The mood on Wall Street fell a little on Monday, the S&P 500 dropping 0.32% to 4,942 pts, the Dow Jones losing 0.71% to 38,380 pts and the Nasdaq -0.20% to 15,597 pts. Caution prevails at the start of the week, while the American market appears close to peaks and the head of the Fed has just delivered some very nuanced comments… A new correction from Tesla based on a broker’s opinion and figures Mixed reactions from McDonald’s and Air Products also weighed on the trend.
Jerome Powell therefore intervened again on the CBS program ’60 Minutes’ broadcast Sunday evening and recorded on February 1, before the latest report on American employment… Asked whether inflation is ” dead,” he said: “I wouldn’t go that far… What I can say is that inflation has really come down over the past year, and quite sharply over the last six month. We are making good progress. The work is not finished and we are determined to ensure that price stability is fully restored for the benefit of the public.”
Asked why the Fed isn’t cutting rates now, Powell responded: “Well, we have a strong economy. Growth continues at a strong pace. The labor market is strong: 3.7% unemployment. And inflation is coming down. With the economy this strong, we think we can approach the question of when to start cutting interest rates cautiously. And, you know, we want to see more evidence that inflation comes down to 2% sustainably. We have some confidence in that. Our confidence is increasing. We just want a little more confidence before we take this very important step of starting to reduce interest rates.”
Thus, J. Powell indicated that the Fed wanted to see more “good data”, but admitted that the members of the FOMC (Fed Monetary Committee) mainly anticipated a rate cut this year. The timing will therefore depend on the data… “The risk of acting too early is that the work is not quite finished and the very good figures we have obtained over the last six months do not turn out to be a true indicator of where inflation is going. We don’t think that’s the case. But the prudent thing to do is to just give it some time and see that the data continues to confirm that inflation drops to 2% sustainably,” insists Powell. “I think it’s more likely that if you act too early, you’ll see inflation stabilize well above our 2% target. So we think we can be cautious in approaching this move simply because of the strength we are seeing in the economy.” “If you act too late, the policy will be too strict. And that could easily weigh on economic activity and the job market,” adds the Fed president.
It is therefore always a question of balancing risks, according to Powell, who again indicated that the Fed was also “very focused on the employment market”. “We are focused on the real economy and doing what’s right for the economy and for the American people in the medium to long term. And I can’t stress enough the importance of restoring price stability, it that is, inflation is low and predictable and people don’t have to think about it in their daily lives.”
As for whether 2% inflation is needed to lower rates: “No, no… That’s not at all what they say, no. We are determined to bring inflation down to 2% over time. I said we wouldn’t wait until we hit 2% to cut rates. In fact, you know, we’re actively looking at cutting interest rates, and on a 12-month basis, inflation, you know, is not at 2%. It’s between 2 and 3%. But it’s coming down in a way that gives us some comfort.”
Neel Kashkari, head of the Minneapolis Fed, was also quite measured on Monday, noting the rapid progress of adjusted inflation towards the Fed’s objective, but noting that there is no rush to lower rates… The bank According to him, the American central government may take more time to measure the incoming data before possibly starting to relax its policy. According to him, current monetary policy is not as austere as it seems.
On the economic front on Wall Street, the final US composite PMI for January 2024 came in at 52, compared to a FactSet consensus of 52.3 and a preliminary reading of 52.3 as well. The final services PMI for January came in at 52.5, compared to the consensus and flash reading of 52.9.
The ISM American services index for January 2024 stood at 53.4, compared to the FactSet consensus of 52 and 50.5 a month before, in revised reading. This reflects an acceleration of expansion in services at the national level. The new orders index in January is very strong at 55.
There will be a large number of Fed officials speaking this week, including Loretta Mester, Neel Kashkari, Susan Collins and Patrick Harker tomorrow Tuesday, then Adriana Kugler, Susan Collins, Thomas Barkin and Michelle Bowman on Wednesday.
Eli Lilly, Amgen, Gilead Sciences, Fiserv, KKR, Chipotle Mexican Grill, Ford Motor, Fortinet, Spotify, Centene, Cognizant, Prudential Financial, Gartner, Cummins, DuPont, GE HealthCare, Snap or Omnicom, will reveal their results on Tuesday. Alibaba, Walt Disney, Uber Technologies, CVS Health, Arm Holdings, PayPal, McKesson, Emerson Electric, Hilton Worldwide, Allstate, Yum! Brands, Roblox, The Carlyle Group and Fox Corporation will publish their accounts on Wednesday.
S&P Global, Philip Morris International, ConocoPhillips, Duke Energy, Intercontinental Exchange, Thomson Reuters, Apollo Global Management, Motorola Solutions, Hershey, Archer-Daniels-Midland, Zimmer Biomet, Pinterest, Expedia, Take-Two Interactive and Interpublic, will reveal their latest figures Thursday. PepsiCo, Newell Brands and Catalent will announce their results on Friday, before market.
On the Nymex, a barrel of WTI crude comes to $72.85. The dollar index gained 0.5% against a basket of currencies.
Values
McDonald’s (-3.7%) published adjusted earnings per share of $2.95 for its fourth quarter, compared to a level of $2.59 a year earlier and a consensus of around $2.8. Revenues, meanwhile, narrowly missed consensus at $6.41 billion, up 8.1% year-on-year from the corresponding period last year. Operating profit increased 8.5% to $2.8 billion. Like-for-like sales increased 3.4%, compared to the market consensus of 4.8%. Comparable American growth was 4.3% versus 4.5% consensus. International like-for-like growth was 4.4%, also lower than market expectations. This is the first time in almost four years that the group has missed the sales consensus, according to Reuters, which mainly blames weak international growth.
Tesla (-3.6%). Piper Sandler reduced its unit delivery estimates on the Texan automaker’s file for this year to 1.93 million from 2.18 million previously. The broker forecasts a drop in automotive gross margin (excluding loans) of 110 basis points over one year to 16.6%. The price target is lowered from $295 to $225.
Nvidia (+4.8%), the graphics and AI chip giant, which is due to publish its latest quarterly financial results in two weeks, is at an all-time high! Over one year, the stock has more than tripled. Since the recent lows of October 2022, it has practically multiplied by six… This does not bother Goldman Sachs, which has just placed Jensen Huang’s group on its list of buy convictions. The broker’s price target is even increased from $625 to $800.
Caterpillar (+6%) announced profits for its fourth fiscal quarter that were higher than expected, but revenues were a little short. The American construction machinery giant posted quarterly adjusted earnings per share of $5.23, compared to a consensus of $4.7. Revenues were $17.1 billion versus $17.2 billion consensus. Adjusted operating profit represented 3.2 billion, against 3.1 billion market consensus. A year earlier, adjusted earnings per share stood at $3.86. Consolidated revenues increased by almost 3% year-on-year. Revenues in the financial segment increased 15% to $833 million. For the year ended, revenues totaled $67.1 billion, for adjusted earnings per share of $21.21.
Air Products & Chemicals (-15%!), the American specialist in industrial and medical gases, published for its first fiscal quarter 2024 adjusted earnings per share of $2.82, an increase of 7%, an adjusted Ebitda of 1. 2 billion dollars, up 8% and an adjusted Ebitda margin of 39.2%, up 510 basis points. Sales for the quarter totaled nearly $3 billion, compared to $3.17 billion in the comparable period last year. The group’s net profit was 609 million dollars compared to 572 million a year before. The group therefore misses the consensus adjusted earnings per share and revenues for the closed quarter. Guidance for the fiscal second quarter is also disappointing. The 2024 profit outlook is finally lower than market expectations, with the group anticipating adjusted earnings per share ranging from $12.2 to $12.5, an increase of 6 to 9%. Second quarter adjusted EPS is expected to be between $2.60 and $2.75.
Estée Lauder (+12%) lowered its annual profit forecasts on Monday, also unveiling a restructuring plan under which the cosmetics designer would reduce its workforce by 3 to 5%… The restructuring program will begin in third fiscal quarter, with related charges expected to be between $500 million and $700 million before tax. Estée now expects, for the 2024 financial year, adjusted earnings per share ranging from $2.08 to $2.23, compared to a previous range of $2.17 to $2.42. For its second fiscal quarter 2024, the group posted sales down 7%, activity down 8% organically and adjusted profit down to 88 cents per share. The pressure on sales mainly reflects the difficulties in Asia and mainly in China.
Tyson Foods (+2%), the American food group, announced for its first fiscal quarter 2024 adjusted earnings per share of 69 cents, well above the market consensus which was only 41 cents. Revenues increased very slightly to $13.32 billion, compared to a consensus of $13.27 billion. Adjusted operating profit declined 9% to $411 million. Adjusted EPS fell 19% year-over-year. The adjusted operating margin was 3.1%. Donnie King, Group Managing Director, adds: “We have seen the benefits of our diverse protein portfolio and the achievement of operational efficiencies through the strategic decisions we have made over the past year.”
Catalent (+9.7%), the American pharmaceutical subcontracting group climbs on Wall Street following the announcement of an acquisition offer at $63.50 per share in cash from Novo Holdings. Catalent and Novo Holdings, a holding and investment company responsible for managing the assets of the Novo Nordisk Foundation, announced an agreement under which Novo Holdings will acquire Catalent in an all-cash transaction that values Catalent at $16.5 billion based on enterprise value.
