Wall Street was on an upward trend on Wednesday, with the S&P 500 gaining 0.41% to 4,556 pts and the Dow Jones +0.53% to 35,273 pts, compared to a gain of 0.46% on the Nasdaq to 14,265 pts in a quiet market before the Thanksgiving break on Thursday (and Friday for many investors). Investors did not really react to the Minutes of the last monetary meeting of the Fed, which did not provide new information, confirming the cautious posture of the central bank, while the markets are playing for the end of the cycle of monetary tightening while awaiting possible relaxations in 2024… Business news remained dominated by AI and by Nvidia which was in retreat after the announcement of its accounts.
On the Nymex, the barrel of WTI crude fell by 3% to $76 while the next OPEC meeting scheduled for this weekend was postponed against a backdrop of tension between the producing countries in the face of the decline in crude prices. The announcement of a very sharp increase in crude reserves in the United States last week did not help matters: According to the American Department of Energy, domestic crude stocks, excluding strategic reserves, have in fact jumped by 8.7 million barrels during the week ended November 17 to 448.1 mb. The consensus was expecting an increase of 1.2 mb. Gasoline stocks increased by 0.7 mb (+0.6 mb expected), and those of distilled products fell by 1 million barrels (-0.2 mb expected).
The dollar index regains 0.6% against a basket of currencies. On the bond markets, the yield on the 2-year T-Bond is 4.93%, compared to 4.43% on the 10-year and 4.56% on the 30-year.
On the economic front, new orders for durable goods in the United States for the month of October 2023 were down sharply by 5.4% compared to the previous month, compared to -3.2% market consensus and +4% for the revised reading from the previous month. Excluding transport, these orders were stable, compared to +0.1% consensus and +0.2% a month earlier.
Unemployment claims fell unexpectedly last week in the United States. The US Department of Labor has just announced, for the week ending November 18, that unemployment claims amounted to 208,000, down 24,000 compared to the previous week. The consensus was positioned at 227,000. The four-week average stands at 220,000, down 750. Finally, the number of unemployed workers receiving compensation for the week ended November 11 stands at 1.840 million, down 22,000 over seven days (1.875 million consensus).
The final index of American consumer sentiment from the University of Michigan for the month of November 2023 was revised slightly higher to 61.3, compared to 61.1 in FactSet consensus and 60.4 in preliminary reading.
On Thursday, Wall Street will be closed for Thanksgiving. The American stock market will only resume for a shortened session closing at 7 p.m. French time on Friday – with the publication of the American composite flash PMI index…
Values
Nvidia (-2.4%), the graphics and AI chip giant, driving force of the stock market rally in recent months in artificial intelligence on Wall Street, last night shattered the consensus profits and revenues for the closed quarter . Forecasts for the current quarter are also significantly higher than expected. Brokers are adjusting their price targets and forecasts upwards today following these announcements, but it seems that the markets remain cautious mainly due to management’s comments regarding the Chinese market, but also an extremely demanding stock market valuation to more than 1.230 billion dollars.
Nvidia therefore published adjusted earnings per share of $4.02 last night for the third fiscal quarter, compared to a consensus of $3.36. Revenues totaled $18.12 billion, well above the $16.1 billion consensus. In other words, revenues have more than tripled compared to last year, with an increase of 206%. Fourth-quarter revenues are expected at $20 billion, plus or minus 2%, while the consensus was around $18 billion. Colette Kress, Nvidia’s chief financial officer, warned last night that US restrictions on chip exports to China could cause a significant decline in sales in the region in the fourth quarter of the fiscal year – even if Nvidia I expect this decline to be more than offset by strong growth in other geographic areas.
The group’s performance remains extraordinary in any case, especially for a “megacap” of more than 1,000 billion. Revenue for the quarter ended October 29 soared 206% year-over-year and 34% compared to the previous quarter. Diluted net earnings per share were $3.71, more than 12-fold compared to last year and up 50% sequentially. Data center revenues for the third quarter totaled a record $14.51 billion, up 41% from the prior quarter and 279% (!) from last year.
Adjusted earnings per share increased six-fold compared to last year and were up 49% compared to the second quarter. Gross margin increased to 74%, compared to 70.1% a quarter before and 53.6% a year earlier. Operating profit reached $10.4 billion. Quarterly net profit was $9.24 billion, compared to $6.19 billion in the second quarter and $680 million for the comparable period last year. On an adjusted basis, net profit was more than $10 billion, up from $1.46 billion a year earlier.
Revenues for the just-started fourth fiscal quarter 2024 are expected at $20 billion, plus or minus 2%, for GAAP and non-GAAP gross margins of 74.5% and 75.5%, plus or minus 50 basis points, respectively. . Operating expenses are anticipated at 3.17 billion GAAP and 2.2 billion non-GAAP.
Microsoft (+1.2%). The OpenAI soap opera continues and the new twist takes the form of a great return of Sam Altman, unceremoniously unloaded Friday evening, as general director. Altman, “exited” by the board of directors of OpenAI at the end of last week for reasons which remain rather unclear, was also quickly named director of a new AI entity at Microsoft – the largest shareholder of the artificial intelligence startup. OpenAI has just announced on the social network ), Larry Summers and Adam D’Angelo. We are working together to iron out the details. Thank you very much for your patience during this time.”
Altman responded to the post by adding, “I love OpenAI, and everything I’ve done over the last few days has been about maintaining this team and its mission. When I decided to join Microsoft on Sunday evening, it was clear that this was the best path for me and the team. With the new board and the support of Satya (editor’s note: Nadella, boss of Microsoft), I look forward to returning to openai and building on our strong partnership with Microsoft.
Autodesk (-6.9%), the American software publisher known for its AutoCAD product, declined on Wall Street, while its revenues and profits for the third fiscal quarter nevertheless exceeded market expectations. Over the period, adjusted earnings per share were $2.07, compared to less than $2 consensus and $1.7 a year earlier. The San Francisco group’s revenues totaled $1.41 billion, up 10.5% year-on-year, compared to $1.39 billion consensus. For its fourth fiscal quarter 2024, Autodesk expects adjusted earnings ranging from $1.91 to $1.97 per share on revenue of $1.422 billion to $1.437 billion. The group envisages an adjusted annual EPS of $7.43 to $7.49, and revenues ranging from $5.45 billion to $5.465 billion, an upward revision of the guidance. The annual revenue forecast came in above analysts’ expectations, signaling resilience in customer spending on design software despite economic uncertainty.
HP Inc (+2.8%). The American IT group posted quarterly sales below market expectations for the period ended at the end of October. Revenue fell 6.5% year-over-year to $13.8 billion for the fiscal fourth quarter. The Californian group from Palo Alto is still suffering from the depression of the PC market. Business computer sales declined 11% to $6.21 billion for the quarter. Consumer PC revenues fell 1% to $3.19 billion. Revenues from the printers unit were 4.4 billion. Quarterly adjusted profit was 90 cents. For the quarter started, ending in January, i.e. the first fiscal quarter, the group expects adjusted earnings per share ranging from 76 to 86 cents, compared to a consensus of 85 cents. Finally, HP forecasts annual EPS ranging from $3.25 to $3.65. HP still says it is on track to launch its “AI” PCs in the second half of next year and anticipates gradual penetration of the market.
Deere, the American colossus of agricultural equipment, fell by 3.1%, the group having recently published quarterly results higher than market expectations, but disappointing forecasts. The group revealed for its fourth fiscal quarter ending at the end of October 2023 a net profit of $2.37 billion, or $8.26 per share, compared to $2.25 billion in profits a year earlier. Quarterly global revenue stood at $15.41 billion, down 1% year-on-year. For the full fiscal year, net profit reached $10.17 billion, on revenues of $61.25 billion. Analyst consensus for the past quarter was less than $7 earnings per share. The forecasts also revealed disappoint operators. Deere expects net income for fiscal 2024 to range from $7.75 billion to $8.25 billion.
Broadcom (-0.9%) finalized on Wednesday the $69 billion acquisition of VMware, a virtualization giant, following approval from the Chinese authorities. This was the last episode of this series of several months. The combination agreement was initially announced in May 2022.
