US markets (S&P 500 Index +1.8%) have broken their 7-day losing streak, with every sector except energy (-1.2%) closing the session in the green. Utilities and Consumer Discretionary stocks led the pack, both rising 3.0% on the day. Oil stocks within the energy sector index were rocked by the fall in price of WTI Crude oil (-5.8%) over the past 24 hours.
European markets (Stoxx 600 Index, -0.4%) fell on Wednesday, following declines in commodity stocks after data from China added to worries about a global economic slowdown. Shares in Ubisoft (UBI:EPA) tumbled 17.2% after investors lost faith that China’s Tencent (0700.HK) would conduct a full buyout of the company.
Johnson & Johnson (JNJ: NYSE)
Shares of Johnson & Johnson (+0.4%) inched higher to $164.07 on Wednesday, outperformed by some of its competitors, including Moderna (+3.7%), Roche (+1.7%), Pfizer (+0.7%), and Merck & Co. (+0.5%).
Several headwinds exist for JNJ, which has contributed to our recent downgrade of this stock from a BUY to a HOLD. Our recommendation holds even while JNJ stock has shed 4.0% since the company reported its upbeat Full Year 2022 earnings on July 19. The company beat revenue expectations ($24.02 billion vs $23.85 billion) for the year and expects to grow earnings 4.48% over the coming year.
Even so, the primary catalyst for our downgrade is Johnson & Johnson’s planned spinoff of its consumer products division. This spinoff will likely intensify its reliance on pharmaceutical products alone and choking off the steady revenue stream it makes on its diverse range of consumer products.
Australia & New Zealand Market Movers
The Australian market (ASX 200 Index, -1.4%) was dragged down by heavy losses in energy (-2.9%) and metal and mining stocks (-2.1%). The former reacting to the drop in price of oil, and the latter reacting to the same economic data from China that pulled down European markets. BHP (-2.7%), Fortescue (-2.7%), and Rio Tinto (-1.5%) were all victims of this downturn.
The ASX financials (2.0%) sector was also a huge underperformer on Wednesday, with the four major banks, NAB (-3.1%), Commonwealth Bank (-2.1%), Westpac (-2.1%), and ANZ (-1.4%), tumbling.
The New Zealand market (NZX 50 Index, -0.4%) fell on Wednesday, building on the smaller incremental losses the markets have notched up all week. The bigger Wednesday loss can be attributed to a few stocks snapping their winning streaks, including Infratil (-1.1%) and Spark (-0.4%), with SkyCity Entertainment (-3.2%) and A2 Milk leading the way down (-2.6%).
What Markets will be Watching this Week
Monday
Australian PMI and retail sales data
Tuesday
Reserve Bank of Australia cash rate decision.
Wednesday
Eurozone employment and second quarter GDP data. Australia’s second quarter GDP data.
Thursday
Bank of Canada interest rate decision
Friday
European Central Bank interest rate decision and China (consumer) CPI and (producer) PPI inflation data.