Wall Street progressed slightly today, with the S&P 500 gaining 0.21% to 4,653 pts and the Dow Jones gaining another 0.07% to 36,603 pts, now very close to historic peaks, compared to an increase of 0.26% on the Nasdaq. at 14,571 pts. The markets rather appreciated the inflation figures yesterday, quite close to expectations, and are now seeing a stable producer price index in November. They will follow the announcements from the Fed and Jerome Powell this evening.
The Fed’s monetary statement will be released this evening at 8 p.m., while Jerome Powell’s conference will be held at 8:30 p.m. The American central bank will most likely leave its rates unchanged between 5.25 and 5.5% on fed funds (probability of more than 98% according to the FedWatch barometer). This would be the third consecutive status quo on rates for the Fed, which therefore seems to have finished with monetary tightening, without wanting to “pivot” too quickly. The markets anticipate a potential monetary easing on March 20 (approximately 50% probability) or May 1, 2024…
The American producer price index for November 2023 was stable compared to the previous month, in line with market expectations. The adjusted food and energy index also remained stable compared to October, against +0.2% of the FactSet consensus. Over one year, the producer price index increased by 0.9% and the adjusted indicator by 2%, i.e. smaller increases than expected.
The Atlanta Fed’s inflation expectations index for December 2023 stood at +2.4%, compared to +2.5% previously. It reports one-year inflation expectations from the point of view of firms.
Oil prices increased slightly after the announcement of a sharp drop in crude oil reserves in the United States last week. According to the US Department of Energy, domestic crude stocks, excluding strategic reserves, fell by 4.3 million barrels during the week ended December 8 to 440.8 mb. The consensus was for a drop of 0.7 mb. Gasoline stocks increased by 0.4 mb (+1.9 mb expected), and those of distilled products increased by 1.4 million barrels (+0.6 mb expected). A barrel of WTI crude is currently gaining 1.3% on the Nymex at $69.5.
Tomorrow Thursday, the day will be marked by announcements of weekly unemployment registrations, retail sales, import and export prices, as well as business stocks and sales.
Finally, on Friday, Four Witches Day (simultaneous expiration of 4 types of contracts: index and stock options, as well as index and stock futures), investors will follow the Empire State manufacturing index from the New York Fed, industrial production figures, as well as the US composite flash PMI index.
Janet Yellen, American Secretary of the Treasury and former head of the Fed, delivered economic comments yesterday, in the midst of a blackout preventing officials of the American central bank from speaking before the FOMC’s monetary decision. Yellen said she saw no reason why inflation should not return to the Fed’s 2% target. She notes that inflation is moderating significantly and believes that the economy is on track for a soft landing. She adds that the high level of long-term rates should put pressure on the fiscal outlook. According to the head of the US Treasury, the rise in real rates could impact the Fed’s decisions on the pace of rates.
In any case, inflation expectations would be “largely under control”, according to Yellen, who rules out a entrenchment of inflation or an inflationary wage spiral. She also specifies that the job market remains strong but is easing, and judges that it is not necessary to have high unemployment to bring down inflation…
The American consumer price index for the month of November 2023 showed an increase of 0.1% compared to the previous month, against a stable consensus and after a month of October without change. Year-on-year, the US CPI for November increased by 3.1% as expected. Excluding food and energy, this price indicator increased by 0.3% compared to the previous month and by 4% over one year. Finally, the average hourly wage appreciated a little more than expected, up 0.4% compared to the previous month and 4% over one year.
In corporate news on Wall Street, Adobe and Nordson Corporation reveal their results this evening. Costco Wholesale (after market), Lennar, Jabil and Manchester United announce Thursday. Darden Restaurants will finally be on the Friday menu.
The dollar index stabilizes this Wednesday against a basket of currencies. On the bond markets, the yield on the 2-year T-Bond is 4.68%, compared to 4.16% on the 10-year and 4.27% on the 30-year.
Values
Tesla (-1%). Rear-wheel-drive, long-range Model 3 vehicles will lose a federal tax credit of up to $7,500 starting Dec. 31, based on new guidelines under the U.S. Inflation Reduction Act , specifies Reuters, referring to a message on the Texan automaker’s website. The U.S. Treasury earlier this month released guidelines detailing new battery supply restrictions that take effect Jan. 1 and are aimed at steering the U.S. electric vehicle supply chain away from China. The tax credit will end for the rear-wheel-drive Model 3 and Long-Range Model 3 on December 31, 2023. “Take delivery by December 31 to receive a full tax credit,” the company said on its website.
Tesla will also deploy an over-the-air update for 2.03 million vehicles to correct an Autopilot control issue, the National Highway Traffic Safety Administration (NHTSA) said on Wednesday. The agency has been investigating the electric automaker for more than two years over whether Tesla vehicles adequately ensure that drivers are paying attention when using the driver assistance system. Tesla’s Autopilot is supposed to allow cars to automatically steer, accelerate and brake within their lane, while the enhanced Autopilot can help change lanes on highways.
Pfizer fell by 9% on Wall Street this Wednesday, while the American pharmaceutical giant delivered a turnover forecast ranging from 58.5 to 61.5 billion dollars for 2024, against a consensus of 63.2 billion. The group, which is facing the sharp drop in Covid sales and generic competition on some of its blockbusters, has also increased its cost reduction objective by $500 million. Covid products, which had boosted activity for two years, would only represent $8 billion in revenue next year according to the latest guidance. Analysts expected a total of 13 billion for Comirnaty and Paxlovid combined. 2024 adjusted profit is now anticipated between $2.05 and $2.25, compared to more than $3.1 consensus. Faced with this weakness, Pfizer revised its objective of reducing expenses to at least $4 billion annually.
Walgreens Boots Alliance (stable), the American pharmaceutical chain, has relaunched discussions with a view to a potential exit from its British chain Boots, according to Bloomberg sources with knowledge of the matter. The group abandoned a process of selling the activity 18 months ago. Walgreens is therefore said to have initiated new discussions about a separation from Boots, which could be valued at around 7 billion pounds or 8.8 billion dollars as part of a potential transaction. An IPO in London would notably be a possibility, according to Bloomberg sources. Any process would not start until next year at the earliest, the sources said…
Take-Two Interactive Software (+3%) climbs on Wall Street this Wednesday. The American video game publisher will join the Nasdaq 100 index on December 18, replacing Seagen – acquired by Pfizer for $43 billion. The information that GTA VI (Grand Theft Auto) would not be released until 2025 initially put pressure on Take-Two Interactive’s stock earlier this month.
