The stock market notched gains on Monday to build on last week’s gains. The growth is believed to be boosted by hopes that the Federal Reserve’s rate-hiking campaign is over.
Overall, S&P was up 0.2% to 4,366, while NASDAQ grew 0.3% to 13,519.
Tweet of the Day
"The current equity short is $134.1B, the largest short position since November 2018."
– GS Scott Rubner pic.twitter.com/gIBrvvbUQ9
— Daily Chartbook (@dailychartbook) November 6, 2023
Chart of the Day
Here is the one-year chart of American Express (AXP) as of October 25, 2023, when the stock was at $144.
American Express is a globally integrated payments company in providing credit and charge cards to individuals and businesses with high credit scores. The company is both a card issuer (e.g. Chase and Citi) and a card network (e.g. MasterCard and Visa). American Express’ integrated payments platform has direct relationships with Merchants and Card Members, creating a closed loop giving the company direct access to information.
American Express stock has been falling on concerns of credit risk. In the earnings call, management stated that Card Member loans and receivables, write-offs and delinquency rates both remained fairly flat to last quarter, but they expect this delinquency and write-off rates to increase overtime. Management raised its reserve build by more than $300 million last quarter, and that combined with write-offs totaled $1.2 billion in provision expenses. Provision expenses were around $800 million a year ago. AXP ended the quarter with $5 billion of reserves, representing 2.7% of total loans.
The company is delivering excellent results, with profits up 34% last quarter on 13% revenue growth. Spending was up 7% (F/X adjusted), with US spending up 9% and International up 15%. Millennial and Gen Z customers spent 18% more than a year ago and accounted for 60% of new accounts.
AXP is part of the Conservative Portfolio. Business is good, but investors are fearful credit will worsen, thus the stock is out of favor at this time.
