Wall Street is timidly turning green this Thursday, despite notable corrections in the Micron, Levi’s and Walgreens files. The S&P 500 advances by 0.11% to 5,484 pts, the Dow Jones by 0.25% to 39,226 pts and the Nasdaq by 0.15% to 17,829 pts. Caution nevertheless remains, also following a contrasting series of statistics across the Atlantic, and while awaiting the first Trump-Biden debate which is being held this evening in Atlanta ahead of the November presidential election. On the Nymex, a barrel of WTI crude gained 1.1% to $81.8. An ounce of fine gold rose 1.1% to $2,337. The dollar index lost 0.2% against a basket of reference currencies.
The face-off between Joe Biden and Donald Trump will therefore be closely watched tonight on CNN. Wall Street’s perception is not clear. It is agreed that a Trump election could revive inflation, but also potentially support the markets, the former president being in favor of a flexible monetary policy, without worrying too much about the economic context…
As expected, American GDP for the first quarter of 2024 grew at a rate of 1.4% in final reading, compared to a previous estimate of 1.3%. The price index increased at a rate of 3.1% against 3% consensus. Personal consumption expenditure increased at a rate of 1.5%, compared to a consensus of 2%.
US durable goods orders for May, which were also just released, rose 0.1% from April, against a stable consensus. Excluding transportation, orders fell 0.1% against +0.1% consensus.
The balance of international trade in goods for the month of May showed a deficit of 100.6 billion dollars, against 95.6 billion dollars consensus and 98 billion for the revised reading of the previous month.
Weekly jobless claims for the week ended June 22 came in at 233,000, compared to the FactSet consensus of 235,000 and the prior week’s revised reading of 239,000.
Preliminary wholesale inventories for May rose 0.6% from the previous month versus a consensus of 0.2%.
The index of promised housing sales in the United States from the National Association of Realtors was down 2.1% compared to the previous month, compared to +1% market consensus measured by FactSet and -7 .7% a month ago.
As for the Fed today, the head of the Atlanta branch, Raphael Bostic, confirmed that he was in favor of a rate cut this year, potentially in the fourth quarter. According to him, inflation is going in the right direction, but we must be sure that it is heading towards 2% before the initial rate cut.
Tomorrow, it will be necessary to monitor household income and spending for the month of May as well as the associated “core” inflation index, closely followed by the Fed, but also the Chicago PMI manufacturing index and the sentiment index. of American consumers from the University of Michigan. Thomas Barkin and Michelle Bowman of the Fed will also have their say.
The 31 major US banks that participated in the Fed’s stress tests would all be able to withstand a severe global recession – implying they would not need to hold more capital. The results published yesterday therefore show that these banks would have enough capital to absorb losses and continue to lend in a two-year scenario where the unemployment rate in the United States rises to 10%, where commercial real estate prices would fall by 40% and the stock market would plunge by 55%. The simulation would still show a collective loss of nearly $700 billion in this dark scenario… “The objective of our test is to help ensure that banks have enough capital to absorb losses in a scenario very stressful,” said Michael Barr, Fed vice chairman for supervision.
This group of large banks includes JP Morgan, Bank of America, Citigroup, Wells Fargo and Goldman Sachs. Even large regional banks, such as PNC, Truist, M&T Bank, Citizens and Regions, would have adequate levels of capital in this worst-case scenario.
In corporate news on Wall Street, Micron and Levi Strauss are correcting the accounts. Nike (after market), McCormick and Walgreens Boots Alliance release this Thursday.
Values
Nvidia (-1.6%) therefore held its general meeting of shareholders yesterday. The star of AI chips briefly became the world’s largest market capitalization last week, and is now worth more than $3,000 billion, with particularly dynamic demand for its products, which are essential to the development of artificial intelligence models. . Jensen Huang, the group’s general manager, even announced at the AGM that the Blackwell platform expected later this year would probably become the most successful product in Nvidia’s history, and even perhaps throughout the history of computing.
Micron lost 6% on Wall Street, despite quarterly results above expectations. The group’s just-in-line guidance was unforgiving, with the stock up more than 70% this year and at an all-time high. The sanction highlights the market’s very strong expectations regarding stocks linked to the theme of artificial intelligence.
Micron, leader in memory chips, estimates that its fourth quarter revenues should be between $7.4 billion and $7.8 billion, compared to a consensus of around $7.6 billion. Adjusted earnings per share over the period are expected at around $1.08 versus a consensus of $1.02. The group is obviously benefiting from the very strong demand in AI markets, but is still struggling in its traditional markets, PC or smartphones. In the third fiscal quarter ended at the end of May, the group still posted very strong growth of 82% year-on-year, to $6.81 billion, while its adjusted earnings per share, of 62 cents, largely beat the consensus which was 50 cents. In particular, the group markets a critical component of AI hardware, HBM high-bandwidth memory, which works with Nvidia chips to process data and helps systems develop and run AI models.
Levi Strauss plunges 17% on Wall Street, while the jeans giant announced lackluster results for the second fiscal quarter. Adjusted earnings per share came in at 16 cents in the period, above market consensus, but revenue missed consensus at just $1.44 billion. Levi Strauss also announced an 8% increase in its dividend to 13 cents per share. Sales increased 8% year-on-year with the favorable basis of comparison. Levi’s maintained its annual forecast, expecting earnings per share ranging from $1.17 to $1.27, including an impact of 5 cents from the new distribution and logistics strategy. Finally, note that online sales increased by 19% year-on-year in the quarter ended.
McCormick (+6%), the American seasoning and spice giant, announced sales for its second fiscal quarter ended at the end of May, down 1% to $1.64 billion, compared to a consensus of $1.63 billion. of dollars. Quarterly adjusted earnings per share of 69 cents came in above market expectations. The group confirmed its expectations for sales, operating profit and adjusted earnings per share for the 2024 financial year. It forecasts that adjusted earnings per share for 2024 will be between $2.80 and $2.85, compared to $2.70 of adjusted earnings per share in 2023. For fiscal 2024, the company expects strong cash flow driven by earnings and working capital initiatives and plans to return a significant portion of cash flow to shareholders under form of dividends.
Walgreens Boots Alliance (-24%!), the American pharmacy chain, is losing ground on Wall Street. The Deerfield, Illinois, group posted revenues up 2.6% to $36.4 billion for the third fiscal quarter ended at the end of May, with operating profit back in positive territory at $111 million. dollars and adjusted operating profit of $613 million, down 36%. Adjusted earnings per share fell 37% to 63 cents. The consensus was for 68 cents in adjusted EPS for $35.9 billion in revenue. The group reduces its adjusted earnings per share guidance for fiscal 2024 to between $2.80 and $2.95, to reflect difficult trends in the pharmaceutical industry and a “worse than expected” consumer environment in the United States. .
