American markets ended the session in positive territory on Tuesday. The S&P 500 gained 0.10%, to 4,554.89 pts. The Dow Jones rose 0.24% to 35,416.98 pts. The Nasdaq gained 0.29% to 14,281.76 pts.
Market sentiment remains rather positive, supported by the recent easing of financial conditions, while operators are still playing the scenario of a rate peak being reached and a controlled economic landing. This has led to a significant decline in bond yields, although the curves have inverted further and fuel debate over the ability of policymakers to achieve this soft landing. Central banks continue to promote the idea of higher rates for longer, while markets anticipate multiple rate cuts next year.
Christopher Waller, Governor of the Fed, fuels optimism by indicating that if inflation falls steadily, there will be no reason to insist on high rates. He also believes “that apart from a shock”, there is no reason why the Fed cannot achieve a soft landing. Austan Goolsbee, head of the Chicago Fed, believes that inflation is reducing, but has not yet returned to the objective. The official highlights the progress so far on the pricing front. Governor Michelle Bowman of the Fed, for her part, specifies that she would be in favor of an additional rate increase if progress on inflation were to stop.
The rally that drove the S&P 500 to one of its best November gains in a century is now running out of steam, according to Citi. The broker judges that futures flows last week were mixed, which would reflect a slightly bearish net positioning on the broad American index, the S&P. The positioning on Nasdaq 100 futures would be neutral. However, Citi does not rule out that short-selling position coverings may still support stocks at the end of the year.
Today’s economic news across the Atlantic is marked by the S&P Case-Shiller and FHFA house price indices for the month of September. The FHFA index rose 0.6% month-over-month and 6.1% year-over-year, while the S&P Case-Shiller ’20-City’ index of the top 20 metro areas rose 0. 7% on an adjusted basis compared to the previous month (+0.2% excluding adjustments, i.e. +3.9% year-on-year).
The Conference Board’s US consumer confidence index for November 2023 came in at 102 (FactSet consensus 100.9) compared to a revised reading of 99.1 for October.
The Richmond Fed’s regional manufacturing index for November 2023 was in the red at -5, compared to a FactSet consensus of +1 and a reading of +3 a month earlier. The indicator therefore comes out negative, which reflects a contraction in manufacturing activity in the region considered.
Cyber Week consumption data sets new records. Thus, online sales for Cyber Monday in the USA exceeded $12 billion with increased promotions. Adobe Analytics data estimates the amount of these sales at $12.4 billion, an increase of almost 10% compared to $11.3 billion in 2022. A new historic peak was already reached last week for Black Friday, with online spending rebounding 7.5%, to a record $9.8 billion in the United States.
On the oil side, the barrel of WTI crude ended sharply up +2.03% at $76.58, at the end of a day of volatility fueled by the ongoing OPEC+ negotiations on oil production. North Sea Brent also gained +1.97% to $81.66.
The dollar fell by -0.37% against the euro, trading at 0.909 euros.
An ounce of gold is firm at $2,040. Bitcoin asserts itself above $37,000, at $37,205.
Tomorrow Wednesday, investors will follow the GDP figures for the 3rd quarter (second estimate out of three), the balance of international trade in goods, the weekly report on domestic oil stocks, as well as the Fed’s Beige Book.
Intuit, Workday, CrowdStrike, Splunk, Hewlett Packard Enterprise and NetApp, are releasing tonight. Salesforce, Synopsys, Snowflake, Dollar Tree, Hormel Foods, PVH, Okta, Pure Storage or Donaldson Company, announced Wednesday. Dell Technologies, Marvell Technology, Johnson Controls, Kroger and Ulta Beauty, report Thursday.
Values
* PDD (+18.08% to $139). The Chinese online retailer, previously known as Pinduoduo, is up 16% on the American market. The group, which specializes in the sale of food products at discount prices, relies on the popularity of its Temu application for the sale of appliances and electronics at discounted prices. PDD posted revenues of 68.8 billion yuan, approximately $9.62 billion, in the quarter ended at the end of September, compared to a consensus of barely 55 billion yuan. Net profit attributable to ordinary shareholders for the quarter was 15.5 billion yuan (10.6 billion for the comparable period last year). The recently launched Temu app is already gaining significant market share in the United States, despite tough competition from Shein and Amazon. PDD’s net profit for the past quarter increased by 47%. PDD also stood out against Chinese giants such as Alibaba.
Note also that the Chinese e-commerce group Shein has confidentially filed an application for an IPO in the United States, according to a report from the Wall Street Journal. According to the newspaper, the offer could take place in 2024 and the group would have been valued at around $66 billion earlier this year.
* 3M (+1.48%) and Dupont (Corteva – -0.5% to $45.5). These cases are under scrutiny, as a US appeals court decided to overturn a lower court’s decision that allowed Ohioans to seek compensation through a class action against chemical groups at the origin of “eternal pollutants”, due to their responsibility in this matter. Although 3M settled drinking water pollution claims for $10.3 billion and other similar settlements have been reached, the appeals court’s decision represents a relief for manufacturers.
*Zscaler (+1.01% to $193.85). The cloud security software specialist repents after his dropout at the start of the session. During the session, 7.48% of the capital changed hands. The San Jose firm announced quarterly accounts significantly above market expectations and guidance that was also solid. Operators noted the increased level of spending, fearing an impact on margins. Zscaler raised its annual revenue and profit estimates, expecting annual revenue of $2.09 billion to $2.10 billion, compared to previous guidance of $2.05 billion to $2.07 billion. The Californian group anticipates adjusted EPS for the year ranging from $2.45 to $2.48, well above previous forecasts of $2.20 to $2.25. For the second fiscal quarter alone, which has just begun, Zscaler is forecasting revenues of $505-507 million, compared to a consensus of $497 million.
In the just ended fiscal 1st quarter of 2024, revenues improved by 40% to $497 million, while “calculated billings” increased by 34% to $457 million. GAAP net loss was $33.5 million, while non-GAAP net income was $106.5 million, 67 cents per share (29 cents a year earlier). The consensus for the ended quarter was 49 cents in adjusted EPS and $473 million in revenue.
* Micron (-1.79% to $76.12). The stock is weakening, as the group has just adjusted its revenue, gross margin, operating expenses and EPS forecasts for the first quarter of fiscal 2024, which ends on November 30, 2023. The company forecast previously a turnover of $4.4 billion, plus or minus $200 million, and a non-GAAP gross margin of -4%, plus or minus 2%. Thanks to a better balance between supply and demand and improved pricing, Micron now expects its revenue to approach $4.7 billion and its gross margin to approach break-even point for the first quarter of fiscal 2024. Adjusted gross margin is now anticipated between -0.5% and 0%. Quarterly operating expenses are expected at $990 million. The adjusted loss per share is estimated at $1 (previously approximately $1.07).
