Wall Street corrected its situation again on Tuesday, after last weekend’s record highs on the S&P 500 and the Nasdaq. The S&P 500 fell 1.02% to 5,078 pts and the Dow Jones lost 1.04% to 38,585 pts, while the Nasdaq plunged 1.65% to 15,939 pts with Apple (-2.8%) and Tesla ( -3.9%). Nvidia (+0.8%), driving force of the markets in recent months, is resisting the shock better, still at its peaks with the euphoria around artificial intelligence which continues… On the Nymex, the barrel of WTI crude lost 0.9% to $78.40. The ounce of gold gains 0.7%. The dollar index lost 0.2% against a basket of currencies. Bitcoin, which reached its historic peaks of $69,000 during the session, is now consolidating below $66,000.
The week will be quite lively on Wall Street from an economic point of view, with in particular a double intervention from Fed boss Jerome Powell on Wednesday and Thursday, as well as the monthly report on the employment situation… Monday, the day was relatively calm, with an intervention from the president of the Philadelphia Fed, Patrick Harker, who however did not provide any new indication on monetary policy, and another from the boss of the Atlanta Fed, Raphael Bostic, who said he sees an initial rate cut in the third quarter and then a pause. Bostic is still considering two rate cuts of 25 basis points this year, but judges that “there is no rush”…
The final US composite PMI index for February 2024 stood at 52.5, compared to a market consensus of 51.4 measured by FactSet and a preliminary level of 51.4 as well. The final services indicator came in at 52.3, compared to a consensus of 51.3 and a flash reading of 51.3.
The ISM American services index for February 2024 stood at 52.6, compared to the FactSet consensus of 52.9 and 53.4 a month earlier. It therefore signals a slight slowdown in the expansion of activity in services in the United States.
Industrial orders in the United States for the month of January 2024 were down 3.6% compared to the previous month, compared to -2.8% FactSet consensus and -0.3% a month earlier.
On Wednesday, the ADP report on American private employment for the month of February, as well as the JOLTS report on job openings for January, will be communicated… Mary Daly, boss of the San Francisco Fed, will speak in the day, but it is above all Jerome Powell, therefore, who will attract all the attention with his monetary policy testimony before the Financial Services Committee of the House of Representatives. Investors will be listening closely for updates from Powell on the overall state of the U.S. economy, the fight against inflation and when the central bank might begin cutting interest rates. The Fed’s Economic Beige Book, a summary of regional conditions, will be released Wednesday evening…
On Thursday, markets will monitor the Challenger study on layoff announcements in the United States, the balance of international trade in goods and services, as well as weekly unemployment claims and quarterly productivity figures. Powell will speak again before the Senate Committee on Banking, Real Estate and Urban Affairs. The president of the Cleveland Fed will also have her say during the day.
Finally, on Friday, the US Department of Labor will publish its monthly report on the employment situation for the month of February (consensus 188,000 non-agricultural job creations, 3.7% unemployment). John Williams of the Fed will also speak during the day…
According to the CME Group’s FedWatch tool, the probability of an additional monetary status quo leaving the range on the fed funds rate between 5.25 and 5.50% on March 20, at the end of the next monetary meeting, stands at 97%. The probability that rates will still remain unchanged on May 1 after the next meeting reaches more than 79%. The first monetary easing could take place on June 12.
On the business side, JD.com, Brown Forman, Foot Locker, Thor Industries and Campbell Soup will reveal their latest figures before market on Wednesday… Kroger, Burlington Stores, Toro Company, BJ’s Wholesale, Ciena and American Eagle Outfitters will announce Thursday before market, while Broadcom, Costco Wholesale, Marvell Technology, MongoDB, DocuSign, Guidewire and Gap will publish their accounts after market.
Values
Apple (-2.8%) is still suffering on Wall Street, while iPhone sales in China would have fallen by 24% year-on-year during the first six weeks of 2024, according to a study by Counterpoint, relayed in particular by Reuters. Apple therefore faces increased competition from Chinese national players such as Huawei. The main rival of the American giant from Cupertino in China in the field of high-end smartphones, Huawei, saw its unit sales soar by 64% over the same period! This obviously revives fears of a slowdown in demand for Apple. Counterpoint’s report shows that Apple’s share of China’s smartphone market has fallen to 15.7%, from 19% last year. Apple thus appears fourth in the market. Huawei rose to second place with a market share of 16.5%, compared to 9.4% a year earlier.
The overall smartphone market in China fell by 7% according to the study. Huawei has seen a resurgence in sales since launching its Mate 60 series in August. Honor, the smartphone brand spun off from Huawei in 2020, was the only other brand in the top five to see its unit sales increase during the first six weeks of the year (+2%). Vivo, Xiaomi and Oppo fell by 15, 7 and 29% respectively according to the study.
Tesla (-3.9%). The setbacks are piling up for the Tesla factory in Germany… After a two-week interruption last month due to the conflict in the Red Sea, the electric vehicle manufacturer was forced this Tuesday to stop its production in Grünheide, near Berlin, due to a power outage caused by a fire on a pylon, caused by an alleged attack by environmental activists in a nearby field. According to German police, firefighters were working to put out the fire, which did not spread to the factory itself. The police suspect an action by environmental activists opposed to the project to expand this “gigafactory”. However, she did not confirm the assertions of certain media referring to the deployment of a team of deminers after the discovery on site of an inscription referring to “war material buried here”.
The electric company E.ON, responsible for connecting the factory to the network, also indicated that its employees were working to repair the damaged pylon of the high-voltage line, the decommissioning of which deprived everyone around the site of power. site. A spokesperson for the American electric car manufacturer confirmed the interruption of production and the evacuation of the site, which has a production capacity of around 500,000 cars per year.
AMD (-1.5%), the American challenger to Nvidia (+0.8%), faces an American regulatory obstacle on the sale of AI chips designed for China, according to Bloomberg. People familiar with the matter cited by Bloomberg say that U.S. government officials informed the company that its AI chips remained too powerful and that AMD would need to obtain a license from the Commerce Department’s Bureau of Industry and Security to export the chip to China. Thus, AMD is logically struggling in its efforts to sell an artificial intelligence chip adapted to the Chinese market, as part of Washington’s crackdown on the export of advanced technologies to the country.
GitLab, the AI-powered DevSecOps platform, plunges 20.9% following a mixed quarterly financial release. However, the group exceeded revenue expectations in the fourth fiscal quarter of 2024 with growth of 33% to 164 million dollars, against 158 million consensus. Adjusted earnings per share stood at 15 cents, compared to a consensus of 8 cents. Revenue guidance for the just-started first fiscal quarter is also quite solid, with the group expecting $165.5 million for the mid-range, compared to a consensus of $162 million.
Target (+12%), the American discount retailer jumped in the wake of its quarterly financial publication. The group reassures with its accounts and expects a recovery in sales in 2024. For the fourth fiscal quarter just ended, adjusted earnings per share were $2.98, compared to $1.89 a year before and $2.42 of consensus. However, comparable sales fell by 4.4% over the period, compared to -4.6% consensus. Online sales fell by 0.7% over the quarter, stabilizing after a fall of 6% in the previous quarter. Net profit for this quarter ended at the beginning of February climbed to $1.38 billion or $2.98 per share, compared to $876 million a year before, with the control of expenses and inventories. Consolidated revenues increased 1.7% to $31.9 billion.
For the current quarter, the group expects adjusted earnings per share ranging from $1.70 to $2.10, compared to a consensus of $2.08. Like-for-like sales are expected to be down 3 to 5%, compared to -3.6% consensus. Over the financial year, Target forecasts comparable sales growth ranging from 0 to +2%. Annual adjusted earnings per share are expected between $8.60 and $9.60, compared to a consensus of $9.15.
Nio (+2.8%), the Chinese designer of electric cars listed on Wall Street, announced unencouraging financial results. The manufacturer’s annual net loss has even widened, facing a harsh competitive environment and less dynamic demand than expected. The net deficit stood at 5.4 billion yuan in the fourth quarter, bringing the annual deficit to 20.7 billion yuan, or about $2.9 billion. Nio reported sales of 17.1 billion yuan for the quarter ended, compared to a consensus of 16.8 billion yuan. In 2024, management intends to prioritize business objectives, improve capabilities and optimize cost management. Nio currently offers a range of premium SUVs and sedans.
Quarterly deliveries increased by 25% to 50,045 vehicles, while deliveries for the whole year numbered 160,038. Nio plans to ship up to 33,000 cars in the first quarter. The gross margin for the last quarter of 2023 was 7.5%, compared to 10% consensus. Nio expects revenue between 10.5 billion and 11.1 billion yuan for the current quarter ending at the end of March. Analysts expected nearly 16 billion yuan.
MicroStrategy (-21%) will offer $600 million in convertible senior bonds maturing in 2030 to buy even more Bitcoin. An over-allocation option of an additional $90 million is also on the program. Michael Saylor’s group undoubtedly displays, theoretically at least, one of the worst “money management” ever seen, since it goes into debt to buy BTC, at an extremely volatile price… The shareholders are however delighted to such audacity, since the stock has practically doubled this year and almost tenfold over 5 years! MicroStrategy, the main corporate holder of Bitcoin, owned 193,000 Bitcoin as of February 25. While BTC climbed 18% over a week and has just returned to its historic peaks of $69,000 reached at the end of 2021, the mountain of Bitcoin held by the group is valued at nearly 13 billion dollars…
