Wall Street remains hesitant before the market this Thursday, with the S&P 500 gaining 0.1% and the Nasdaq 0.3%, compared to a decline of 0.1% on the Dow Jones. The American market is struggling to find its direction after the beautiful rally in November fueled by hopes of peak rates, controlled inflation and a soft landing.
On the Nymex, a barrel of WTI crude gained 1% to $70.3. An ounce of gold gained 0.2% to $2,051. On the foreign exchange market, the dollar index fell by 0.3% against a basket of currencies. On the bond markets, the yield on the 2-year T-Bond stands at 4.62%, the 10-year at 4.17% and the 30-year at 4.27%. Yields rose somewhat on fears relating to a normalization of monetary policy in Japan.
In the United States, unemployment claims increased slightly last week. The US Department of Labor reported unemployment claims for the week ended December 2 at 220,000, up 1,000 from the previous week – a level consistent with market expectations. The four-week average stands at 220,750, an increase of 500. Finally, the number of unemployed workers receiving compensation for the week ended November 25 stands at 1.861 million, down 64,000 over seven days (1.910 million consensus).
The latest Challenger, Gray & Christmas study on the subject highlighted announcements of 44,510 job cuts during the month of November, compared to 36,836 a month earlier. Thus, these announcements of planned layoffs increased by 24% from one month to the next.
Yesterday, the latest ADP report highlighted job creations in the private sector numbering 103,000 in November, compared to a FactSet consensus of 120,000, and a level revised downward to 106,000 for the month of October. The previous reading in October was 113,000. Last month saw moderate hiring growth and a further slowdown in wage gains, according to ADP. Goods and services saw weakness, with leisure, hospitality and manufacturing showing declines. Medium-sized companies with 50 to 249 employees still generated 71,000 jobs in November and large companies 33,000. “Restaurants and hotels have been the biggest job creators during the post-pandemic recovery. But that momentum is behind us, and the return to trend in leisure and hospitality suggests that the economy as a whole will experience more moderate growth in hiring and wages in 2024,” summarizes chief economist Nela Richardson.
Wholesale stocks and consumer credit figures are still expected this Thursday.
Finally, the markets will follow tomorrow Friday very carefully the monthly American government report on the employment situation for the month of November (FactSet consensus at 3.9% unemployment, 172,500 job creations including 145,000 in the private sector, +0.3 % for average hourly earnings compared to the previous month), as well as the preliminary Consumer Sentiment Index from the University of Michigan for December (consensus 61.6).
Note also that the Fed’s FOMC monetary meeting on December 12 and 13 is approaching, which implies a period of blackout during which the officials of the American central bank, for once, are silent. According to the CME Group’s FedWatch tool, the probability is 97.5% that the Fed will opt for a monetary status quo and leave its rates unchanged between 5.25 and 5.50% on fed funds. This is the last monetary meeting of the year for the bank. The FedWatch tool shows that monetary easing would be possible as early as the meeting on March 19 and 20, 2024, with a 51.7% probability of a quarter-point rate cut…
In company news, Chewy, Braze and C3.ai published their latest quarterly financial results last night. Broadcom, Lululemon Athletica, Dollar General, The Cooper Companies, DocuSign and Ciena are there this Thursday. Hello Group and Johnson Outdoors will finally announce on Friday.
Values
GameStop, the former star “meme stock” of Wall Street, is losing ground after its quarterly publication. The American video game retailer thus missed the sales consensus over the past quarter. The Texas group posted revenue of $1.08 billion for the closed period, its third fiscal quarter, reflecting a decline of 9%. The consensus was 1.18 billion. The group’s three product categories declined. In contrast, GameStop posted a loss per share of just one cent per share, compared to -8 cents consensus. Controlling expenses therefore made it possible to preserve profitability. The executive chairman and main shareholder of GameStop, Ryan Cohen, took over the additional role of CEO in September. The day before yesterday, the board approved a new policy that gives Cohen authority to manage the company’s investment portfolio. GameStop had $909 million in cash and equivalents and $300 million in marketable securities at the end of the period.
Veeva Systems, an American software group which provides cloud solutions to the pharmaceutical industry, once again exceeded market expectations for its third fiscal quarter, but fell 3% last night after announcements on Wall Street. Quarterly revenues were $616 million, up 12%, while subscription revenues were $495 million, also up 12%. Adjusted profit was $219 million, a year-over-year growth of 19%. Adjusted EPS was $1.34, compared to $1.13 per share a year earlier. The consensus was for $1.28 adjusted EPS on $615 million in revenue. For the financial year ending January 2024, the group expects revenues of $2.36 billion to $2.37 billion, as well as adjusted EPS of $4.59.
C3.ai, one of the star American artificial intelligence groups, which offers a complete enterprise AI application development platform and a family of turnkey enterprise AI applications, unscrews following its quarterly publication. It reported quarterly revenue below estimates and provided a worrying outlook. The adjusted operating loss for the fiscal year is expected to be $135 million, compared to previous guidance of up to $100 million. The Californian group from Redwood City, which launched products equipped with generative AI in March, clarified last night that it was going to spend more than expected to take advantage of the enthusiasm generated by the segment. These investments in generative AI are expected to put near-term pressure on free cash flow and profitability. C3.ai then expects positive cash flow for the financial year ending April 2025.
For the just-ended fiscal second quarter, revenue rose 17% to $73.2 million – compared to a consensus of $74 million. The adjusted loss per share came to 13 cents for the quarter ended at the end of October, compared to a consensus of -18 cents.
McDonald’s yesterday slipped some elements concerning its CosMc’s concept of coffee seemingly intended to compete with Starbucks. The fast food group had already hinted at this concept during the summer. Chris Kempczinski, CEO of McDonald’s, indicated that CosMc’s was a small format concept displaying McDonald’s DNA but its own personality. Yesterday, the manager delivered some new elements during an investors event, after detailing the group’s expansion plans. McDonald’s therefore wants to enter the specialty coffee sector, a category deemed “attractive and rapidly growing” according to Kempczinski. The group intends to test the new concept to see if people will stop by CosMc’s in the afternoon to buy a churro, an infusion (…) or a customizable drink. These products could be combined with cookies, ice cream or sandwiches. Kempczinski, however, warned that for the moment this was only a test. A location will open in Bollinbrook, Illinois, starting this week.
Dollar General, the American discount retailer, published revenues of $9.7 billion for its third fiscal quarter, ending in early November, an increase of 2.4% year-on-year. However, activity fell by 1.3% on a comparable basis. Operating profit fell 41% to $434 million. Diluted earnings per share fell 46% to $1.26. Consolidated net profit fell 47% to $276 million. The consensus was for $1.19 in quarterly adjusted earnings per share on $9.64 billion in revenue. Dollar General continues to expect net sales growth of between 1.5 and 2.5% in fiscal 2023. Same-store sales growth is expected to range from -1% to stagnation. Earnings per share are expected between $7.10 and $7.60, a decline of 29 to 34%.
Ciena, the American network equipment manufacturer, announced for its fourth fiscal quarter 2023, ended at the end of October, revenues of $1.13 billion, GAAP net income of 62 cents per share and adjusted earnings per share of 75 cents. The consensus for the ended quarter was 69 cents in adjusted earnings per share on $1.09 billion in revenue. It is therefore quite easily overwhelmed. Quarterly revenue compares to $971 million last year. For the year, Ciena posted total sales of $4.39 billion, compared to $3.63 billion in 2022.
AbbVie announced the purchase of Cerevel Therapeutics in an $8.7 billion transaction that will strengthen its neuroscience pipeline. The laboratory will pay $45 per Cerevel share in cash. AbbVie’s prey is developing drugs against Alzheimer’s disease, Parkinson’s disease, psychosis, epilepsy (…). Its experimental drug, emraclidine, is in trials as a treatment for schizophrenia. The operation presents a premium of 73% compared to prices on December 1, before rumors began to circulate about a potential deal. Humira’s revenue, which exceeded 21 billion in 2022, is expected to be less than 9 billion next year. Sales of Imbruvica, AbbVie’s leukemia treatment, fell 20% in the third quarter…
Chewy takes off on Wall Street. The American distributor of pet products has indeed lowered its annual sales and profit estimates. He also announced the appointment of David Reeder as financial director. For its third quarter, the group posted adjusted earnings per share of 15 cents, compared to 9 cents consensus and 1 cent for the comparable period last year. Revenues totaled $2.74 billion, narrowly missing the consensus. They stood at 2.53 billion over the corresponding period last year. Chewy cut its full-year revenue forecast to between $11.08 billion and $11.1 billion.
AMD, the American processor designer and rival of Nvidia in AI chips, displayed its ambitions yesterday. At a Californian event in San Jose, Lisa Su, CEO of the group, provided some particularly substantial estimates regarding the potential of the artificial intelligence chip market, which could climb to more than $400 billion over the next four years. years. This represents more than twice the level anticipated in August. The market for AI chips for data centers is estimated at $45 billion this year… The group is also confident in the potential of its MI300 lineup. AMD’s new AI chips reportedly feature 2.4 times more memory than Nvidia’s H100 GPU. Su claims that these new chips are equivalent to the H100 in ability to train AI software and much better in the software execution process…
Nvidia is nevertheless developing its next generation chips at the same time. The H100 will thus be replaced by the H200 in the first half of 2024. Nvidia should also offer a completely new architecture for the GPU later in the year.
