As soon as the monetary policy announcements from the American Federal Reserve (Fed) were made, the markets, which had been wait-and-see until then, came alive. The unsurprising announcement of the status quo on key rates, and especially the declaration of intention to reduce rates by three-quarters of a percentage point on ‘fed funds’, reassured the equity markets.
In this context, the S&P 500 recovered by +0.89%, to 5,224 pts this Wednesday. The Dow Jones, which measures industrial stocks, was firm with an increase of +1.03% to 39,512 pts. At the same time, the Nasdaq Composite gained +1.25% to 16,369 pts.
This Wednesday, the Fed announced its intention to keep its key rates unchanged in the range of 5.25-5.5%, for the 5th consecutive time. The Fed has also signaled plans to cut them by three-quarters of a percentage point this year, despite more modest expectations for falling inflation.
Indeed, the Fed presents inflation as still “high”. Jerome Powell, the president of the American central bank, however, stressed during his press conference that if recent data shows “high” inflation, they have not changed the underlying “narrative” of a gradual easing of price pressures in the United States.
Jerome Powell, however, is cautious about a rapid adjustment of rates. He believes that recent inflation data has not strengthened the Fed’s confidence to the point of saying that the battle against inflation has been won.
Officials at the federal institution are therefore waiting for “greater confidence” in the continued decline in inflation before making an initial cut in interest rates. The recent data on inflation “have not really changed the overall situation, which is that of inflation which is gradually decreasing, on a path somewhat strewn with pitfalls”, declared Jerome Powell who also minimized the scope of indicators according to which the labor market is starting to run out of steam: “The labor market is in good shape” (…) “I do not see any cracks currently” in the labor market which is “recovering from imbalances extremes following the start of the COVID-19 pandemic.
Finally regarding the Fed’s balance sheet, Jerome Powell indicated that the day was approaching when the central bank would slow down the pace of liquidation of its portfolio. “It will be appropriate to slow the pace of the liquidation fairly soon,” the Fed chairman said. Jerome Powell said slowing the pace of reductions in bond holdings from the current pace of just under $100 billion per month would reduce the risk that the Fed goes too far and shakes up money markets.
On the oil side, the US Department of Energy announced a greater than expected drop in crude reserves in the United States last week. Domestic crude stocks, excluding strategic reserves, fell by 2 million barrels in the week ended March 15, to 445 million barrels. The consensus was expecting a drop of 0.9 mb. Gasoline stocks decreased by 3.3 mb (-1.4 mb expected), and those of distilled products increased by 0.6 million barrels (-0.1 mb expected).
This Wednesday, a barrel of WTI crude fell -2.34% to $81.48.
In terms of currencies, the dollar fell by -0.6% against the euro, with the greenback trading at 0.915 euros.
An ounce of gold ended at $2,157. Bitcoin stabilizes at $62,480.
Values
* Boeing (+3.67% to $187.78). The American aeronautical group will burn more cash than expected in the 1st quarter. The Chicago company also shifted its cash flow target set for 2022, namely an annual cash flow of around $10 billion by 2025 or 2026. “It’s going to take us longer than expected to get there “said Brian West, without further details. “But we believe that the actions we are taking now position us better for the long term,” added Boeing’s chief financial officer during a conference organized by Bank of America. Over the first 3 months of the year, Boeing’s cash burn is expected to be between $4 and $4.5 billion, “more than we initially forecast in January.” This is due to a combination of lower deliveries, lower production volumes in the trading division as well as some pressure on working capital.
* PDD (+3.52% to $132.17). The Wall Street-listed Chinese online retailer, previously known as Pinduoduo, is benefiting from the popularity of Temu, its off-price shopping app. The specialist in the sale of food products at discount prices posted revenues of 88.9 billion yuan, approximately $12.5 billion, for the quarter ended at the end of December, an increase of… 123% compared to the year. last. Net profit attributable to ordinary shareholders for the quarter was 23.3 billion yuan ($3.28 billion), an increase of 146%, compared to 9.45 billion yuan for the comparable period a year earlier. The Temu app is gaining significant market share, including in the United States, despite competition from Shein or Amazon. For the closed financial year, PDD posted revenues of 247.6 billion yuan ($34.9 billion), an increase of 90%, for an adjusted profit of $9.56 billion.
* Chipotle Mexican Grill (+3.48% to $2,895). The American Tex-Mex fast food chain announced that its board of directors has approved a 50-1 stock split, a change that will be proposed to shareholders on June 6. The stock has gained more than 70% over 12 months. The split would be the first in the history of the group, founded around thirty years ago and listed on the stock market in January 2006 at a price of $22. If approved, the split will take effect on June 26.
* Tesla (+2.53% to $175.66). Elon Musk’s group will announce, on April 2, its delivery figures for the first quarter of 2024, and recently decided on several price increases, after repeated reductions having eroded its margins. The Texan manufacturer of electric vehicles will raise the price of Model Y produced in China by 5,000 yuan, approximately 639 euros, from April 1, indicates Reuters, citing Elon Musk’s group. Tesla had already reported an expected increase of around 2,000 euros in the price of the Model Y in several European markets from Friday. The group also announced on Friday a $1,000 increase in the price of the Model Y in the United States, expected on April 1.
* Meta (+1.87% to $505.52). The Facebook owner told Reuters that the group should receive initial deliveries of Nvidia’s new B200 AI chip later this year. Nvidia CFO Colette Kress said, cited by Reuters, that the group expected to “come to market later this year” with its new GPUs, but that the volume of shipments would not increase significantly before 2025. Meta , one of Nvidia’s largest customers, which purchased hundreds of thousands of previous generation chips for content recommendation systems and generative AI products, is therefore still expected to stock up heavily on new GPUs. Meta CEO Mark Zuckerberg revealed in January that the social media colossus planned to have around 350,000 of the previous chips, called H100, in its inventory by the end of the year. This week, Zuckerberg added that Meta plans to use Blackwell to train Meta’s Llama models. Meta would consider continuing to use the previous generation of products to train Llama 3 and would use Blackwell for future generations of the model, according to a Meta spokesperson cited by Reuters…
Several brokers on the market, including Oppenheimer, have today raised their price targets on Nvidia beyond $1,000.
* General Mills (+1.17% to $69.43). The American food group announced adjusted earnings per share of $1.17 for its third fiscal quarter, compared to 97 cents a year before and a market consensus of $1.05. The adjusted gross margin was 34%, close to market expectations and without much change year-on-year. Sales fell slightly to $5.1 billion over the period, but exceeded analysts’ forecasts. The group maintains its 2024 results forecasts at the end of the quarter.
* Nvidia (+1.09% to $903.72). The Californian group from Santa Clara is holding its GTC conference this week. It announced various new products, including in particular its Blackwell GPU, the successor to the already highly coveted H100 and H200 GPUs. According to the group, it is the most powerful chip in the world. The H100 and H200 chips had already become the go-to GPUs for AI applications, sending Nvidia’s data center revenues soaring. Jensen Huang, the group’s chief executive, said Nvidia was well positioned to capture much of the expected massive new data center spending.
* Intel (+0.36% $42.2). The White House has agreed with the Department of Commerce to grant the processor giant up to $8.5 billion in subsidies for its production based in the United States, within the framework of the Chips Act. Pat Gelsinger, boss of Intel, is therefore reaping the fruits of intense lobbying in recent years for Washington to grant billions to American chip manufacturers. It is the largest announcement of a subsidy to a beneficiary in the chip sector, said US Commerce Secretary Gina Raimondo. The agreement therefore consolidates Intel’s positions, while President Joe Biden intends to revive semiconductor manufacturing in the United States. Intel would use the funds for a series of new projects in Arizona, Ohio, New Mexico and Oregon. The agreement, announced on March 20, also includes government loans of up to $11 billion.
* BioNTech (-4.38% to $90). The German laboratory, partner of Pfizer (+0.25% to $27.7) in Covid-19 vaccines, announced sharply declining financial results, while the group is now focusing on cancer drugs. Revenues were 1.48 billion euros for the 4th quarter and 3.82 billion euros for the closed financial year, compared to respectively 4.28 billion euros and 17.31 billion euros a year before. Quarterly net profit fell to 458 million euros (E2.28 billion a year earlier, in the same period). The annual profit fell to 930 ME, ten times lower than the previous year. BioNTech is now targeting a turnover for the year 2024 of between 2.5 and 3.1 billion euros, depending on the evolution of Covid regulations and vaccination. It previously forecast a turnover of around 3 billion for 2024. The group anticipates its first launch in oncology in 2026 and 10 indication approvals by 2030.
