Wall Street is now gaining a little ground at the start of the session this Wednesday, the S&P 500 gaining 0.21% to 4,766 pts, the Dow Jones 0.15% to 37,583 pts and the Nasdaq 0.36% to 14,911 pts. Yesterday, the American stock market ended on a mixed note, the day after a rally led by Nvidia and the Nasdaq. Operators are showing a certain caution while awaiting the inflation figures which will be revealed at the end of the week, as well as the first quarterly reports of the season…
On the Nymex, a barrel of WTI crude rose 1% to $72.9. An ounce of gold gains 0.1% to $2,034. The dollar index lost 0.1% against a basket of currencies. The yield on the 2-year T-Bond is 4.35%, compared to 4.02% on the 10-year and 4.19% on the 30-year.
According to the CME Group’s FedWatch tool, it is very likely (95%) that the Fed will leave its rates unchanged on January 31 after its next monetary meeting, between 5.25 and 5.5%. The first relaxation could take place on March 20 during the next meeting (probability of around 65% according to the same tool). The latest economic statistics showed, across the Atlantic, a fairly resilient job market but some additional signals of economic slowdown.
The trend is expected to remain volatile in the coming days. On the economic front, inventories of American companies for the month of November 2023 fell by 0.2% compared to the previous month, in line with the consensus of local economists measured by FactSet.
Oil prices are reducing their lead after the announcement of a surge in reserves of gasoline and distilled products in the United States last week. According to the US Department of Energy, domestic crude stocks, excluding strategic reserves, increased by 1.3 million barrels during the week ended January 5 to 432.4 mb. The consensus was for a drop of 0.7 mb. Gasoline stocks jumped by 8 mb (+2.5 mb expected), and those of distilled products increased by 6.5 million barrels (+2.4 mb expected).
Additionally, John Williams of the New York Fed will speak during the day.
The news will be a little more comprehensive tomorrow Thursday, with the American consumer price index for December, weekly unemployment claims, as well as the American budgetary balance. On Friday, markets will follow the producer price index and a speech from the Fed’s Neel Kashkari.
Coming back to the crucial statistic of the week, the CPI (consumer price index) for December 2023 which will be revealed tomorrow at 2:30 p.m., the FactSet consensus is 0.2% increase compared to the previous month and 3 .2% year-on-year (+0.2% month-on-month or +3.8% year-on-year, excluding food and energy). This would reflect, compared to November, a small increase in the overall index (+0.1% in November), but a decline in inflation excluding food and energy (+0.3% in November).
Finally, note that the rating agency Fitch has indicated that it no longer expects an American recession this year. The agency also forecasts three rate cuts from the Fed in 2024.
Concerning companies listed on Wall Street, KB Home will announce this Wednesday after trading. Infosys, an Indian giant listed on the American market, will publish on Thursday. On Friday, banks and financial institutions will kick off the 4th quarter results season. UnitedHealth, JP Morgan Chase, Bank of America, Wells Fargo, BlackRock, Citigroup and Bank of New York Mellon will reveal their accounts before the market. Delta Air Lines will also release Friday.
Values
Hewlett Packard Enterprise (+2%) confirmed the acquisition of network equipment manufacturer Juniper Networks (+2%), a small rival of Cisco, for around $14 billion, in order to strengthen its artificial intelligence offerings. Texas-based HPE is a cloud services provider serving customers ranging from small businesses to large enterprises and governments. HPE is also an offshoot of the emblematic technology company founded in 1939 by William Hewlett and David Packard, Hewlett-Packard… The almost century-old group therefore intends to give itself a facelift by developing its AI offerings and riding the wave current…
Hewlett Packard Enterprise will buy Juniper Networks for $14 billion in an all-cash deal. HPE is offering $40 per Juniper share, a premium of more than 32% compared to the stock’s close on Monday, before the first rumors of the “deal”. HPE thus intends to exploit Juniper’s offerings such as network security and AI-based enterprise network operations. The deal is expected to be accretive to HPE’s adjusted earnings and free cash flow within the first year following completion of the combination. The transaction would be financed by commitments of $14 billion in term loans and is expected to close in late 2024 or early 2025.
Amazon (+1%). Twitch, Amazon’s live streaming unit, is preparing to cut 35% of its workforce, or around 500 positions, according to Bloomberg. The Bloomberg agency cites people close to the project. This decision could be announced as early as this Wednesday. The new cuts come as this activity remains loss-making nine years after the company was acquired by Amazon. In the final months of 2023, several senior Twitch executives announced their departures, including the Chief Product Officer, Chief Customer Officer, and Chief Content Officer. Twitch also lost its chief revenue officer, who worked in Amazon’s Ads unit.
Amazon would also lay off several hundred employees in its Prime Video and Amazon MGM studios, according to ‘The Information’, which refers to an email sent this morning to employees. Amazon video executive Mike Hopkins reportedly said in the email that Amazon had identified “opportunities to reduce or pause investments in some areas” but planned to increase spending on some. “most impactful content and product initiatives.”
Walmart (+1%) will expand its drone delivery service to 1.8 million homes in the Dallas Fort-Worth region. At the Consumer Electronics Show (CES) in Las Vegas, the American retail giant revealed how some of the latest technologies will allow it to offer a new type of commerce. The company presented its plan for continuous innovation. Specifically, Walmart outlined how the technology would benefit customers and members, as well as teams. Walmart also announced another step toward its goal of providing customers with the ultimate convenience of receiving items in as little as 30 minutes by expanding drone delivery to an additional 1.8 million homes in the Dallas Fort-Worth metro area – or 75% of the surface area.
Boeing (+1%), the American aeronautics colossus, achieved its airliner delivery targets and recorded a 70% increase in net orders in 2023. Reuters estimates that this reflects strong demand for air travel and planes, but adds that European rival Airbus remained the largest plane maker for the fifth year in a row. American published its year-end figures yesterday, Tuesday, as it faces new difficulties following an accident involving an Alaska Airlines 737 MAX 9, which lost a fuselage panel in flight last week . Boeing delivered 528 aircraft in 2023, representing growth of 10% compared to 2022. The manufacturer reported 1,456 gross orders for the year and a total of 1,314 net orders after cancellations, with a record of 369 net orders in December.
Taiwan Semiconductor (-1%), the world’s largest supplier of made-to-order chips, a major supplier to Nvidia and Apple, reported fourth-quarter revenues above expectations, with demand coming from artificial intelligence players, who compensated for the persistent depression in smartphone and laptop activities. December sales were 176 billion Taiwan dollars, approximately 5.7 billion US dollars, bringing quarterly sales to 625 billion Taiwan dollars, a stable year-on-year performance against an anticipated decline by analysts. The consensus was NT$616 billion. Regardless, TSMC has still not returned to growth and December sales showed a decline of more than 8% compared to the previous year.
Intuitive Surgical, the American medical robotics giant, jumped nearly 6% on Wall Street, following the publication of preliminary sales figures above market expectations for the fourth fiscal quarter. The group forecasts sales of approximately $1.93 billion for the fourth quarter of 2023, an increase of 17% compared to the fourth quarter of 2022. Intuitive therefore expects sales for 2023 of about $7.12 billion, an increase of 14%. The unaudited results presented are preliminary and subject to completion of final close-out procedures and annual independent audit and, therefore, are subject to adjustment.
Tesla (-1%) will offer a restyled version of its Model 3 sedan in North America and has kept prices unchanged, indicates Reuters, based on information from the Texan group’s website and a message published on the network social X (formerly Twitter).
Apple (-0.4%) appears in the red on Wall Street, while market sources say the research firm Redburn lowered its recommendation on the value from ‘buy’ to ‘neutral’ while maintaining its goal of $200. This is the third deterioration in the value since the start of the year, after reductions by Barclays and Piper Sandler last week. Redburn expects iPhone to return to growth during 2024, but sees little room for upside over the next few years and fears a disappointing March quarter could impact the confidence in the prospects.
