Wall Street ended up without any real direction on Wednesday, as the US Federal Reserve left its interest rates unchanged, as expected, at the end of its last monetary meeting, while expressing its great caution with regard to the decline in the inflation, even if the Fed indicated that it “should not proceed with a rate increase”. The Dow Jones index gained 0.23% to 37,903.29 points. The S&P500 lost 0.34%, to 5,018.39 points. The Nasdaq Composite fell 0.33% to 15,605.48 points.
At the end of its monetary policy meeting, the American central bank therefore unanimously decided to maintain the ‘fed funds’ objective at 5.25%-5.50%… In the press release accompanying its decision, the Fed did not give a timetable for a potential rate cut, while officials of the institution expressed their concerns about the persistence of inflation: The Chairman of the Fed, Jerome Powell, recalled that the bank was determined to bring inflation back to the 2% target. However, he noted “progress” and “ruled out the possibility of a further increase in rates”…
“Powell noted that inflation is still a problem but remained optimistic that it would improve in coming quarters,” said Ryan Detrick, chief strategist at Carson Group.
The Fed boss also stressed that American labor markets were “normalizing”, citing the latest data published today, before adding cautiously: “It will probably take more time for us to be sure that inflation returns to its target of 2%.
In the press release accompanying its monetary decision, the Fed mentioned the “lack of progress” in reducing inflation, while several data have surprised on the rise in recent months…
The US central bank reiterated its data-driven approach, with Jerome Powell explaining that “indicators will have to tell us whether the terminal rate is reached…”We focus on the length of time monetary policy should be maintained at a restrictive level”, Jerome Powell further explained, stressing that monetary policy was indeed at a restrictive level.
“I expect to see inflation decline this year, although I am less confident about it,” he added…
The American central bank also spoke of the great “resistance” of labor markets: “We see a fairly consistent slowdown in the rate of wage growth, but there is still a way to go,” noted Jerome Powell. The Fed has a dual mandate relating to inflation and unemployment. This second objective is once again being monitored by the monetary policy committee, after a period during which inflation had its full attention, the Fed boss further clarified. It would take a “significant” decline in employment to convince the institution to change its monetary policy outlook, he said.
Recalling that American growth remained strong and that he saw no risk of ‘stagflation’, characterized by low growth and high inflation, Jerome Powell stressed that the Fed had “the luxury of being able to be patient” on its rates. . He also stressed that the American elections would not influence the establishment’s decisions…
The Fed finally announced a reduction in the redemption ceiling for US Treasury bonds from June 1, which will go from the current $60 billion to $25 billion. “This will reduce the risk of stress on the monetary markets,” explained Jerome Powell.
The shift will slow the pace at which the Fed’s balance sheet shrinks, with the volume of assets held by the central bank hitting a record $9 trillion in 2022 to absorb the shock of the COVID pandemic.
If such a decision was expected from the markets, uncertainty remains over the date of the announcement… The euro rose this evening to 1.07/$, while bitcoin remains discussed at $57,810. Oil returns to $83 per Brent.
Values
Amazon grew by 2.2% in the wake of its first quarter results above market consensus, thanks in particular to its cloud computing division which benefited from the enthusiasm around AI. ..
Advanced Micro corrected by 8.9% after announcing a disappointing forecast for sales of its chips powering artificial intelligence… The group’s revenues were, however, slightly above expectations in the first quarter, despite moderate demand for chips used in data centers adding to the weakness of the market for chips intended for video games… The company reported a turnover of 5.47 billion dollars, close to consensus.
Super Micro Computer fell 14% following the publication of quarterly results below market expectations. The company expects fourth-quarter revenue of between $5.1 billion and $5.5 billion, compared to a consensus of $4.89 billion.
Johnson & Johnson climbs 4.6%, after announcing progress towards an amicable agreement of 6.48 billion dollars to settle disputes over its talc.
CVS Health plunges more than 16% after reporting disappointing quarterly profit and lowering its annual revenue forecast. High demand for reimbursements has led to increased costs in its health insurance business…
Pfizer (+6%) The group’s profit exceeded market expectations in the first quarter, supported by cost reductions and significant sales of vaccines against pneumonia and respiratory synctial virus. The pharmaceutical group posted an adjusted profit of 82 cents per share, against a market consensus of only 50 cents.
Mondelez (-1.7%) published first quarter turnover and profits above expectations, supported by stable demand. Net income reached $9.29 billion, compared to a market consensus of $9.16 billion.
Carlyle (-8.5%) reported first quarter distributable profit up 59% year-on-year, supported by significant asset sales across its private equity portfolio.
KKR (+2.2%) reported first-quarter adjusted net profit up 20% year-on-year, thanks to high management and transaction fees, as well as profits from its annuities business.
PG&E (+1.7%) has entered into exclusive negotiations to sell a minority stake in Pacific Generation to KKR, a division valued at $3.5 billion.
Prudential (+1.6%) Profit in the first quarter increased by more than 13%, thanks to the good performance of the insurer’s American unit.
Marriott International (-1%) raised its adjusted annual profit forecast, counting on a rebound in international travel demand which would offset the normalization of domestic travel in the United States…
Starbucks (-15.8%) announced a surprise drop in comparable sales in the second quarter as demand was weak. Comparable global turnover fell by 4% in the second quarter, while analysts on average expected an increase of around 1%…
Ford (+0.4%) will recall 242,669 Maverick vehicles due to a failure to turn on the taillights which reduces the visibility of the vehicle, the National Highway Traffic Safety Administration (NHTSA) said on Wednesday.
Amcor (+9.6%) raised the lower end of its annual profit forecast, anticipating higher prices for its containers and cartons, as well as lower input costs.
IBM (-1%) A judge has canceled the $1.6 billion fine that the company had to pay to its rival BMC Software.
