Wall Street takes its breath before market this Wednesday, the S&P 500 dropping 0.2%, the Dow Jones 0.1% and the Nasdaq 0.2%. The consolidation seems quite legitimate, after the successive records of the Dow Jones, and while the Nasdaq 100 also approached its best historical levels. On the Nymex, a barrel of WTI crude increased by 1.4% to nearly $75. An ounce of gold fell 0.3% to $2,046. The dollar index gains 0.2% against a basket of reference currencies. On the bond markets, the yield on the 2-year T-Bond is 4.38%, compared to 3.88% on the 10-year and 4% on the 30-year.
In economic news in the United States, the current account balance for the third quarter of 2023 came out in deficit of more than $200 billion, which is quite close to the Bloomberg consensus, after a revised deficit of $216.8 billion. dollars for the previous quarter.
The American consumer confidence index for the month of December will be known at 4 p.m. (consensus 104.5), at the same time as resales of existing homes for the month of November (consensus 3.78 million units) and just ahead of the Department of Energy’s weekly report on domestic oil stocks for the week ended December 15.
Austan Goolsbee, president of the Chicago Fed, specifies that the American central bank will not allow itself to be influenced by the markets. According to him, it is inflation which will determine the future monetary decisions of the Fed. The monetary institution may reconsider its restrictive policy if inflation continues to approach the 2% objective. Questioned by Fox News, the official adds that stock markets got a little excited in reaction to the more accommodating tone of Fed President Jerome Powell, as part of his press conference following a third consecutive monetary status quo.
Raphael Bostic, who heads the Atlanta Fed, also spoke yesterday. According to him, it is likely that inflation will continue its gradual decline over the coming months, but slowly enough not to justify lifting the restrictive policy for the time being. Bostic therefore remains very conservative and is only considering two rate cuts next year, during the second half of the year. He nevertheless noted that the Fed should not do too much in the direction of tightening so as not to undermine the employment market… Bostic indicated that the Fed was in a good position and on the right track to correct inflation without too much difficulty on the labor market. He said he was paying a lot of attention to the 3- and 6-month inflation rates, which are falling, while adding that he still expected inflation to decline slowly and unevenly.
On Yahoo! Finance, Thomas Barkin, head of the Richmond Fed, estimated that the Fed would reduce its rates if inflation continued to fall. However, he also cautioned that he considered inflation to be more stubborn than the average person, and therefore could not predict where the data would head.
Despite the numerous interventions by Fed officials this week, there is not much change in market expectations regarding rates, with the FedWatch tool giving a probability of around 10% now of a rate cut on January 31, 2024, compared to nearly 79% as of March 20. According to the same tool, rates could be in a range of 3.75 to 4% at the end of next year (probability of 38%), or between 3.50 and 3.75% (probability of 31%). .
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FedEx plunges 11% before market, following quarterly results lower than market expectations. For the quarter ended November, the shipping giant posted revenue of $22.17 billion, down 3% year-over-year, while its adjusted earnings per share missed consensus at $3.99, down from 3 .18$ a year earlier. Analysts on average expected revenue of $22.3 billion and adjusted earnings per share of $4.14. It is therefore a double disappointment. Adjusted profit, however, recovered by 23% to more than a billion dollars, but this remains insufficient compared to market estimates.
Quarterly operating profit at the Express air unit fell 60% as volumes fell at the U.S. Postal Service, which shifted more packages to more economical ground services. FedEx is negotiating the renewal of the US Postal Service contract with a view to improving its profitability. “I am confident that Express’s margin will come back, once the company restructures its operations and demand returns,” FedEx Chief Executive Raj Subramaniam said at the presentation conference last night. Operating profit for FedEx’s Ground division fortunately increased by 51% for the past quarter.
The group lowers its annual revenue forecast just before the crucial holiday season. Management believes that revenues will continue to be affected by volatile macroeconomic conditions, which are weighing on customer demand. For the fiscal year ending at the end of May 2024, FedEx now projects a low-single-digit decline in revenue, while previously targeting relative stability. As a consolation prize, the group plans to buy back $1 billion worth of additional shares during the financial year. Annual adjusted earnings per share are expected between $17 and $18.5, before accounting adjustments related to retirement plans and costs of business optimization initiatives.
General Mills, the American food group, has lowered its annual sales forecasts, with the slowdown in demand for cereals and “snack” products, as well as products for pets. The group plans, for its 2024 financial year, stable sales or organic decline of up to -1%. It previously expected organic growth of 3 to 4%, while analysts envisaged growth of more than 2%. For the closed quarter, the group posted revenues of $5.14 billion, down 2% year-on-year, compared to a consensus of $5.3 billion. Quarterly sales also fell by 2% organically. Operating profit increased by 2% to 812 million. Quarterly adjusted diluted earnings per share were $1.25, up 14%. The consensus was for $1.15 adjusted EPS.
Google (Alphabet) could well reorganize a large part of its activity dedicated to advertising sales, which currently has 30,000 employees. At least that’s what The Information site believes it is, according to which a manager informed some of the staff of these plans last week, “sparking anxiety” about potential cuts in staff in certain departments. Sean Downey, in charge of advertising sales to major clients on the American continent, reportedly declared during a meeting that Google planned to restructure its advertising sales teams. The official did not indicate whether or not these plans involve layoffs.
The planned reorganization would come as Google relies more on machine learning techniques to help its customers buy even more ads on its search engine, YouTube and other services, The Information said. Google has offered such tools for years, which automatically suggest and create new ads that would be effective for customers. Those ads are on track to generate tens of billions of dollars in annual revenue for the company, a person with knowledge of the situation told The Information. Since these tools do not require much attention from employees, they incur relatively little expense, so advertising revenue generates a high profit margin, the news site adds.
General Motors, Ford and several other major automakers are opposing a request from the U.S. National Highway Traffic Safety Administration to recall 52 million airbag systems. Airbag manufacturers are also protesting the proposal from the US regulator, the National Highway Traffic Safety Administration (NHTSA), which notes that inflators produced by two airbag manufacturers, ARC Automotive and Delphi, should be recalled because the risk of breakage and projection of metal fragments. The defects were linked to a death and caused several injuries in the United States according to the NHTSA.
This recall could be the second largest in the history of the American auto industry. GM and other manufacturers judge that the associated risks would be very low, thus contesting the agency’s analysis and therefore the recall request. ARC Automotive estimates that based on the failure rate measured by NHTSA, there would actually be less than one potential failure in the next 33 years. The inflators in question concern vehicles produced between 2000 and early 2018 by a dozen manufacturers, including GM, Ford, Volkswagen, Toyota, Mercedes-Benz, BMW, Stellantis, Hyundai, Kia and Porsche. Manufacturers are mostly opposed to the recall. NHTSA initially requested a voluntary recall in May, but was rebuffed by ARC.
Masimo said he was ready to settle the dispute over connected watches with Apple. In an interview with Bloomberg, the chief executive of medical technology provider Masimo, Joe Kiani, said he would be likely to reach an agreement with Apple, but added that the Californian Apple group had not contacted him and that it would take two to dance the tango. However, he says he is ready to work with Apple to improve their product. According to Kiani, a software update for the Apple Watch would not work because Masimo’s patents do not relate to the software, but to the hardware accompanying the software.
Masimo had earlier welcomed the findings of the International Trade Commission (ITC). “After an in-depth, multi-year legal investigation, the ITC concluded that Apple had infringed certain of Masimo’s patented innovations for measuring oxygen in the blood,” Masimo said. Apple has decided to preventively withdraw the models from sale in the USA. While Masimo seems open to an agreement in this patent war, the White House is monitoring the matter. On December 21, the Cupertino group will stop online sales of the new smart watch models concerned in the United States. Retail stores will also stop carrying them on December 24. The decision affects the Apple Watch Series 9 and Apple Watch Ultra 2, which offer the blood oxygen sensor.
