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Market Update: Uber Rides into Profit Territory Since IPO, Treasury Yields Surge on Strong Jobs Data, S&P Index Nears 5000

 

Uber Technologies achieved its inaugural annual profit since becoming a publicly traded entity last year and anticipates sustained expansion in the initial quarter of 2024, denoting the culmination of a period wherein the ride-sharing and food-delivery enterprise prioritized growth over profitability. During the last quarter of 2023, the company recorded a profit of $1.43 billion, attributed to a $1 billion gain from its equity investments alongside operational earnings. This achievement propelled Uber to achieve a net income for the entire year, following a series of substantial losses in previous years. (Source: Wall Street Journal)


Markets

 

The S&P 500 index attained a significant milestone, reaching the threshold of 5,000 points just moments before the close of trading on Thursday, February 8th, thus extending its ongoing trend of hitting new all-time highs.

 


Source: Bloomberg Terminal

 

Despite the remarkable surge in the market-cap weighted index, there are cautionary signals evident when comparing it to its equal-weight counterpart.


Over the past year, the performance of the S&P 500 index, as tracked by the SPDR S&P 500 ETF Trust, has experienced a substantial increase of 21%. Conversely, the Invesco S&P 500 Equal Weight ETF has only yielded a 4% return over the same period, significantly lagging behind its cap-weighted counterpart. This stark contrast in performance has led to a relative ratio between the two indices reaching levels not observed since September 2020. Additionally, the forward price-to-earnings ratio for the cap-weighted index currently stands at 21, rendering it 24% more expensive compared to the valuation of the equal-weight index.

 


Source: TradingView

 

The concentration of weight in the "Magnificent Seven" within the S&P 500 Index plays a pivotal role in explaining the significant 17-percentage-point difference in performance observed over the past year between the two indices. The cumulative weight attributed to these seven stocks within the cap-weighted S&P 500 has surged to 29.3% of the total index. Remarkably, the collective performance of these heavyweights has seen a remarkable surge of nearly 80% over the same period. Notably, these select stocks alone have accounted for a substantial 64% contribution to the S&P 500's overall returns during this timeframe.

 

Source: Business Insider

 

U.S. Treasury yields saw an increase on Thursday as investors observed strong employment figures and recent statements from Federal Reserve officials, which dashed hopes for a rate cut in March. The 10-year Treasury yield witnessed an uptick of approximately 6 basis points, reaching 4.156%, while the 2-year Treasury yield climbed around 4 basis points to 4.458%. This surge in yields coincided with another set of resilient employment data, as initial filings for unemployment insurance dropped to 218,000 last week, indicating ongoing workforce retention by employers. Notably, this figure came in below the Dow Jones estimate of 220,000. (Source: CNBC)

 

Corporate News

 

Arm CEO Renée Haas remarked that Artificial Intelligence (AI) is not experiencing a "hype cycle" and emphasized that the potential it offers is still in its nascent phase. Consequently, the company's stock surged by 48%.

 

According to the Financial Times, Bill Ackman revealed plans for a hedge fund product that will focus on "asymmetric opportunities," distinct from an already disclosed closed-end US fund.

 

L’Oréal's financial performance was negatively impacted by weak demand in China. Expedia saw a decline in its stock price following disappointing booking figures and the sudden announcement of a CEO change.

 

Commodities

 

ConocoPhillips anticipates another strong year ahead. CEO Ryan Lance stated that US oil producers are projected to increase global supplies by nearly half of Libya's total crude output in 2024.

 

Exxon Mobil Corp. intends to withdraw from Equatorial Guinea in the coming months, marking the conclusion of nearly three decades of oil exploration activities that elevated the small West African nation to OPEC membership. Exxon stated in an email that it will transfer its investments in the country to the government during the second quarter.

 

Oil rallied as Israeli Prime Minister Benjamin Netanyahu’s dismissal of a potential cease-fire in the Israel-Hamas war triggered algorithmic buying in markets.


Source: Bloomberg News

 

Private Credit

 

A consortium of private-credit firms, including Apollo Global Management Inc. and Blackstone Inc., is in the final stages of securing a $2 billion debt package to facilitate the acquisition of software developer Alteryx Inc. by Clearlake Capital and Insight Partners, as reported by sources familiar with the matter.

 

Ares Management Corp. has successfully raised A$2.6 billion ($1.7 billion) for a credit fund focused on Australia and New Zealand, aiming to seize opportunities arising from banks scaling back their leveraged lending activities.

 

T. Rowe Price Group Inc. and Oak Hill Advisors are launching a new private credit fund accessible to individual investors in the US to tap into the rapidly expanding $1.5 trillion market. The fund, named the T. Rowe OHA Select Private Credit Fund (OCREDIT), has already amassed $1.5 billion in investible capital, according to a statement obtained by Bloomberg News.

 

 

 

 

 

 

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