Wall Street is trying to go even higher at the start of the session after a series of flat indicators that reinforce expectations of a Fed rate cut. The Nasdaq gained 0.30% to 18,082 points and the S&P 500 rose 0.16% to 5,519 points. The Dow Jones nevertheless lost 0.14% to 39,276 points. On the bond market, rates eased significantly with a 10-year US yield dropping 9.3 bp to 4.339%. Yesterday, Wall Street had set new highs again after Federal Reserve Chairman Jerome Powell said that inflation was moving in the right direction.
Speaking from Sintra, Portugal, Fed Chairman Powell acknowledged that the Fed had made “quite a bit of progress” in reducing inflation, but stressed that policymakers needed more evidence before cutting interest rates. Powell said service inflation was more stubborn, tied to wages. However, he noted that the labor market is easing and therefore presents less of a challenge for inflation. The leader expects inflation to return to the 2% target, perhaps late next year or more likely in 2026.
With the US market set to close early on Wednesday due to the national holiday tomorrow, Thursday, July 4, investors have been presented with a wave of clearly disappointing indicators. On the US employment front, one of the main issues on Wall Street at the moment, private sector job creations for June came in at 150,000 according to ADP, compared to a Bloomberg consensus of 165,000 and a level of 157,000 a month earlier, in revised reading. “Job growth has been solid, but not broad-based,” says Nela Richardson, chief economist at ADP. “Without a rebound in hiring in leisure and hospitality, June would have been a dismal month.”
For their part, unemployment claims increased more than expected last week in the United States. The US Department of Labor announced that for the week ending June 29, unemployment claims stood at 238,000, up 4,000 from the revised level of the previous week. The consensus was set at 234,000. The four-week average stands at 238,500, up 2,250. Finally, the number of unemployed people receiving benefits for the week ending June 22 came to 1.858 million (1.840 million expected), up 26,000 over seven days, the highest since November 2021. Similarly, US-based employers announced 48,786 job cuts in June, according to Challenger, Gray & Christmas. Excluding 2020, in the midst of the pandemic, this is the largest number of job cuts for a month of June since 2009. On Friday, operators will monitor the monthly government report on the situation of the labor market for the same month of June. Economists expect around 190,000 jobs to be created with the unemployment rate stable at 4%.
Another disappointing stat of the day: the ISM services index for June. The latter stands at 48.8, against 52.6 consensus and 53.8 a month earlier. This indicator is thus at its lowest in four years and signals a contraction in activity. Almost all sub-indices are showing declines, including those relating to employment and prices.
Finally, new durable goods orders for May decreased by 0.5% compared to the previous month, against an increase of 0.2% expected by the consensus. The increase for the previous month was also revised to +0.4%. Durable goods orders excluding transportation showed a decrease of 0.7% month-on-month, against +0.3% expected, after an increase revised to 0.5% in April.
According to CME Group’s FedWatch tool, the probability of a September Fed rate cut of at least 25 basis points now exceeds 74%. The FOMC Minutes, which will be released later in the day after markets close, will be the final catalyst of the day for traders.
The euro rebounds against the dollar to $1.0811 between banks. The barrel of Brent gains further ground and is trading at $86.9 in London. The ounce of gold is trading at $2,362.
Values
* Paramount jumps 9.3%. Independent film and television producer Skydance Media has reached a preliminary agreement to buy Shari Redstone’s National Amusements and merge with Paramount Global, the parent company of CBS and MTV, according to press reports. National Amusements, the family-owned company that controls Paramount, will submit the deal to a special committee of Paramount directors, Bloomberg sources said.
Under the tentative deal, Skydance would pay $1.75 billion for National Amusements, which owns 77 percent of Paramount’s voting stock. The deal includes a 45-day period during which other bidders could submit offers, according to the Wall Street Journal, which first reported the news Tuesday. Film producer Steven Paul, Seagram heir Edgar Bronfman Jr. and IAC’s Barry Diller have also expressed interest in acquiring National Amusements, according to Reuters. Paramount owns the Paramount Pictures movie studio, as well as other flagship assets such as CBS, MTV and Nickelodeon.
* Tesla soars another 7%. The company continues to be buoyed by its delivery figures for the quarter ended June. During the period, Tesla produced about 411,000 vehicles and delivered nearly 444,000. In addition, the company deployed 9.4 GWh of energy storage products in the second quarter, its highest quarterly deployment to date. Tesla will report its full quarterly financial results after the close on July 23.
* Southwest Airlines (+1%) said it has adopted a “poison pill” mechanism, a protective clause, amid pressure from activist investor Elliott Investment Management for changes at the airline. The plan is aimed at deterring what Southwest called “de facto or negative control” of the group without compensating other shareholders, Southwest said. It comes after Elliott in June disclosed a $1.9 billion stake in the carrier and demanded new leadership and an overhaul of Southwest’s business to better compete with other airlines.
* Alaska Airlines (+0.7%). The airline’s flight attendants will receive an average pay increase of 32% under a new three-year tentative agreement, the Associate of Flight Attendants union announced.
* Rivian (+0.6%) denied a press report that the American electric vehicle maker was in discussions with Volkswagen to extend their partnership beyond the recently announced software joint venture.
* Regeneron (-1.3%). Sanofi and its U.S. partner announced that they have obtained approval from the European Medicines Agency for the use of Dupixent, its best-selling anti-inflammatory drug, in uncontrolled chronic obstructive pulmonary disease (COPD). The European Medicines Agency (EMA) has approved Dupixent for the treatment of COPD in patients who cannot be treated with standard inhalations, Sanofi said. The Committee for Medicinal Products for Human Use, which reports to the EMA, had recommended approval of Dupixent in the European Union in late May. COPD, also known as “smoker’s cough,” is a potentially fatal disease that affects 35 million people in Europe and 16 million Americans.
* Apple (-0.4%) will have an observer role on the board of directors of OpenAI, the creator of ChatGPT, as part of the partnership on artificial intelligence (AI) between the two groups announced last month, Bloomberg reports. Phil Schiller, head of the App Store and former head of marketing at Apple, has been chosen for this position, the agency specifies.
