Wall Street was up again this Tuesday, with the S&P 500 once again gaining 0.25% to peaks at 5,487 pts and the Nasdaq 0.03% to 17,862 pts, while the Dow Jones rose by 0. 15% at 38,834 pts. Technology stocks, against a backdrop of persistent enthusiasm around the theme of artificial intelligence, continue to put on a show:
On the side of the “Big Three” at more than 3,000 billion dollars, Nvidia climbs 3.5% to the highest in its history at $135.58, now ahead of Apple (-1.1%) and Microsoft in terms of capitalization. (-0.3%) which consolidate…
On the Nymex, a barrel of WTI crude gained another 2% to $81.65. The dollar index lost 0.2% against a basket of reference currencies. Bitcoin falls to $64,387.
John Williams, head of the New York Fed, estimated that the American economy was “going in the right direction”, without however commenting on the rate outlook… The official estimated that the Fed’s future decisions would depend on incoming economic data. Recent inflation data has been encouraging according to him, who anticipates a continuation of this trend. Williams made the remarks on Fox Business. He indicated that disinflation should therefore continue in the second half and next year. He also praised the strength of the American economy and the job market…
Thomas Barkin, the president of the Richmond Fed, judged for his part on Tuesday that inflation was “clearly in the process of reducing”. However, according to him, it is not easy to know what signal to draw from inflation last year, or this quarter, or over the last two weeks… Regarding goods, power over prices is diminishing. In services, on the contrary, the manager sees companies exploring price increases as much as possible. Thus, inflation in services would still be far from the mark, compared to the Fed’s objectives.
The day before, Patrick Harker, the head of the Philadelphia Fed, had judged that only one rate cut this year was justified, based on his current forecasts. “If my economic forecasts are confirmed, I think a single rate cut by the end of the year would be appropriate.” However, the leader does not rule out two rate cuts… or none, depending on the data. Furthermore, Harker hopes to see several more months of improvement on the inflation front.
Minneapolis Fed President Neel Kashkari also said it was reasonable for the US central bank to cut interest rates once this year, but until December.
Remember that the Fed last week maintained its key rate in the range of 5.25 to 5.50%, at a 23-year high, in order to maintain continued pressure on the economy and curb inflation. The bank released projections showing a median forecast of 19 U.S. central bankers calling for just one rate cut this year.
“We’re in a really good position right now to take our time, get more data on inflation, more data on the economy, on the job market, before we have to make a decision,” Kashkari said. “We are in a strong position, but if you just say there will be a reduction, as the median indicates, it will probably be towards the end of the year”… “We need more evidence to convince us that inflation is on the way to falling back to 2%,” insisted the official in an interview with CBS.
On the “statistics” side, retail sales in the United States for the month of May 2024 were up only 0.1%, compared to +0.3% of the FactSet consensus and after a decline of 0.2% in revised data for the month of April. Excluding automobiles this time, sales fell by 0.1% from one month to the next, compared to +0.2% consensus and -0.1% in April. Excluding automobiles and gasoline, sales increased by 0.1%, compared to +0.3% consensus and -0.3% in April.
American industrial production for the month of May 2024 showed a clear increase of 0.9% compared to the previous month, against +0.3% consensus. Manufacturing production also increased by 0.9% compared to the previous month, against +0.2% market consensus and -0.4% a month earlier. The production capacity utilization rate stood at 78.7% compared to a consensus of 78.6%.
The American real estate market index is expected on Wednesday, while on Thursday, the program will be expanded with housing starts and building permits, unemployment claims, the Philadelphia Fed manufacturing index, the balance of accounts current markets, the Atlanta Fed’s inflation expectations index, and the weekly report on US domestic oil stocks.
Finally, on Friday, for Four Witches Day, operators will monitor the US composite flash PMI index, existing home resales, as well as the Conference Board leading indicators index.
Values
GameStop (-2.5%) after dropping 12.1% the day before on Wall Street, while the group held its general meeting, which had been postponed following a technical problem. The video game retailer has attracted great interest in recent weeks, as influencer “Roaring Kitty” reignited speculation by taking an equity stake and attempting to galvanize small American gamers. Unfortunately, GameStop’s ‘meme stock’ rally came to an end, with the group’s management taking advantage of the windfall to raise funds, more than $3 billion in total. The fundraising strengthened the balance sheet, but it also greatly diluted shareholders. Yesterday, Ryan Cohen, CEO of the group, spoke only very briefly during the AGM, mainly emphasizing GameStop’s focus on achieving profitability. Thus, management intends to reduce costs and operate on a smaller network of stores.
“We are focused on creating long-term shareholder value. We are not here to make promises or exaggerate things. We are here to work,” he said.
Apple (-1.1%) will end its BNPL (“buy now, pay later”) credit service payable in four installments without fees in the United States as part of the launch of a new loan program. Users will be able to access split loans offered through credit cards, debit cards and lenders when paying with Apple Pay, starting later this year. “This solution will allow us to offer flexible payments to more users, in more locations around the world, in collaboration with Apple Pay-enabled banks and lenders,” Apple said. Existing Apple Pay Later users with open loans will still be able to manage and pay them through the Wallet app.
Tesla (-1.1%) is working on its Master Plan 4, multi-billionaire Elon Musk declared on his social network X. “It will be epic,” added the Tesla CEO. The specialized site Electrek recalls that parts one and two of Musk’s Master Plan for Tesla laid the foundations for its success and that the electric vehicle manufacturer achieved most of the objectives then listed. Last year, Musk released his ‘Master Plan Part 3’ through a presentation and white paper. “The third part was quite different from the first two. It didn’t really put forward a specific product roadmap like the first two, and instead focused on the math and how we can move the whole world forward towards a sustainable economy thanks to electric vehicles and renewable energies”, recalls Electrek.
Berkshire Hathaway (stable), the investment firm of Omaha guru Warren Buffett, acquired 2.95 million additional shares of the oil group Occidental Petroleum (+2%). The latest purchases were made since Thursday, for a total of $176 million. Berkshire now holds 255.3 million Occidental shares. This represents a 29% stake in the American oil producer.
Lennar (-4.9%), the American real estate developer published for its second fiscal quarter, adjusted earnings per share of $3.38, compared to a consensus of $3.2 and a level of 2.94 $ a year ago. Revenues were $8.8 billion for the period, 2% better than consensus, compared to $8.1 billion for the same period a year earlier. However, the stock is trending downward on Wall Street today, due to forecasts for third-quarter deliveries lower than market expectations. The group expects deliveries of 20,500 to 21,000 homes in the third quarter, compared to around 20,900 consensus. The average sale price is expected between $420,000 and $425,000, compared to 426,000 in the second quarter.
Boeing (-1.8%) and its general manager Dave Calhoun will have to keep a low profile before the US Senate this Tuesday, during a public hearing and while the aircraft manufacturer is accused of putting its profits before safety of travelers. Investors, meanwhile, are concerned about Calhoun’s succession after the stock price fell by a third this year. New President Steve Mollenkopf, who took office as part of a reshuffle in March, is leading the search for the next CEO. According to sources close to the matter cited by Bloomberg, this research has accelerated in recent weeks. This Tuesday, Calhoun should recognize the shortcomings of his group which resulted in a series of incidents and accidents. According to Bloomberg, he is expected to confirm strict policies to prohibit retaliation against employees who report security problems, after whistleblowers and a group of experts called the practice common.
Remember that the US Department of Justice, Congress and other federal agencies are investigating the company. The head of the Federal Aviation Administration deplored regulatory oversight that was too lax, promising to keep Boeing under control until there was real evidence of progress, Bloomberg recalls.
