Myer & Premier Get Marked Down | Battle for Insignia Heats Up

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Welcome to Equity Espresso’s Market Recap.

Markets took a sharp downturn on Monday, with the S&P/ASX 200 index falling 1.29% to 8,191.9 pts, its worst day performance in nearly a month, after stronger-than-expected U.S. jobs data reduced expectations for an early interest rate cut by the Federal Reserve.

Nine sectors closed in negative territory, with Technology (-3.35%) leading the declines. WiseTech, Xero, Technology One, and NextDC tumbled between 3% and 4%. Life 360 saw even steeper losses, slumping 5.07%. The Financials (-2.08%) sector saw sharp falls, with all the major banks experiencing substantial drops.

Consumer Discretionary (-1.93%) faced pressure after disappointing trading updates from Myer (-22.27%) and Premier Investments (-15.56%), whose share prices were punished.

Energy (+1.82%) stocks provided a bright spot in the market, rising after Brent crude reached a four-month high of $81 per barrel following new U.S. sanctions against Russia. Major energy companies benefited, including Woodside (+2.02%) and Santos (+2.15%).

Australian bond yields climbed, with 10-year rates climbing 10 basis points to 4.63%, nearing November's peak of 4.71%, while three-year yields rose to 4.06%. Market expectations for a February rate cut have decreased to a probability of 63% from 72%. Markets are full pricing in an April cut, which remains fully priced.

Company News

• Insignia Financial (+2.43%) has received a revised non-binding takeover proposal from Bain Capital at $4.30 per share. This represents a 7.5% increase from their initial December 12 offer of $4.00 per share and matches CC Capital Partners' January 3 bid price.

• Myer (-23.14%) shares sunk after providing a trading update for the first 22 weeks of the year, reporting flat comparable sales from the pcp., while total sales declined 0.8% to $1,592 million, partly due to the temporary Werribee store closure. Despite online sales growing by 2.8%, representing 22% of total sales, operating gross profit fell by $15 million amid challenging economic conditions and distribution centre complications.

• Novonix (-5.59%) shares dropped after the company failed to secure the U.S. Department of Energy tax credits needed to further fund its Tennessee facility.

• NRW Holdings (-9.45%) shares fell after CFO Richard Simons resigned after two years in the role. Group financial controller Alexander Hall will serve as acting CFO while the company seeks a permanent replacement.

• Premier Investments (-15.92%) released its 1H25 trading update, projecting global sales of $855-865 million (vs. $879.5m pcp.) with flat Australian performance and underlying EBIT of $160-165 million (vs. $209.8m pcp). Their Apparel Brands division, which includes Just Jeans, Jay Jays, Portmans, Dotti, and Jacqui E, expects sales of $405-412 million but faces a $16-20 million EBIT decline from the previous period, though maintaining stable gross margins.

• St Barbara (-10.71%) shares dropped after reporting December quarter gold production of 10,262 ounces, down from 12,233 ounces in the previous quarter, while gold sales reached 11,712 ounces at A$4,116 per ounce. The company maintained its annual guidance of 65,000-75,000 ounces but expects to hit the lower end.

• Telix Pharmaceuticals (+0.13%) has acquired assets from ImaginAb, including early-stage therapeutic candidates, a biologics technology platform, and a protein engineering facility.

Wall Street

U.S. stocks experienced a sharp decline on Friday, with major indexes erasing their 2025 gains following a stronger-than-expected jobs report that dampened hopes for imminent interest rate cuts. The Dow Jones fell 1.63%, the S&P 500 dropped, and the Nasdaq declined 1.63%. The December jobs report showed 256,000 new payrolls, significantly exceeding economists' expectations of 155,000, while unemployment unexpectedly fell to 4.1%.

The robust employment data triggered a spike in 10-year Treasury yields to their highest level since late 2023 as investors adjusted their rate cut expectations. Market sentiment shifted dramatically, with traders now anticipating the Federal Reserve's first rate cut in June rather than earlier in the year.

The market-wide selloff was particularly severe for small-cap stocks. The Russell 2000 index fell into correction territory after a 2.27% decline. Among the S&P 500 sectors, only Energy showed resilience, with a modest 0.34% gain.

Delta Air Lines (+9.04%) exceeded analyst expectations with Q4 earnings of $1.85 per share and $14.44 billion in revenue, forecasting 7-9% revenue growth for Q1 2025. CEO Ed Bastian anticipates their strongest year ever, with projected annual free cash flow of $4 billion and adjusted earnings above $7.35 per share. Constellation Energy (+25.2%) surged after announcing its acquisition of Calpine Corp for $16.4 billion in cash and stock, with a total value of $26.6 billion, including debt.

S&P500 Sector Performance

Economic Data

• Australian Job Advertisements increased 0.3% in December 2024, reversing November's 1.8% decline, indicating continued labour market strength despite high interest rates.

• China Exports surged 10.7% year-on-year in December 2024, surpassing market forecasts of 7.3% and accelerating from a 6.7% rise in the previous month. Manufacturers front-loaded orders in anticipation of further tariffs, notably from the U.S.

• The U.S. Economy added 256k jobs in December 2024, the most in nine months, following 212k in November and beating market forecasts of 160k.

• U.S. Consumer Sentiment fell to 73.2 in January, down from 74 in December, which was the highest in eight months and below forecasts of 73.8.

• Canada’s Unemployment Rate fell to 6.7% in December 2024, down from 6.8% in the previous month and below expectations of 6.9%.

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🌎️ Around The Globe

• Disney, Fox, and Warner Bros. Discovery have abandoned their joint sports-streaming venture, Venu Sports, following antitrust concerns. This comes as Disney announced its acquisition of rival FuboTV.

• JCPenney is merging with Sparc Group, the owner of stores including Forever 21, Brooks Brothers, and Aeropostale, to form a new company - Catalyst Brands.

• Kentucky has secured a $110 million settlement from Kroger Co. in its lawsuit alleging the grocery chain's role in fueling the state's opioid epidemic. The funds will be directed toward combating addiction in Kentucky.

• The Los Angeles wildfires have caused preliminary damage and economic losses estimated between $52-57 billion, according to AccuWeather.

• Meta Platforms announced in a Friday internal memo that it would dismantle its diversity, equity, and inclusion (DEI) programs, ending initiatives across hiring, training, and supplier selection.

• The U.S. Supreme Court heard arguments on Friday regarding the potential nationwide TikTok ban under the Protecting Americans from Foreign Adversary Controlled Applications Act, which could take effect on January 19.

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