Wall Street is expected to rise before market this Wednesday, with the S&P 500 gaining 0.4%, the Dow Jones 0.2% and the Nasdaq 0.5%. The American market has nevertheless been hesitating since the start of the week, after a superb rally in November against a backdrop of hopes of peaking rates, controlled inflation and a soft economic landing. Operators are therefore keeping in mind a rather positive scenario which could even allow the start of monetary easing at the end of the first quarter of 2024. Yesterday, the US market benefited from a better trend on the ‘Magnificent Seven’ (Apple, Microsoft , Amazon, Alphabet, Tesla, Nvidia, Meta), which had been the subject of sustained profit-taking on Monday…
On the Nymex, a barrel of WTI crude fell by 1.5% to $71.2 this Wednesday. An ounce of gold gained 0.6% to $2,048. On the foreign exchange market, the dollar index fell by 0.1% against a basket of currencies. On the bond markets, the yield on the 2-year T-Bond stands at 4.58% and the 10-year at 4.15%.
The weakness of the American job market is confirmed in November. Thus, according to the latest ADP report on the subject, job creations in the private sector for the past month totaled 103,000, compared to a FactSet consensus of 120,000, and a level revised downward to 106,000 for the month of October. The previous reading in October was 113,000. Last month saw moderate hiring growth and a further slowdown in wage gains, according to ADP. Goods and services saw weakness, with leisure, hospitality and manufacturing showing declines. Medium-sized companies with 50 to 249 employees still generated 71,000 jobs in November and large companies 33,000.
“Restaurants and hotels have been the biggest job creators during the post-pandemic recovery. But that momentum is behind us, and the return to trend in leisure and hospitality suggests that the economy as a whole will experience more moderate growth in hiring and wages in 2024,” summarizes chief economist Nela Richardson.
The US deficit in international trade in goods and services for the month of October 2023 stood at $64.3 billion, compared to the consensus $64.1 billion and the revised reading of $61.2 billion for the previous month.
Weekly jobless claims, wholesale inventories and consumer credit figures are due Thursday. Finally, the markets will follow on Friday the monthly American government report on the employment situation for the month of November (FactSet consensus at 3.9% unemployment, 172,500 job creations including 130,000 in the private sector, +0.3% for the average hourly wage compared to the previous month), as well as the preliminary consumer sentiment index from the University of Michigan for December (consensus 61.6).
Note also that the Fed’s FOMC monetary meeting on December 12 and 13 is approaching, which implies a period of blackout during which the officials of the American central bank, for once, are silent. According to the CME Group’s FedWatch tool, the probability is 97.7% that the Fed will opt for a monetary status quo and leave its rates unchanged between 5.25 and 5.50% on fed funds. This is the last monetary meeting of the year for the bank.
In company news, MongoDB, Toll Brothers and Box Inc announced their latest quarterly accounts last night. Brown-Forman, Veeva, Campbell Soup, Chewy, Braze and C3.ai, will release this Wednesday. Broadcom, Lululemon Athletica, Dollar General, The Cooper Companies, DocuSign and Ciena will be there on Thursday. Hello Group and Johnson Outdoors will finally announce on Friday.
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Nvidia, the American colossus of graphics and AI chips, has indicated that it will develop a new series of products that comply with American government regulations and which could thus be exported to China! Jensen Huang’s group would therefore work closely with the Biden administration to ensure that new chips intended for the Chinese market comply with the restrictions. The Californian group holds, Reuters recalls, more than 90% of the Chinese market for artificial intelligence chips, valued at $7 billion, but new American restrictions on exports could generate opportunities for Chinese competitors… Reuters reported last month that Nvidia told Chinese customers it was delaying the launch of a new AI chip for China until the first quarter of next year.
“Nvidia has worked closely with the US government to create products that comply with its regulations,” Huang said at a press conference in Singapore. “Our plan now is to continue working with the government to come up with a new set of products that comply with the new regulations which have certain limitations,” added the executive, quoted by Reuters. He said Nvidia needed to seek market feedback and that the process was ongoing, adding that Huawei was a “formidable” local competitor. The group, the big stock market star of the year 2023 with a performance of more than 220%, had warned during its November financial publication that it expected a sharp drop in its sales in the fourth quarter in China.
Apple gained another 2.1% last night on Wall Street, to $193, very close to historic highs. The market capitalization of the Apple group therefore crosses the 3,000 billion dollar mark, 230 billion dollars more than Microsoft (despite the OpenAI effect), or almost as much as Amazon and Alphabet combined! Despite the multiple uncertainties surrounding iPhone sales, Sino-American tensions, the diversification of production and the growth driver (or not…) constituted by the Vision Pro headset, investors are still playing the Apple file in stock exchange. This is all the more remarkable given that the growth of the group’s activity is historically low, even though its valuation multiples are at their highest.
In immediate news, Apple wants the iPhone 16 batteries to be made in India. People familiar with the matter told the Financial Times that Apple is encouraging battery makers to increase production in India and/or establish new factories there. A person close to Apple told the FT that if iPhone 16 battery production worked, the company would move more iPhone battery production to India. Industry experts and local officials told the FT that Apple’s suppliers may not find it easy to increase production in India. A local official added that Luxshare decided to expand in Vietnam as the Indian government had not approved the company’s development plans in India.
Yesterday, Apple shares mainly benefited on the stock market from the upward revision of sales estimates for Taiwanese assembler Foxconn, a key partner in the supply chain of the Californian Cupertino group. These strong forecasts from Foxconn suggested solid demand for Apple products for the holiday season. Foxconn said current quarter revenue would be better than its early fall guidance for “significant” growth. The group specifically cited better-than-expected demand for smartphones, tablets and other consumer electronic devices during the months of October and November.
Mastercard announced yesterday that its board of directors had approved a new share repurchase program worth up to $11 billion for Class A securities. The payment processing colossus also raised its dividend quarterly to 66 cents per share, compared to 57 cents previously. The cash dividend will be paid on February 9, 2024 to holders of record of its Class A common stock and its Class B common stock as of January 9, 2024. The new share repurchase program will take effect at the end of the Company’s previously announced $9 billion program in December 2022. As of December 1, 2023, the Company had approximately $3.5 billion remaining under the previously approved stock repurchase program.
ExxonMobil, the American oil giant, has posted its 2024 production target, expecting production of 3.8 million barrels of oil equivalent per day, with the help of the Permian Basin and Guyana. Exxon had previously estimated that its production would stagnate until the end of this year, at 3.7 million boed, due to its withdrawal from Russia. The group also intends to increase the pace of share repurchases to $20 billion per year from the completion of the Pioneer acquisition until 2025. Exxon also said it expects $6 billion per year. additional savings by 2027.
Box stumbles on Wall Street, while the software group active in file sharing and online collaboration is cautious in terms of prospects, counting on revenues of 262 to 264 million dollars in the fourth fiscal quarter, against 266 million of consensus. For its third quarter, ended at the end of October, the Californian group posted sales of $261.5 million, compared to $250 million a year earlier. Consolidated net profit was 10.7 million, compared to 9.9 million a year before. Adjusted earnings per share were 36 cents for the period ended, compared to a consensus of 38 cents. For the fourth quarter, this adjusted EPS is anticipated between 38 and 39 cents. Over the full year, revenues are therefore expected between $1.037 and $1.039 billion, while adjusted EPS is expected between $1.42 and $1.43. The consensus was $1.49.
SentinelOne, the American cybersecurity group, is taking off on Wall Street. The group posted a quarterly loss of 3 cents per share, against -8 cents consensus. In addition, SentinelOne posts fourth quarter revenue guidance higher than market expectations. In the quarter ended in October, the group achieved total revenues of $164 million, up 42% year-on-year, compared to a consensus of $156 million. Annual recurring revenue over the period was $664 million, also beating analyst consensus. Fourth-quarter revenue is expected at $169 million, versus the $166 million consensus. Annual revenues are now anticipated at $616 million, up from $605 million previously. The group has started marketing to certain clients its program based on generative AI, Purple AI.
Brown-Forman, one of the American alcoholic beverage giants, released its results for the second quarter and first half of 2024 ended October 31. Second quarter net sales increased 1% to $1.1 billion (-1% on an organic basis). During the quarter, operating profit increased 8% to $339 million (+9% on an organic basis) and diluted earnings per share increased 6% to $0.50. Although the group remains optimistic about its growth prospects for the 2024 financial year, evolving global macroeconomic conditions continue to create a challenging operating environment “which tempers its expectations.” Consequently, the group now forecasts, for the 2024 financial year, organic sales growth of around 3 to 5%, and organic growth in operating profit of 4 to 6%.
Campbell Soup, the American food group, beat the profit consensus for the closed quarter, with the increase in prices of its packaged meals and snacks. Quarterly revenues fell by 2% to 2.5 billion with an organic decline of 1%. Adjusted Ebit and earnings per share fell by 9% and 11%, respectively. The group finally reaffirmed its financial forecasts for the 2024 financial year.
