Wall Street progressed significantly on Wednesday, with the S&P 500 gaining 1.37% to 4,707 pts and the Dow Jones gaining another 1.40% to 37,090 pts, enough to rise towards its historic peaks, compared to an increase of 1.38%. on the Nasdaq at 14,733 pts. The markets appreciated the latest statements from the Fed which recorded the peak reached by rates against a backdrop of falling inflation, while awaiting monetary easing from H1 2024…
In the meantime, the American central bank has left its rates unchanged between 5.25 and 5.5% on fed funds (probability of more than 98% according to the FedWatch barometer). This is the third consecutive status quo on rates for the Fed, which therefore seems to have finished with monetary tightening… Its president, Jerome Powell, indicated that the key rate of the central bank “was getting closer otherwise had already reached its peak”…”We believe that our key rate is at its peak, or close to its peak for this tightening cycle, and the economy still surprises forecasters”, declared the head of the Fed during a press conference following the meeting of the Fed’s monetary policy committee, the FOMC.
“We are prepared to tighten policy further if necessary,” Powell continued… If Fed officials “do not believe it will be appropriate to raise rates further,” he said, “they “The question of when it will be appropriate to lower rates is beginning to arise,” added Jerome Powell.
In its press release, the American central bank indicated that its decision had been taken “unanimously”.
Members of the Fed’s Board of Governors further stressed that inflation had “declined over the past year” and indicated that they would monitor activity to see if “further” rate hikes would be necessary, which implies that after months of monetary tightening, it may no longer be necessary to increase rates…
Indeed, 17 of 19 Fed officials expect the policy rate to be below its current level at the end of 2024, with the median projection showing the rate falling three-quarters of a percentage point from the current target of 5.25%. at 5.50%. No official forecasts a rate hike by the end of next year…
In its economic forecasts, the Fed now anticipates inflation at 2.8% for the end of 2023 and 2.4% for the end of 2024, close to its objective of 2%. The unemployment rate in the United States would increase from 3.7% currently to 4.1%, a projection identical to that of September, while economic growth should slow, falling from 2.6% this year to 1.4%. in 2024…
Overall, these forecasts therefore present the outlines of a “soft landing” for the economy, an objective pursued by the Fed, which hopes that inflation will continue to slow without leading to a recession or a sudden increase in unemployment.
“I always thought that inflation could decrease without causing a recession, and for the moment, that is what we are seeing,” insisted Jerome Powell at a press conference.
In the wake of the Fed’s decision and projections, operators have increased the probability to 60% that the central bank will reduce its rates in March 2024…
In terms of indicators, the American producer price index for November 2023 was stable compared to the previous month, in line with market expectations. The adjusted food and energy index also remained stable compared to October, against +0.2% of the FactSet consensus. Over one year, the producer price index increased by 0.9% and the adjusted indicator by 2%, i.e. smaller increases than expected.
The Atlanta Fed’s inflation expectations index for December 2023 stood at +2.4%, compared to +2.5% previously. It reports one-year inflation expectations from the point of view of firms.
Oil prices increased slightly after the announcement of a sharp drop in crude reserves in the United States last week. According to the US Department of Energy, domestic crude stocks, excluding strategic reserves, fell by 4.3 million barrels during the week ended December 8 to 440.8 mb. The consensus was for a drop of 0.7 mb. Gasoline stocks increased by 0.4 mb (+1.9 mb expected), and those of distilled products increased by 1.4 million barrels (+0.6 mb expected). The barrel of WTI crude is currently regaining 1.5% on the Nymex at $69.85.
Thursday, the day will be marked by announcements of weekly unemployment registrations, retail sales, import and export prices, as well as business stocks and sales.
Finally, Friday, “Four Witches” day (simultaneous expiry of 4 types of contracts: options on indices and on stocks, as well as futures contracts on indices and stocks), investors will follow the manufacturing index Empire State from the New York Fed, industrial production figures, as well as the flash US composite PMI index.
The American consumer price index for the month of November 2023 showed an increase of 0.1% compared to the previous month, against a stable consensus and after a month of October without change. Year-on-year, the US CPI for November increased by 3.1% as expected. Excluding food and energy, this price indicator increased by 0.3% compared to the previous month and by 4% over one year. Finally, the average hourly wage appreciated a little more than expected, up 0.4% compared to the previous month and 4% over one year.
In corporate news on Wall Street, Costco Wholesale (after market), Lennar, Jabil and Manchester United will announce their accounts on Thursday. Darden Restaurants will finally be on the Friday menu…
The dollar index fell against a basket of currencies after the Fed, with the euro returning to 1.09/$.
Values
Tesla (+1%). Rear-wheel-drive, long-range Model 3 vehicles will lose a federal tax credit of up to $7,500 starting Dec. 31, based on new guidelines under the U.S. Inflation Reduction Act , specifies Reuters, referring to a message on the Texan automaker’s website. The U.S. Treasury earlier this month released guidelines detailing new battery supply restrictions that take effect Jan. 1 and are aimed at steering the U.S. electric vehicle supply chain away from China. The tax credit will end for the rear-wheel-drive Model 3 and Long-Range Model 3 on December 31, 2023. “Take delivery by December 31 to receive a full tax credit,” the company said on its website.
Tesla will also deploy an over-the-air update for 2.03 million vehicles to correct an Autopilot control issue, the National Highway Traffic Safety Administration (NHTSA) said on Wednesday. The agency has been investigating the electric automaker for more than two years over whether Tesla vehicles adequately ensure that drivers are paying attention when using the driver assistance system. Tesla’s Autopilot is supposed to allow cars to automatically steer, accelerate and brake within their lane, while the improved Autopilot can help change lanes on highways…
Walgreens Boots Alliance (+7.4%), the American pharmaceutical chain, has relaunched discussions with a view to a potential exit from its British chain Boots, according to Bloomberg sources with knowledge of the matter. The group abandoned a process of selling the activity 18 months ago. Walgreens is therefore said to have initiated new discussions about a separation from Boots, which could be valued at around 7 billion pounds or 8.8 billion dollars as part of a potential transaction. An IPO in London would notably be a possibility, according to Bloomberg sources. Any process would not start until next year at the earliest, the sources said…
Take-Two Interactive Software (+3.7%) climbs on Wall Street this Wednesday. The American video game publisher will join the Nasdaq 100 index on December 18, replacing Seagen (stable) – acquired by Pfizer for $43 billion. The information that GTA VI (Grand Theft Auto) would not be released until 2025 initially put pressure on Take-Two Interactive’s stock earlier this month.
Pfizer fell by 6.7%, while the American pharmaceutical giant delivered a turnover forecast ranging from 58.5 to 61.5 billion dollars for 2024, against a consensus of 63.2 billion. The group, which is facing the sharp drop in Covid sales and generic competition on some of its blockbusters, has also increased its cost reduction objective by $500 million. Covid products, which had boosted activity for two years, would only represent $8 billion in revenue next year according to the latest guidance. Analysts expected a total of 13 billion for Comirnaty and Paxlovid combined. 2024 adjusted profit is now anticipated between $2.05 and $2.25, compared to more than $3.1 consensus. Faced with this weakness, Pfizer revised its objective of reducing expenses to at least $4 billion annually.
