The American market consolidated quite heavily before the market this Wednesday, catching its breath following the recent records of the Nasdaq and the S&P 500 – fueled mainly by the surge in Nvidia. In pre-session today, and while the bond markets are tense, the S&P 500 drops 0.7%, the Dow Jones 0.6% and the Nasdaq 0.8%.
On the Nymex, a barrel of WTI crude gained 0.7% to $80.4. An ounce of gold lost 0.6% to $2,342. The dollar index gains 0.1%. On the bond markets, the yield on the 10-year T-Bond stands at 4.56% and the 30-year at 4.69%. The yield on 5-year Treasury bills reached 4.59%, a four-week high.
Neel Kashkari, the president of the Minneapolis Fed, was uncompromising yesterday on the subject of monetary policy, not ruling out a further increase in rates, which are already at a 23-year high. “I do not exclude potential increases in interest rates from here,” said the official, who nevertheless considers it more likely that the central bank will maintain its rates at the current high levels for an extended period, the time to bring inflation back towards the target. “We could stay here as long as necessary until we are convinced that inflation is falling sustainably towards our 2% target.”
Kashkari clarified once again that the US central bank must take its time to assess the situation and the reality of slowing inflation before lowering rates. The official notes the remarkable resilience of the American economy and the strength of the labor market, particularly in services. In an interview with CNBC, he adds that nothing should be ruled out, but that the Fed would be wise to wait. “I don’t think we should rule anything out at this stage. We are all committed to bringing inflation back to our 2% target,” Kashkari summarized. “Most people thought we would be in a recession toward the end of last year, but that didn’t happen. Instead, we saw very strong growth. American consumers have remained remarkably resilient, just like the real estate market, I therefore see no need to rush and reduce rates,” adds the manager, who wants to “do things right.”
“At the beginning of this year, inflation moved sideways, which raised questions in my mind. Is the disinflationary process continuing or will we reach an inflation level above 3%? I think that it’s still too early to know and we have to wait and see to have more confidence,” insists Kashkari.
In economic news on Wall Street this Wednesday, the Fed will again dominate the day, with interventions from John Williams and Raphael Bostic, as well as the publication in the evening of the Economic Beige Book, summary of regional conditions (8 p.m.). The Richmond Fed manufacturing index will also be released today at 4 p.m.
Tomorrow will be marked by the publication of the American GDP for the first quarter and that of the balance of international trade in goods. Unemployment claims, wholesale inventories, the housing sales promise index and the weekly report on US domestic oil stocks will also be released this Thursday. The Fed’s Lorie Logan and John Williams will speak on the same day.
The week will end with the publications of household income and spending (with the famous ‘core PCE’ price index, essential for the Fed) as well as the Chicago PMI index. Raphael Bostic will speak on Friday.
In the news of companies listed on Wall Street, Salesforce announces its accounts after the close this evening, at the same time as Agilent, Nutanix, Pure Storage, Okta, UiPath or HP Inc. Dick’s Sporting Goods, Chewy and Abercrombie & Fitch have already published this Wednesday before market.
Foot Locker, Kohl’s, Birkenstock, Roivant, Burlington Stores, Best Buy, Hormel Foods and Dollar General will report pre-market results tomorrow, while Costco, Dell, Marvell Technology, Veeva, Zscaler, Ulta Beauty, Gap, SentinelOne, Nordstrom, The Cooper Companies and MongoDB will publish after closing.
Values
Nvidia ended the day yesterday with a gain of almost 7%, at an all-time high. The stock gained 2.6% on Friday and 9.3% on Thursday – the day after the sensational quarterly accounts of Jensen Huang’s group and the announcement of a split by ten of the stock. In three sessions, Nvidia took approximately… 460 billion dollars in market capitalization! The group now weighs more than 2,800 billion dollars, almost as much as Apple (2,910 billion dollars) and Microsoft (3,200 billion dollars). Driven by the incredible demand for AI chips, Nvidia is continuing its crazy ride and accumulating records. The stock has tripled in value in one year.
There was no notable catalyst yesterday though, other than perhaps the $6 billion fundraising from Elon Musk’s AI startup, xAI, at a valuation of $24 billion. According to The Information, Musk intends to use Nvidia chips for a new supercomputer of phenomenal power which will be used to power the Grok chatbot.
Wednesday evening, Nvidia had published exceptional accounts. For the first quarter of its 2025 fiscal year, the group posted historic revenues of $26 billion, up 18% compared to the previous quarter and… 262% (!) compared to the previous year. . The consensus was around $24.6 billion. Data center revenues also reached a record at $22.6 billion, up 23% quarter over quarter and… 427% year over year! Adjusted earnings per share were $6.12, an increase of 19% compared to the previous quarter and an increase of 461% year-on-year! Adjusted EPS exceeds consensus by almost 10%. GAAP earnings per share even soared by 629% compared to the previous year. Second-quarter revenue is expected at around $28 billion, plus or minus 2%, compared to a consensus of $26.8 billion.
The group also announced a ten-fold share split which will be effective on June 7, which means that there will be ten times more shares in circulation, allowing for better liquidity. Note in passing that the fortune of Jensen Huang, founder and CEO of the group which owns 3.6% of Nvidia (or 86.8 million shares), has just reached $100 billion following the recent stock market rally.
ConocoPhillips has confirmed an agreement to acquire Marathon Oil in an all-stock transaction. The two companies announced that they have entered into a definitive agreement under which ConocoPhillips will acquire Marathon Oil in an all-stock transaction with an enterprise value of $22.5 billion, including $5.4 billion net debt. Under the terms of the agreement, Marathon Oil shareholders will receive 0.2550 shares of ConocoPhillips common stock for each share of Marathon Oil common stock, representing a 14.7% premium to the closing stock price of Marathon Oil yesterday and a 16% premium to the volume-weighted average price of the previous 10 days.
The acquisition of Marathon Oil is expected to be immediately accretive to earnings, cash flow and return of capital per share, says ConocoPhillips, which expects to realize at least $500 million in cost and capital savings. capital during the first full year following the closing of the transaction. Separate from the transaction, ConocoPhillips plans to increase its common base dividend 34% to 78 cents per share starting in the fourth quarter of 2024. Additionally, ConocoPhillips expects share repurchases to exceed $20 billion in the first three years following the transaction, including more than $7 billion in the first full year, at recent commodity prices.
The transaction is subject to Marathon Oil shareholder approval, regulatory approvals and other customary closing conditions. The operation should be finalized in the fourth quarter of 2024. Note that both groups are based in Houston, Texas.
Merck, the American laboratory, announced the acquisition of EyeBio, developer of drugs against eye diseases, for an amount of up to 3 billion dollars. Merck will disburse $1.3 billion in upfront payments and up to $1.7 billion in future milestone payments. The American pharmaceutical group said in February that it was seeking deals worth up to around $15 billion. EyeBio, based in London, operates as Eyebiotech Ltd and has operations in the United States and the United Kingdom.
Chewy. The American distributor of pet products announced, for its first fiscal quarter, adjusted earnings per share of 31 cents compared to 7 cents consensus. Net profit was 67 million, representing a net margin of 2.3%, expanding by 150 basis points. The adjusted Ebitda margin increased by 170 basis points to 5.7%. Revenues totaled $2.88 billion (+3.1%), against a consensus of $2.85 billion. “Fiscal year 2024 is off to a strong start. We delivered robust net sales and record adjusted Ebitda in the first quarter,” said Sumit Singh, CEO. Chewy also announced that its board of directors has authorized a share repurchase program of up to $500 million of its common stock.
Dick’s Sporting Goods, an American sporting goods distribution group, climbs on Wall Street following its quarterly publication. For the first fiscal quarter, like-for-like growth was 5.3% with growth in transactions and average basket, while total sales increased 6.2% to $3.02 billion. Consolidated net profit declined 10% to $275 million, while profit before tax rose 4% to $342 million. The group is raising its comparable sales growth forecasts for the whole of 2024 to a range of 2 to 3%, compared to 1 to 2% previously. It also increases its earnings per share estimates to between $13.35 and $13.75, compared to $12.85 to $13.25 previously.
Abercrombie & Fitch is making progress on Wall Street, as the group raised its annual sales forecast with resilient demand. Revenue for the 2024 financial year is now expected to increase by 10%, compared to previous guidance ranging from 4 to 6%. For the quarter ended at the beginning of May, the group posted revenues of $1.02 billion (+22.1%), compared to a market consensus of $963 million. Adjusted earnings per share soared to $2.14, compared to 39 cents a year earlier and $1.72 market consensus. Free cash flow became positive at $56 million.
Microsoft. PwC, the auditing and consulting giant, will become OpenAI’s largest corporate client, indicates the Wall Street Journal, citing the group’s agreement with the artificial intelligence startup supported by Microsoft. PwC will provide ChatGPT Enterprise to its 75,000 U.S. and 26,000 U.K. employees, according to the WSJ, the first to report the deal. “We are actively engaged in genAI with over 95% of consultancy client accounts in the UK and US, while discussing the use and implications of AI with many of our clients. “audit”, added PwC, without however revealing the financial details of the deal or plans to resell the AI product.
