which were among the worst-hit assets of the year, appear to have also made a recovery this month, with the NYSE FactSet Global Blockchain Technologies Index now on track for its largest monthly gain since February 2021, Bloomberg reports. The index is up 16.5% over the past 30-days — but down 59.1% YTD. Leading coin exchange company Coinbase, saw its shares rise 12.3% in the past month after earlier falling 17.8% from the start of the year.


CLOSER TO HOME- The Gulf’s market for corporate bonds is going through a rough patch: Market volatility and rising interest rates have caused the corporate bond market in the GCC to grind to a halt so far in 2022 as issuers face a choice between steep issuance premiums now or higher rates later, Reuters says. Bond sales plunged 80% y-o-y in the first six months of the year as companies delayed issuances due to market turbulence. The GCC typically accounts for about 40% of bond issuances in emerging markets in any given year.

Down

EGX30

9,762

-0.2% (YTD: -22.4%)

None

USD (CBE)

Buy 18.89

Sell 18.97

None

USD at CIB

Buy 18.91

Sell 18.97

None

Interest rates CBE

11.25% deposit

12.25% lending

Down

Tadawul

11,975

-0.1% (YTD: +6.2%)

Up

ADX

9,662

+0.7% (YTD: +13.8%)

None

DFM

3,257

0.0% (YTD: +1.9%)

Down

S&P 500

3,962

-0.9% (YTD: -16.9%)

Up

FTSE 100

7,276

+0.1% (YTD: -1.5%)

None

Euro Stoxx 50

3,596

0.0% (YTD: -16.3%)

Down

Brent crude

USD 103.20

-0.6%

Up

Natural gas (Nymex)

USD 8.30

+4.6%

Up

Gold

USD 1,745.30

+0.8%

Up

BTC

USD 22,797

+2.5% (YTD: -50.7%)

THE CLOSING BELL-

The EGX30 fell 0.2% at yesterday’s close on anemic turnover of EGP 566 mn (31.6% below the 90-day average). Foreign investors were net sellers. The index is down 22.4% YTD.

In the green: Ibn Sina Pharma (+6.9%), Credit Agricole Egypt (+6.1%) and MM Group (+4.0%).

In the red: CIB (-1.9%), Housing & Development Bank (-1.5%) and Orascom Development Egypt (-1.3%).

Asian markets are in the red in early trading this morning as concerns about the likelihood of a global recession deepen risk-off sentiment. Shares in Europe and the US are likely to follow them later today, according to the future markets.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Etisalat Misr (tax ID: 235-071-579), the leading telecoms provider in Egypt; and Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt.