At the close of the market, after a positive indicator of producer price inflation and contrasting banking publications, Wall Street ended in disorganized order. The S&P 500 gains +0.08% to 4,783 pts, bringing its progression over the week to +0.43%. The Dow Jones lost -0.31%, returning to 37,592 pts (-0.24% over the week). The Nasdaq rises feverishly by +0.02% to 14,972 pts, for an overall weekly evolution of +0.87%.
Yesterday’s publication of an American consumer price index showing growth slightly higher than expected did not significantly change expectations of monetary easing, nor did Friday’s announcement of a decline in prices. to production in the same month.
Yesterday, the American inflation figures for the month of December were somewhat disappointing. Thus, the report showed a consumer price index increasing by 0.3% compared to the previous month, against 0.2% market consensus. Over one year, this indicator increased by 3.4% compared to 3.2% consensus. Excluding food and energy, the December CPI increased by 0.3% compared to the previous month, in line with market expectations, and by 3.9% year-on-year.
The American producer price index for December, on the other hand, was a very pleasant surprise on Friday. Thus, the PPI fell by 0.1% compared to the previous month (+0.2% consensus). It only increases by 1% over one year (+1.3% consensus). Excluding food and energy, the indicator was stable compared to November (+0.2% market consensus). It increased by 1.8% over one year excluding volatile elements (+2% market consensus).
Loretta Mester, head of the Cleveland Fed, said yesterday on Bloomberg that March would likely be too early for a rate cut because the December CPI report shows there is still work to do . She also said it would be appropriate to begin negotiations on ending ‘QT’ (quantitative monetary tightening by reducing the Fed’s balance sheet) this year, but not imminently.
Thomas Barkin, another voting member of the Fed and head of the Richmond branch, also offered a cautious outlook on the rate cut timetable, saying he still had to be convinced that inflation is stabilizing and that he would be open to a rate cut once inflation is on track to reach the famous 2% – the objective of the American central bank.
Mester and Barkin thus maintained a cautious posture, as did John Williams, president of the New York Fed, on Wednesday, who declared that the policy was restrictive enough to bring inflation back to the 2% target, but that the Fed would need to maintain a restrictive policy for some time to fully achieve this goal.
Neel Kashkari, the head of the Minneapolis Fed, clarified for his part that companies’ expectations were for a decline in inflation, which would be a relief for the central bank.
According to the FedWatch barometer, the probability is more than 93% that the Fed will opt for a monetary status quo on January 31, leaving its rates unchanged between 5.25 and 5.50%, while the first easing would take place on March 20 (76% probability). The same tool shows that rates could end the year in a range of 3.75 to 4% (approximately 32% probability), or between 3.5 and 3.75% (40% probability).
A barrel of WTI crude returns -0.33% to $72.79.
The dollar is stable against the European currency, at 0.913 euros.
An ounce of fine gold ended at $2,048. Bitcoin is at $46,217.
Values
* Bank of New York Mellon (+4.02% to $54.85). The bank posted a halving of its quarterly profit due to non-recurring charges. The bank posted a charge of $752 million for the FDIC special fee. Net interest income in the quarter increased 4% to $1.1 billion. Quarterly net profit was $256 million, or 33 cents per share, compared to $509 million a year earlier. Revenues totaled $4.31 billion, up 10%. Deposits increased by 4% sequentially to $273 billion.
* Citigroup (+1.04% to $52.62). The bank posted a net loss in the fourth fiscal quarter due to non-recurring charges. The bank announced a net loss of $1.8 billion in the 4th quarter. In particular, it recorded charges of $780 million due to severance and other costs related to restructuring efforts. The group achieved a turnover of $17.4 billion. Analysts had expected Citi to post earnings per share of 10 cents and revenue of $18.7 billion. The bank is in the midst of a turnaround effort under Jane Fraser, who has decided to cut layers of management and staff and reorganize the business. Citi also paid a special assessment of $1.7 billion to the FDIC. The bank cited reserves of $1.3 billion associated with risks in Russia and Argentina, and a charge of $880 million for the devaluation of the Argentine peso. Excluding items, adjusted EPS would have been 84 cents. The bank’s financial director also confided that Citi would cut 20,000 jobs over the next two years.
* BlackRock (+0.88% to $799.6). The group announced revenues and profits above expectations for its 4th quarter. Adjusted earnings per share were $9.66, compared to $8.8 consensus and $8.93 a year earlier. Revenues totaled $4.63 billion ($4.34 billion a year earlier). Furthermore, the asset management giant also announced the acquisition of Global Infrastructure Partners, an independent infrastructure fund manager, in a cash and stock transaction worth more than $12 billion. The deal includes $3 billion in cash and approximately 12 million BlackRock shares. Approximately 30% of the total consideration, entirely in shares, will be deferred and is expected to be issued in approximately five years.
* Delta Air Lines (-8.97% to $38.47). The American airline is stalling on Wall Street, despite a better-than-expected quarterly profit. It must be said that Delta has also adjusted its 2024 financial forecasts due to supply chain constraints and economic risks. The Atlanta group now expects adjusted earnings per share of $6 to $7 this year, compared to a previous target of more than $7 and a consensus of $6.5. For the 1st quarter, adjusted EPS is expected between 25 and 50 cents (38 cents consensus). For the closed quarter, adjusted EPS came to $1.28 ($1.17 consensus).
* Tesla (-3.67% to $218.89). Elon Musk’s firm is reducing the prices of its two models manufactured locally in China, according to Bloomberg. According to Tesla’s local website, the starting price of the base Model 3 sedan was reduced by 5.9 percent to 245,900 yuan, while the starting price of the Model Y SUV was lowered by 2.8 % to 258,900 yuan. “The movement could trigger additional price cuts, putting pressure on margins,” worries Bloomberg, as the world’s leading electric automobile market slows down. Elon Musk’s group will also suspend most of its production at the Berlin site for two weeks – from January 29 to February 11 – due to component supply constraints following the attacks in the Red Sea, which caused changes in transport routes between Europe and Asia.
* UnitedHealth (-3.37% to $521.51). The American health insurance giant stumbles on Wall Street. Operators are mainly concerned about the increase in expenses. The group nevertheless published a profit higher than market expectations for the 4th fiscal quarter, with adjusted earnings per share of $6.16 and revenues totaling $94.4 billion. The market consensus was $5.98 earnings per share and $92.1 billion in revenue. Over the financial year, revenues increased by 15% to $371.6 billion, while operating profits increased by 14%. UnitedHealth finally reaffirmed its profit forecasts for 2024, expecting EPS ranging from $27.5 to $28.
* Wells Fargo (-3.34% to $47.4). The establishment announced profits for its 4th quarter up 9%, despite increased provisions for credit losses. Q4 revenues increased 2% to $20.5 billion, while net income reached $3.45 billion or 86 cents per share. A year before, the American banking establishment had posted a quarterly profit of $3.16 billion. Wells paid $1.9 billion in special royalties to the FDIC during the quarter. The group nevertheless benefited from cost reduction measures during the quarter ended. He finally warned that its 2024 net interest income could decline by 7 to 9%.
* Bank of America (-1.06% to $32.8). The bank announced, for its 4th fiscal quarter, a decline in profit to $3.1 billion, with the costs of bailing out the FDIC guarantee fund and other elements. Net interest income declined 5% to $13.9 billion, as the bank spent slightly more to retain customer deposits. BofA passed a quarterly charge of $2.1 billion for the special fee owed to the FDIC, the American deposit guarantee agency which faced the crisis of regional banks in 2023. The second largest American credit institution ultimately generated a profit of $3.1 billion and 35 cents per share for the quarter ended at the end of December, compared to $7.1 billion in profits a year before. In total, non-recurring charges reached $3.7 billion over the closed period.
The group reported a drop in unrealized losses on securities held to maturity, with the recovery of bond markets. The bank recorded unrealized losses of nearly $98 billion in the 4th quarter compared to…$131.6 billion in the 3rd quarter.
* JP Morgan Chase (-0.73% to $169.05). Jamie Dimon’s bank posts, for the 2023 financial year, a huge annual profit of $49.6 billion. Even if the performance appears more mixed in the 4th quarter, the annual results show a historic profit for the establishment. This annual record is all the more surprising given that the year was extremely delicate for the sector, with the regional banking crisis, from which JP Morgan emerged stronger, once again. In comparison, Wells Fargo (-3.34%) made “only” $30 billion in annual profits and Bank of America (-1.06%) “barely” $23 billion.
For the 4th quarter alone, JP Morgan posted a profit of $9.3 billion, down 15% year-on-year, after a non-recurring charge of $3 billion corresponding to a special assessment invoiced by the Federal Deposit Insurance Corporation, a body supervision of bank deposits in the United States. The bank posted quarterly earnings per share of $3.04 for revenues of $38.6 billion (+12%). A year before, EPS stood at $3.57 and net profit at $11 billion. Over the full year, revenues increased by 3% to more than $158 billion.
JPM and several large banks, however, had to replenish the deposit insurance fund (DIF) of the Federal Deposit Insurance Corporation, emptied by the bankruptcies of Silicon Valley Bank and Signature Bank last year…
Jamie Dimon also delivered his latest comments on the economic situation, praising the resilience of the American economy, while the markets are hoping for a soft landing. He was nevertheless cautious regarding inflation.
