InvestMacro

By ForexTime 

• RUS2000: FXTM’s best-performing US stock index so far this week/month
• RUS2000 forecasted to have the most potential upside over the next 12 months
• Fed speakers, US data next week could help RUS2000 move closer to 2021 all-time high
• Markets predict 89% chance Fed will cut rates by further 75-basis points by end-2024
• Return of US recession fears could send RUS2000 plummeting

The RUS2000 index has been outshining its US peers of late.

This US stock index tracks the smallest 2000 publicly listed companies operating in the world’s largest economy i.e. companies that are more reflective of true US economic conditions.

Of late, the RUS2000 has been rejoicing the most, relative to FXTM’s other US stock indexes, over the Fed’s jumbo-sized 50 basis point rate cut!

That rate cut on September 18th, 2024 was the first US rate cut in 4 years.

With the Fed coming to the US economy’s aid with its rate cuts, the RUS2000 has outperformed other US stock indexes, both on a week-to-date (wtd) and month-to-date (mtd) basis:

• RUS2000: up 3.2% wtd / 1.6% mtd
• US400: up 3% wtd / 1.1% mtd
• NAS100: up 1.7% wtd / 1.35% mtd
• US500: up 1.56% wtd / 1.16% mtd
• US30: up 1.53% wtd / 1.1% mtd

But RUS2000 still missing out on record-high club, for now

To be clear, the RUS200 has yet to join the record-high party which already features the likes of US500, US30, US400, and even gold of late.

At the time of writing, the RUS2000 remains about 8.5% below its all-time high, using intraday prices, of 2458.85 registered on November 8th, 2021.

Wall Street experts predict it will eventually set a new record high, but perhaps only by this time next year.

Wall Street most bullish on RUS2000 12-month outlook

Here are the forecasted potential gains for these US stock indexes over the next 12 months:

• RUS2000: 19.4%
• NAS100: 11.7%
• US400: 9.9%
• US500: 9.1%
• US30: 5.4%

However, such gains are predicated on the notion that the Fed can indeed fend off a US recession.

And much of that will depend on the incoming US economic data, and whether the Fed can overcome their differing views and lower interest rates fast enough to avoid such a scenario.

Otherwise, a US recession is bound to send the RUS2000 plummeting, given the economically-sensitive nature of the stocks within this index.

What to look out for in the coming week?

The incoming scheduled speeches by Fed officials, fresh out of their September FOMC meeting, could provide further cause for RUS2000 bulls (those hoping prices will go higher) to rejoice even more:

Monday, September 23

• NZD: New Zealand August trade balance
• SG20 index: Singapore August CPI
• TWN index: Taiwan August unemployment
• EU50 index: Eurozone September PMIs
• GBP: UK September PMIs
• USD index: US September PMIs
• RUS2000 index: Speeches by Chicago Fed President Austan Goolsbee, Atlanta Fed President Raphael Bostic, Minneapolis Fed President Neel Kashkari

Tuesday, September 24

• JP225 index: Japan September PMIs
• AUD: RBA rate decision
• TWN index: Taiwan August export orders
• GER40 index: Germany September business climate
• Brent/Crude: OPEC releases annual World Oil Outlook
• US400 index: US September consumer confidence

Wednesday, September 25

• CNH: China medium-term lending facility rate
• AU200 index: Australia August CPI
• SEK: Riksbank policy rate decision
• TWN index: Taiwan August industrial production

Thursday, September 26

• JPY: BoJ meeting minutes
• SG20 index: Singapore August industrial production
• CHF: SNB policy rate decision
• US500 index: US weekly initial jobless claims; US 2Q GDP (final)
• USD index: Speeches by Fed Chair Jerome Powell (pre-recorded), New York Fed President John Williams, Treasury Secretary Janet Yellen

Friday, September 27

• JPY: Tokyo September CPI; LDP internal elections
• CN50 index: China August industrial profits
• EUR: Eurozone September economic confidence; Germany September unemployment
• US400 index: US August PCE, personal income and spending
• RUS2000 index: Speeches by Boston Fed President Susan Collins, Fed Governor Adriana Kugler

Sure, the coming week also features key US economic data such as the US purchasing managers index (PMIs), consumer confidence, weekly jobless claims, final estimate of 2Q GDP, personal income and spending, as well as the Fed’s preferred inflation gauge – the personal consumption expenditures (PCE).

All of these quantitative data certainly hold the potential to move US stock markets, including the RUS2000 index.

However, markets may instead be more attentive to the forward-looking statements out of Fed officials in the days ahead.

Why are the Fed speakers so important?

These scheduled speeches come just days after the Fed’s jumbo rate cut on September 18th.

Note that this latest US rates decision also featured its first dissenting vote from any FOMC member since 2022.

Fed Governor Michelle Bowman voted in favour of a run-of-the-mill 25 basis point cut at the just-concluded September meeting.

A closer look at the FOMC’s famous “dot plot” also suggests that policymakers at the world’s most powerful central bank are at odds regarding the size and timing of future rate cuts:

• 10 of 19 officials prefer another 50-bps in rate cuts by end-2024
• 7 of the 19 voted for only one sole 25-bps rate cut by year-end
• 2 of the remaining officials voted for no more rate cuts this year.

FOMC “dot plot” at odds with market forecasts

Not only are there differing views amongst FOMC members themselves, those views are also at odds with the market’s current forecasts.

At the time of writing, markets are forecasting a 89% chance that the Fed will lower its benchmark rates by another 75-basis points by Christmas.

Hence, the incoming Fed speak** will be stacked up against the latest Fed dot plot, and also current market forecasts.

**in bold in our coming week’s list of highlighted events (see above).

Notable shifts to existing market forecasts over incoming Fed rate cuts, either by way of signals from the Fed speak or US economic data, are bound to move prices across various asset classes in the week ahead.

In short, if you think the Fed watch is over, think again.

POTENTIAL SCENARIOS:

• If the incoming Fed speak and US economic data assures markets that the Fed can proceed with the forecasted 75 basis points in rate cuts by end-2024, that could help RUS2000 punch its way past 2300 and closer to its November 2021 record high.
• If the incoming Fed speak and US economic data pushes back on market forecasts for 75 basis points in Fed rate cuts by end-2024, that could drag the RUS2000 stock index back to its 21-day and 50-day simple moving averages (SMA) around 2170 for support.

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

By The Ino.com Team

With a $897.58 billion market cap, Taiwan Semiconductor Manufacturing Company Limited (TSM) plays a crucial role in the global semiconductor ecosystem by leading in the production of advanced chips used across several industries, including consumer electronics, automotive, telecom, and artificial intelligence (AI).

As one of the world’s largest independent semiconductor foundries, TSM’s expertise in advanced process technologies, such as 3nm and 5nm nodes, has made it a critical supplier for major tech companies, such as NVIDIA Corporation (NVDA), Advanced Micro Devices, Inc. (AMD), and Apple Inc. (AAPL).

Recently, the stock has dipped by around 10% from its all-time highs, making many investors wonder whether this pullback offers a prime buying opportunity. Let’s assess whether long-term investors should capitalize on TSMC’s discounted price.

TSMC’s Technological Leadership

Taiwan-based TSMC’s role in advancing manufacturing chip technology has solidified its position as a critical player in the high-tech ecosystem, particularly in industries such as AI, 5G, automotive, and data centers. One of the company’s greatest strengths is its leadership in advanced node technology.

As a global chip leader, TSM provides the most advanced and comprehensive portfolio of dedicated foundry process technologies, including A16, 2nm, 3nm, 5nm, 7nm, and more. The company’s 3nm process is the industry’s leading semiconductor technology, providing the best power, performance, and area (PPA) and represents a full node advance from the 5nm generation.

TSMC continuously expands its 3nm technology portfolio to cater to diverse customer needs. Last year, the chip giant added new members to its industry-leading 3nm technology family, including the N3X process, designed specifically for high-performance computing (HPC) applications, and N3AE, facilitating an early start for automotive applications on the most advanced silicon technology.

Moreover, TSMC’s 2nm technology employing nanosheet transistors continues to make significant progress in terms of yield and device performance and is expected to commence production in 2025.

Earlier this year, at its 2024 North America Technology Symposium, TSMC introduced its latest semiconductor process, advanced packaging, and 3D IC technologies, showcasing its silicon leadership in driving the next generation of AI innovations.

With TSMC’s cutting-edge N3E technology now in production and N2 slated for production in the second half of 2025, the company unveiled A16, the next technology in its roadmap. A16, set for production in 2026, integrates TSMC’s Super Power Rail architecture with nanosheet transistors. It enhances logic density and performance by allocating front-side routing resources to signals, making it well-suited for HPC products.

Also, the chip company introduced its System-on-Wafer (TSMC-SoW™) technology, a groundbreaking solution designed to deliver exceptional performance to the wafer level in addressing the future AI needs of hyperscaler data centers.

TSMC Surpasses Second-Quarter Earnings Expectations Amid AI Chip Boom

TSMC’s revenue and earnings beat analyst expectations in the second quarter of 2024 as demand for advanced chips used in AI applications continues to surge. In the quarter that ended June 30, 2024, the company’s net revenue rose 40.1% year-over-year to $20.82 billion. That surpassed analysts’ revenue estimate of $20.09 billion.

CEO C.C. Wei, in an earnings call, said business during the quarter was supported by robust demand for its industry-leading 3nm and 5nm technologies. TSMC’s shipments of 3-nanometer accounted for 15% of total wafer revenue, 5-nanometer constituted 35%, and 7-nanometer made up 17%. Advanced technologies, defined as 7-nanometer and more advanced technologies, accounted for 67% of total wafer revenue.

TSMC’s non-GAAP income from operations rose 41.9% year-over-year to $8.86 billion. Its net income and earnings per ADR were $7.66 billion and $1.48, increases of 36.3% year-over-year, respectively. Its earnings per ADR compared to the consensus estimate of $1.42.

“Moving into third quarter 2024, we expect our business to be supported by strong smartphone and AI-related demand for our leading-edge process technologies,” said Wendell Huang, Chief Financial Officer of TSMC.

Based on the company’s current business outlook, TSMC’s management expects revenue between $22.40 billion and $23.20 billion for the third quarter of 2024. The company’s gross profit margin is projected to be between 53.5% and 55.5%, and its operating profit margin is anticipated to be between 42.5% and 44.5%.

Why TSMC’s Stock Dip May Be a Buying Opportunity

TSMC’s leadership in advanced chip manufacturing, coupled with the growing demand for advanced chips across AI, 5G, and high-performance computing sectors, positions the company for long-term growth. Management has projected third-quarter revenue to be $22.40-$23.20 billion, compared to $17.30 billion reported in the previous year’s quarter.

Meanwhile, analysts appear highly bullish about the company’s earnings growth. Street expects TSMC’s revenue and EPS for the current quarter (ending September 2024) to grow 38.8% and 37.9% year-over-year to $23.44 billion and $1.78, respectively.

For long-term investors, TSMC’s recent 10% decline may present an opportunity to buy into a company at the forefront of technological innovation. While short-term market fluctuations and geopolitical concerns may persist, the company’s technological leadership and strong growth outlook make it a compelling choice for those looking to benefit from the continued evolution of AI and semiconductor technology.

Bottom Line

TSMC’s recent stock dip presents a potential buying opportunity for long-term investors seeking exposure to a global leader in semiconductor innovation. With its industry-leading 3nm and 5nm process technologies, TSMC is well-positioned to capitalize on the growing demand for advanced chips, particularly in AI, 5G, and high-performance computing (HPC) industries.

While geopolitical risks and market volatility may pose challenges in the near term, TSMC’s strong earnings outlook and continuous innovation in semiconductor manufacturing suggest that this dip could be a strategic entry point.

By Ino.com – See our Trader Blog, INO TV Free & Market Analysis Alerts

Source: Taiwan Semiconductor’s 10% Dip: Is It Time to Buy?
https://www.ino.com/blog/2024/09/taiwan-semiconductors-10-dip-is-it-time-to-buy//?a_aid=CD3344&a_bid=e69e6702

By The Ino.com Team

In the first half of 2024, China’s shipbuilding industry secured nearly 75% of new global orders, demonstrating the nation’s expanding manufacturing power. Ship completions surged by 18.4% year-over-year to 25.02 million deadweight tons (dwt), which represents 55% of the global total during this period. Moreover, the industry’s order backlogs increased by 38.6% to 171.55 million dwt. China’s dominance is no fluke, the country leads in 14 out of 18 major ship types for new orders.

But what’s driving this rapid ascent? It’s a mix of cutting-edge technology, surging global demand, and the unmatched efficiency of Chinese shipyards. By adopting advanced construction techniques and digital tools, China has managed to build ships faster and better, which has translated into booming profits. In fact, the industry’s profits for the first five months of 2024 came in at 16 billion yuan ($2.24 billion), up 187.5% year-over-year.

China’s defense industry is rapidly advancing, producing increasingly larger and more capable warships at an impressive pace. For instance, the construction of the Yulan-class landing helicopter assault (LHA) ship, also known as the Type 076, at the Changxing Island Shipbuilding Base. This vessel is set to be a game-changer, poised to become the largest amphibious assault ship in the world.

Satellite images from July 4 show the vessel’s flight deck spans over 13,500 square meters, which is nearly the size of three American football fields. That’s significantly larger than the U.S. America-class LHAs and Japan’s Izumo-class carriers and much bigger than its Chinese predecessor, the Type 075.

The Type 076 isn’t just about size; it’s about capability. With room for dozens of aircraft, drones, and amphibious landing craft, plus accommodations for over 1,000 marines, this ship is set to revolutionize the People’s Liberation Army’s (PLA) power projection. Its expansive flight deck and roomy internal hangar will offer enhanced capacity and flexibility, making it a formidable addition to China’s naval arsenal.

Images also reveal that the drydock where the new 076 class is being constructed opened only in October as part of a new port expansion. This rapid production is giving Beijing a significant edge, with the potential to outpace its rivals like the United States.

Since 2019, China has launched four Type 075 vessels, with two now combat-ready and four more on order. Although the U.S. Navy leads in total warship tonnage, China has surpassed the U.S. in the number of warships over 1,000 tons, and in combat logistics and support vessels.

The real worry for U.S. officials is China’s shipbuilding capacity. According to U.S. Naval Intelligence, China’s shipbuilding capacity is now 632 times greater than the U.S., supported by a vast network of efficient shipyards.

In the past decade, China has launched 23 destroyers and eight guided-missile cruisers, while the U.S. has launched only 11 destroyers and none of the cruisers. This booming production capability, backed by a robust civilian shipbuilding industry, is raising serious concerns in Washington.

As nations respond to China’s expanding naval prowess, there is likely to be increased demand for advanced defense technologies and military solutions. This heightened demand could drive growth in defense stocks, reflecting the broader trends in global military strategy and procurement.

Therefore, investors and defense analysts are turning their attention to how companies like Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC) are positioned to capitalize on these developments. With that in mind, let’s dig deeper into the fundamental strength of the featured stocks in detail.

Lockheed Martin Corporation (LMT)

Security and aerospace company LMT focuses on research, design, development, manufacture, integration, and sustainment of advanced technology systems, products, and services. It operates through four segments: Aeronautics; Missiles and Fire Control; Rotary and Mission Systems; and Space.

LMT’s net sales increased 8.6% year-over-year to $18.12 billion in the fiscal 2024 second quarter (ended June 30). Its consolidated operating profit grew marginally from the year-ago value to $2.04 billion, while its non-GAAP net earnings amounted to $1.64 billion in the same period. Also, the company’s EPS came in at $6.65, up 3.3% year-over-year.

While analysts predict a slight 4.6% drop in EPS for the year ending December 2024, its revenue is expected to grow by 5.5% year-over-year to $71.25 billion. For fiscal 2025, forecasts suggest revenue and EPS will hit $74.16 billion and $28.01, respectively.

Regarding rewarding shareholders, Lockheed Martin offers a stable dividend with a four-year average yield of 2.66% and a payout ratio of 44.3%. LMT’s current annual dividend of $12.60 translates to a 2.26% yield at the prevailing share price. Moreover, the company has increased its dividend payouts at a CAGR of 6.9% over the past three years.

In terms of price performance, the stock has gained nearly 30% over the past six months. As defense budgets rise globally, driven by geopolitical tensions, Lockheed Martin is well-positioned to benefit and deliver stable returns to your portfolio.

Northrop Grumman Corporation (NOC)

NOC operates as a global aerospace and defense technology company through four segments: Aeronautics Systems; Defense Systems; Mission Systems; and Space Systems. The company leads in satellite manufacturing and space technology, contributing to missions like NASA’s Artemis program.

Recently, the company declared a quarterly dividend of $2.06 per share on the common stock, in consistent with its 10% increase announced on May 14. This dividend is payable to its shareholders on September 18, 2024. With a forward annual dividend of $8.24 per share and a yield of 1.62%, Northrop not only rewards shareholders but also boasts 21 years of consecutive dividend growth.

Financially, NOC is on a solid footing. In the second quarter (ended June 30, 2024), its total sales increased 6.7% year-over-year to $10.22 billion, while its total operating income rose 12.7% from the year-ago value to $1.09 billion. Net earnings for the quarter came in at $940 million and $6.36 per share, reflecting an increase of 15.8% and 19.1% from the same period last year, respectively. Also, its free cash flow improved by 79.7% from the prior-year quarter to $1.10 billion.

Street expects NOC’s revenue to increase 5.2% year-over-year in the current year (ending December 2024) to $41.34 billion, while its EPS is expected to grow by 8.2% from the prior year to $25.20 in the same period. For the fiscal year 2025, its revenue and EPS are expected to reach $42.92 billion and $27.69, registering an increase of 3.8% and 9.8%, respectively.

Moreover, NOC’s shares have gained more than 16% over the past month and nearly 9% year-to-date, making it a compelling option in a rapidly evolving defense landscape.

By Ino.com – See our Trader Blog, INO TV Free & Market Analysis Alerts

Source: China’s Naval Expansion: Why Defense Stocks Like NOC & LMT Are Poised for Growth