Wall Street is climbing this Wednesday, following relatively reassuring figures for American consumer price inflation. The S&P 500 gained 0.7% to 5,283 pts, the Dow Jones 0.5% to 39,754 pts and the Nasdaq 0.8% to 16,641 pts. Yesterday, the American rating had already surprised by its resistance, following the very mixed figures for producer prices and unenthusiastic comments from Jerome Powell. In corporate news, the ‘meme stocks’ GameStop and AMC are trending sharply lower after the incredible rally of the last few days, while announcements are multiplying in the field of AI, with Google yesterday…
The American consumer price index for the month of April 2024 increased by 0.3% compared to the previous month and by 3.4% year-on-year. The market consensus stood at +0.4% month-on-month and +3.4% compared to last year. Excluding food and energy, the CPI increased by 0.3% compared to March and 3.6% year-on-year, while the consensus was also around +0.3% compared to April and +3.6% year-on-year.
Retail sales for the month of April in the United States were stable according to today’s report, against +0.4% consensus and +0.6% for the revised reading of the previous month. Excluding automobiles, sales were in line with expectations, up 0.2%, after a revised increase of 0.9% for the month of March. Excluding automobiles and gasoline, sales nevertheless fell by 0.1% in April, compared to the previous month, against +0.1% consensus and +0.7% for the revised reading for March.
The New York Fed’s Empire State Manufacturing Index for May came in at -15.6, compared to a consensus reading of -10 and a reading of -14.3 a month prior. The index signals a stronger contraction in activity in May.
The National Association of Home Builders’ American real estate market index for the month of May published this Wednesday came in at just 45, compared to the FactSet consensus of 50.5 and 51 a month earlier.
Oil prices remain in the red despite the announcement of a fairly clear drop in crude reserves in the United States last week. The barrel of WTI crude yields 0.6%. According to the US Department of Energy, domestic crude stocks, excluding strategic reserves, decreased by 2.5 million barrels in the week ended May 10 to 457 million barrels. The consensus was for a drop of 0.4 mb. Gasoline stocks fell by 0.2 mb, and those of distilled products remained almost stable.
The American producer price index for the month of April 2024 showed yesterday an increase of 0.5% compared to the previous month, against +0.3% consensus and +0.2% one month previously. Over one year, the producer price index increased by 2.2%. Excluding food and energy, the PPI increased by 0.5% month-on-month against 0.2% consensus, an increase of 2.4% year-on-year compared to a market consensus of 2. 3%.
Jerome Powell, head of the Fed, participated yesterday in a discussion in Amsterdam with Klaas Knot, the president of the Dutch central bank DNB (De Nederlandsche Bank), on the occasion of the annual meeting of the Foreign Bankers’ Association. The Fed leader’s economic comments were cautious. Powell anticipates a continued rebalancing of the job market. He noted the lack of progress on the inflation front in the first quarter and was a little less confident about the pace of improvement. He thus indicated that his confidence in a moderation of inflation was lower than it had been previously. Nevertheless, the head of the American central bank recalled the favorable development in 2023 after an equally difficult first quarter regarding inflation.
Asked about the disappointing producer price index, Powell put things in perspective and added that the previous month’s data had been revised. Even if the fight against inflation takes longer than expected, he is confident that the Fed will ultimately succeed in bringing inflation back towards the 2% objective. According to him, it is a question of keeping rates at a restrictive level for longer. “I’m confident that we’ll get there,” Powell summed up the inflation target. According to him, monetary policy is restrictive but it will take more time for the Fed to ensure that inflation returns to this objective… He therefore does not envisage an additional increase in rates for the time being, but sees these rates remaining longer than expected at the current high level.
Regarding American banks and the impact of high rates on the financial system, Powell highlighted the solidity and size of US establishments.
The Fed is expected to cut rates twice this year, starting in September, according to the majority of economists polled by Reuters, who at the same time significantly raised their inflation forecasts for the second consecutive month. According to the study, nearly two-thirds of the economists surveyed, or 70 out of 108, predict a first reduction in the federal funds rate in September, to a range of 5 to 5.25%. These results come from a survey conducted from May 7 to 13. In the previous survey last month, just over half of economists expected easing in September.
Neel Kashkari, head of the Minneapolis Fed, as well as Governor Michelle Bowman and Vice President for Supervision Michael Barr, also spoke today.
Thursday, the day will be busy again, with housing starts and building permits at 2:30 p.m., weekly unemployment registrations, as well as the Philadelphia Fed’s manufacturing index and even import and export prices. ‘export. Industrial production figures will be announced at 3:15 p.m. by the Fed. Patrick Harker, Michael Barr, Loretta Mester and Raphael Bostic from the Fed will speak during the day.
Finally, on Friday, the Conference Board Leading Indicator Index will be followed at 4 p.m.
In corporate news on Wall Street, Cisco publishes after trading this evening. Walmart, Deere, Baidu and JD.com report Thursday before market, while Applied Materials, Copart and Take-Two Interactive reveal their accounts after the close.
Values
Amazon (-1%). Amazon Web Services continues its offensive and announces an investment plan of 7.8 billion euros, approximately 8.4 billion dollars, in Germany by 2040. AWS is thus building a cloud infrastructure specific to Europe. The group will launch several data centers in the German state of Brandenburg by the end of 2025, which will be accessible to all its customers. The investment would support an average of 2,800 full-time jobs in local German companies each year.
Alphabet (+1%) was eagerly awaited at the Google I/O 2024 conference, an event for developers held in Mountain View. Google has mentioned artificial intelligence more than a hundred times, while the group faces strong competitors, in particular OpenAI, supported by Microsoft. Google will thus strengthen its conversational robot Gemini and improve its search services. Sundar Pichai, the group’s general manager, therefore presented the group’s new developments, mainly in the field of AI. Gemini Pro will display improved responses to queries involving rich text, images or long videos. Gemini Live will offer the possibility of a conversation. The group will also make the Overviews tool, which uses generative AI to synthesize information and answer specific questions, accessible to American users. Gemini is also offered in a 1.5 Flash version that is lighter than the Pro but potentially more effective for certain actions and incidentally less expensive.
Among the many new features, Google also presented Veo, an AI video generation tool from text or images, Imagen 3 for image generation, the Astra AI assistant, as well as the TPU (competitor of GPU) Trillium and MusicFX in music generation. Note that Gemini will be integrated into Gmail, Docs and Calendar, while AI will be natively integrated into Internet search.
In short, so many initiatives that seem to directly target OpenAI, while the star AI startup made its own announcements at the start of the week just before Google.
Microsoft (+1%)… Ilya Sutskever, the co-founder and chief scientist of OpenAI, who played a key role in the attempted ouster of the CEO of the AI startup, Sam Altman, will leave the band. Ilya Sutskever will be replaced by research director Jakub Pachocki, OpenAI announced. Pachocki notably led the development of GPT-4. Sutskever’s departure is no surprise. He clashed with Sam Altman over the speed of development of AI. Jan Leike, another OpenAI veteran who co-led the “superalignment” team with Sutskever, has also resigned. “Leike’s responsibilities included exploring ways to limit the potential harms of AI,” Bloomberg says. Sutskever indicated on the social network X that he was now working on a “very personally significant” project.
Tesla (-2%) still plans to lay off 601 additional employees in California, according to information provided in a WARN notification to the state government. Elon Musk, general manager of the electric vehicle manufacturer, indicated a month ago that Tesla planned to reduce its workforce by more than 10%, while the group had just over 140,000 employees at the end of 2023. The Reuters agency specifies that since then, the group has carried out several phases of workforce reduction, while Musk would like to go as far as eliminating 20% of positions. The agency cites people familiar with the matter on this subject. The new cuts in California concern employees at the Palo Alto and Fremont sites and are expected at the end of June, lasting two weeks. Last month, the manufacturer indicated that it would eliminate more than 6,000 jobs in California and Texas as part of the workforce reduction plan.
Boeing (-2%) is losing ground on Wall Street, while the US Department of Justice indicated that the group would not have respected the conditions of the agreement concluded in 2021 following the 737 MAX accidents in 2018 and 2019 in Indonesia and Ethiopia which had caused 346 victims. U.S. officials said Boeing breached its obligations under a deferred prosecution agreement (DFA) by “failing to design, implement and enforce a compliance and ethics program aimed at preventing and detecting violations of U.S. fraud laws throughout its operations.”
GameStop (-28%) and AMC (-24%) fell back on Wall Street after their dizzying rally at the start of the week. True to form, the management of the AMC cinema chain decided to further dilute by selling shares for $250 million the day before yesterday, taking advantage of the current liquidity. AMC sold 72.5 million titles. The average price for this operation is $3.45 before commissions. The chain also entered into a debt-for-equity swap agreement, exchanging 23.3 million newly issued securities at an average price of $7.33 per share for nearly $164 million in bonds maturing in 2026. .
