Wall Street is in the green this Friday, despite Nike’s sharp fall following its sales warning. The S&P 500 is up 0.62% to 5,517 points, on its peak, while the Dow Jones is up 0.69% to 39,432 points. The Nasdaq is up 0.61% to 17,972 points, after crossing 18,000 points earlier today. The gains are confirmed following a key inflation indicator across the Atlantic. Last night, the first Trump-Biden debate held in Atlanta ahead of the November presidential election was appalling, if not catastrophic. On CNN, Joe Biden appeared very weakened, struggling to express himself in front of a Donald Trump faithful to his character. The American markets do not seem to be disturbed, however, while in the Democratic clan, things are getting complicated… On the Nymex, the barrel of WTI crude lost 0.6% to $81.2. The ounce of fine gold stabilized at $2,336.
U.S. household personal income for May rose 0.5% month-over-month, compared with a FactSet consensus of +0.4%. Household personal spending rose 0.2%, compared with a 0.3% consensus. The May core PCE price index rose 0.1% month-over-month, as expected. Year-over-year, the core PCE index rose 2.7%, slightly more than expected.
The Chicago Manufacturing PMI for June 2024 came in at 47.4, compared to a market consensus of 40 and a level of 35.4 a month earlier. The recovery in the index is therefore very clear, even if it remains below the 50 mark, which still reflects a slight decline in activity.
The final U.S. consumer sentiment index measured by the University of Michigan for June 2024 came in at 68.2, compared with a consensus of 65.9 and 65.6 for its previous reading. The inflation expectations index came in at 3%, compared with a consensus of 3.3%.
Thomas Barkin, head of the Richmond Fed, said he believes the Fed’s interest rate hikes so far should be enough to bring down inflation. He added that monetary policy may not be as tight as it seems, however. The challenge now, he said, is to act deliberately while keeping a close eye on the real economy. In a speech prepared for a Global Interdependence Center conference in Paris, Barkin said that “all this tightening is likely to slow the economy further.” At the same time, given “the remarkable strength we’re seeing in the economy,” the official said he was open to the idea that the neutral rate has moved up a bit.
So a rise in the neutral rate would mean the Fed’s policy rate would also have to be higher to exert the same degree of restraint on the economy. “Agility is key,” Barkin said, as the Fed receives new information every day and must adjust accordingly.
Mary Daly, head of the San Francisco branch, said the inflation data was positive, but that the work was not yet finished. It is still premature to comment on the evolution of monetary policy, while inflation remains too high. She believes that inflation above the 2% target should persist for part of 2025… Michelle Bowman, governor of the Fed, is also due to speak this Friday.
In corporate news on Wall Street, after the falls of Micron, Walgreens and Levi Strauss yesterday, today it is Nike’s turn to unscrew in the wake of quarterly reports and lackluster forecasts.
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Apple (+0.3%) is gaining ground on Wall Street towards its all-time highs, as the Californian group with the apple logo posted iPhone shipments in China up 40% in May following major promotions by local retailers. Bloomberg calculates that at the same time, smartphone shipments in China increased by 13%. The latest figures from the China Academy of Information and Communications Technology therefore show a rebound in iPhone shipments, which had started in March. In April, these shipments had increased by more than 50%, while Apple and its local distributors have reduced prices since the beginning of the year to compete with Chinese players and in particular Huawei Technologies.
Nike stumbles 19% on Wall Street. The sports shoe giant delivered annual forecasts lower than market expectations. The group posted revenues for the fourth fiscal quarter down 1.7% to $12.6 billion, 2% lower than consensus, with notable weakness from Converse whose revenues fell 18% due to a pronounced slowdown in North America and Western Europe. Revenues in China, of 1.86 billion, on the other hand, exceeded expectations. Quarterly adjusted earnings per share were also better than expected, at $1.01, compared to 85 cents consensus and 66 cents a year earlier. The gross margin increased to 44.7% compared to 43.6% a year before, but it misses the consensus which was 45.3%.
The group, which also owns the Jordan brand, expects revenues to decline by mid-single digits for the current financial year, while analysts had expected growth of 2% on average! Nike executives have blamed the slowdown in part on lifestyle brands, including Air Force 1 and Nike Dunks, which generate a high proportion of their sales online. The decline in activity could even reach 10% in the first fiscal quarter of 2025 alone, which has just begun. Nike had previously expected sales growth in 2025. “Fiscal 2025 will be a transition year for our company,” Nike CEO John Donahoe said last night during the company’s earnings call. “We expect significant, sequential improvement in the second half compared to the first half, and that starts with the confidence we have in the new products we are bringing to market,” the group’s CFO added.
Berkshire Hathaway (+0.4%). Warren Buffett gave a record $5.3 billion in Berkshire shares to the Bill & Melinda Gates Foundation and four other charities. It’s the Oracle of Omaha’s largest annual donation since 2006.
Polestar (-6.6%), the Swedish electric vehicle designer listed on Wall Street, announced a decline in its 2023 revenues, against a backdrop of slowing demand. Annual revenues declined by 3%, while the group’s loss widened. Revenues for the year came to $2.38 billion, compared to $2.45 billion in 2022. The net loss came to $1.17 billion compared to $482 million a year earlier.
Uber (+3.2%) and Lyft (+5.1%) have reached an agreement in Massachusetts over driver status. The two companies have agreed to a minimum hourly pay of $32.50 for their drivers in Massachusetts. They will also pay $175 million to settle a lawsuit brought by the state attorney general, Reuters reports.
