The American stock market is catching its breath this Friday, following the series records of the S&P 500 and Nasdaq indices. The S&P lost 0.52% to 5,405 pts, the Dow Jones 0.83% to 38,327 pts and the Nasdaq 0.22% to 17,629 pts. On the Nymex, a barrel of WTI crude lost 0.1% to $78.6. An ounce of fine gold rose 1.2% to $2,346. The dollar index increased by 0.5% against a basket of reference currencies.
Janet Yellen, US Secretary of the Treasury, commented on the US economy yesterday, deeming economic growth solid and the job market still robust. According to her, strong American growth is driving global expansion. Concerning the job market, pressures have eased and salaries are increasing more slowly. Finally, Yellen expects to see further progress in lowering inflation, while this week’s consumer and producer price figures pleasantly surprised.
The American consumer price index for May 2024 was stable compared to the previous month, against a consensus of +0.1% and after an increase of 0.3% in April. Over one year, the consumer price index shows an increase of 3.3%, compared to a consensus of 3.4%. Excluding food and energy, the CPI increased by 0.2% month-on-month and 3.4% year-on-year, compared to +0.3% and +3.5% consensus respectively. The average hourly wage increased as expected by 0.4% in May, compared to the previous month.
Yesterday, the producer price index for the month of May 2024 was down 0.2% compared to the previous month and up only 2.2% over one year, while the consensus was +0.1% month-on-month and +2.5% year-on-year. Excluding food and energy, the index was stable compared to the previous month and up 2.3% year-on-year, while the consensus was +0.3% compared to April and +2.5% in year-on-year.
Austan Goolsbee, president of the Chicago Fed, and Lisa Cook, governor of the American central bank, speak this Friday.
Remember that the Fed left its rates unchanged the day before yesterday, at a 23-year high of between 5.25 and 5.5%. Jerome Powell, head of the institution, estimated that the inflation outlook proposed by the Fed constituted a fairly conservative forecast subject to revision. Powell said the data released on consumer price inflation was moving in the right direction. He noted, however, that the central bank’s new forecasts, which show an increase in long-term federal funds rates, reflect a “change of opinion” among those responsible for the establishment. “We make policy with the economy we have,” he said… The increase in the long-term federal funds rate from 2.6% to 2.8% shows that those responsible are coming “gradually” to the idea that the previous very low interest rate environment might no longer happen…
Powell also noted that a single quarter-point rate cut alone would not have a major impact on the U.S. economy, with the overall rate trajectory being the most important element. He said the central bank’s initiation of rate cuts, when that happens, would remain important. The start of the easing of monetary policy would be “a significant decision for the economy that must be taken correctly”.
The CME Group’s FedWatch tool now shows a probability of around 86% of a new monetary status quo on July 31, after the next meeting. The probability of a rate cut by September 18 reaches 71%. The barometer shows a dominant probability (around 44%) in the 4.75-5% range for the end of the year, which shows that despite the latest information provided by the Fed and its ‘dot plot’, the markets are instead banking on two quarter-point rate cuts this year.
The US import price index for May 2024 declined by 0.4% compared to the previous month, according to today’s report. The consensus was -0.3%. Over one year, the index increased by 1.1%. The export price index, for its part, fell by 0.6% month-on-month and increased by 0.6% year-on-year.
The preliminary index of American consumer sentiment from the University of Michigan for the month of June 2024 stood at 65.6, compared to the market consensus of 73 and 69.1 a month before. The index concerning inflation expectations for the coming year came out at 3.3%, against the market consensus of 3.2%.
Values
GameStop (-4%). Influencer Keith Gill, also known by the nickname Roaring Kitty, updated his position on the video game retailer’s case on Reddit. He now owns 9 million shares, up from 5 million. “Kitty’s” post on Reddit shows a valuation of $262.1 million. This also represents approximately 2% of GME’s capital. On the other hand, the influencer no longer holds the 120,000 call options with a strike of $20 and expiry on June 21 that he had declared in a previous Reddit post. Roaring Kitty’s announcement came after closing yesterday. Remember that GameStop has just completed two fundraising rounds in a few weeks – the last of $2.14 billion -, taking advantage of the current euphoria caused largely by Keith Gill’s messages on social networks.
GameStop also postponed its virtual general meeting, which was expected on Thursday, due to technical problems linked to the web host.
Adobe, the American software group, jumped nearly 15% on Wall Street. The group envisages notable growth for its products and suggests that its new artificial intelligence tools are no stranger to this trend. New annual net recurring digital media revenues are expected at around $460 million in the third quarter, compared to a consensus of $435 million. Total revenues are anticipated between 5.33 and 5.38 billion. Revenues from the Digital Media segment are expected between 3.95 and 3.98 billion. Adjusted EPS is estimated between $4.50 and $4.55.
Adobe boosts its adjusted earnings per share target for the fiscal year to $18-18.20, compared to a consensus of $18. Revenues for the year are expected between $21.4 and $21.5 billion, while Digital Media net ARR is expected to be around $1.95 billion. Revenues from the Digital Media segment are expected between 15.8 billion and 15.85 billion. For the just ended fiscal second quarter, revenues increased 10% to $5.31 billion, while adjusted earnings per share were $4.48. The consensus was $4.4 in adjusted EPS and $5.3 billion in revenue.
Adobe’s proprietary AI model, Firefly, has been integrated into Photoshop and Illustrator among others while the company is working to develop similar technology for its Premiere editing software. The model has been used to generate more than 9 billion images, according to CEO Shantanu Narayen. Customers are also renewing their offer towards more expensive packages, notably with increased use of Firefly. New innovations allow Adobe to attract “an expanding universe of users,” Narayen added.
Tesla (-2%). Shareholders have, as expected, re-validated Elon Musk’s impressive 2018 compensation package, then estimated at $56 billion – and now valued at $46 billion. Shareholders also approved Tesla’s incorporation in Texas rather than Delaware. This favorable vote is not a surprise, since Musk had already suggested that both resolutions would pass by a wide margin. During this Austin meeting, Proposition 3 put to the vote therefore concerned incorporation in Texas, while a judge in Delaware had blocked Musk’s package. Proposition 4 asked shareholders to re-ratify the businessman’s record financial compensation plan. The contested package had already been voted on in 2018, but a Delaware judge then ruled that investors had not been fully informed of the details.
Microsoft (stable) will not roll out ‘Recall,’ an AI-based feature that tracks PC usage, to its new computers next week. Instead, the group will test this feature with a smaller group later. The Reuters agency raises concerns about the risks to privacy on this subject. Recall tracks web browsing to voice chats, creating a history stored on the computer that the user can search when they need to remember something they did. Recall will only be available immediately for a preview of its Windows Insider program, while some anticipated a much broader deployment to PC Copilot+ users (category of computers with AI features) on June 18. Reuters cites a Microsoft blog post.
Microsoft will also invest 6.69 billion euros, or nearly $7.2 billion, to develop new data centers in Aragon, in northeastern Spain, which is becoming a major cloud computing center in Europe also including Amazon, indicates Reuters. The regional government of Aragon said Microsoft had applied for a building permit for data centers at a site outside the city of Zaragoza. The Redmond giant’s investment in Aragon will be spread over 10 years.
Sirius
