Despite a good morning, Wall Street gradually turned red on Friday, carried away by Nike’s violent dropout on a warning about its sales. However, the PCE inflation data in the United States in May was reassuring.
At the close, the S&P 500 fell by -0.41% to 5,460 points. The Dow Jones gave back -0.12% to 39,118 points. The Nasdaq fell by -0.71% to 17,732 points, after a record of 18,035 points in early trading.
This session is also in line with the first Trump-Biden debate, which was held in Atlanta ahead of the November presidential election. On CNN, Joe Biden appeared very weakened, struggling to express himself in the face of a Donald Trump firmly established in his character. The American markets do not seem to be disturbed for the moment, while in the Democratic clan, things are starting to get complicated…
On the macroeconomic front, personal income of American households for the month of May grew by +0.5% compared to the previous month, against a FactSet consensus of +0.4%. Personal household spending increased by +0.2% against +0.3% consensus. The ‘core PCE’ price index for the month of May was, as expected, up 0.1% from one month to the next. Over one year, the ‘core PCE’ index increased by +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 index of American consumer sentiment measured by the University of Michigan for the month of June 2024 stood at 68.2, compared to 65.9 consensus and 65.6 for its previous reading. The inflation expectations index stood at 3% against a consensus of 3.3%.
Thomas Barkin, head of the Richmond Fed, indicated that he believed that the interest rate increases by the American central bank so far should be enough to bring down inflation. He added that monetary policy may nevertheless not be as restrictive as it appears. It is now a matter of acting deliberately while keeping a close eye on the real economy. In a speech prepared for a Global Interdependence Center conference in Paris, Barkin judged that ultimately, “all this monetary tightening should slow the economy further. At the same time, given “the remarkable strength we see in the “economy”, the manager says he is open to the idea that the neutral rate has progressed somewhat.
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 the work was not yet done. It is therefore still premature to comment on the evolution of monetary policy, while inflation remains too high. It estimates that inflation above the 2% target should persist for part of 2025…
On the oil side, a barrel of WTI crude returns -0.56% to $81.49.
The greenback is trading at 0.933 euros.
An ounce of gold ended at $2,324.
Values
* Nike (-19.98% to $75.37). After the falls of Micron, Walgreens and Levi Strauss on Wall Street on Thursday, today it is Nike’s turn to take a huge fall following lackluster quarterly results and forecasts! The sports shoe giant’s annual forecasts are lower than market expectations. The group posted revenues down 1.7% to $12.6 billion for the fourth fiscal quarter, 2% lower than the consensus, with notable weakness at Converse, whose revenues fell -18% due to a pronounced slowdown in North America and Western Europe. Revenues in China, at $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 of consensus and 66 cents a year earlier. Gross margin increased to 44.7% (43.6% a year earlier), but missed the consensus of 45.3%.
The company, which also owns the Jordan brand, expects revenue to decline by mid-single digits this year, compared with analysts’ average forecast of 2% growth, a forecast that is dampening markets. Nike executives have blamed the slowdown in part on lifestyle brands, including the 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 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’re bringing to market,” added the group’s CFO.
* Apple (-1.63% at $210.62). Despite a good start to the session, the Apple brand finally stalled on Wall Street, while remaining in the area of its historic highs. The Californian Apple group posted iPhone deliveries in China up 40% in May, following major promotions by local retailers. Bloomberg calculates that at the same time, smartphone deliveries in China increased by 13%. The latest figures from the China Academy of Information and Communications Technology therefore show a rebound in iPhone deliveries, which had started in March. In April, these deliveries 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.
* Berkshire Hathaway (-0.45% to $612,241). Warren Buffett donated a record $5.3 billion in Berkshire securities to the Bill & Melinda Gates Foundation and 4 other charitable entities. This is the largest annual donation from the Oracle of Omaha since 2006.
* Uber (+3.33% to $72.68) and Lyft (+5.3% to $14.1) reached an agreement in Massachusetts regarding the status of drivers. Both groups agreed to a minimum hourly wage of $32.50 for their drivers in Massachusetts. They will also pay $175 million to put an end to a lawsuit brought by the state attorney general, indicates Reuters.
* Polestar (+8.42% to $0.14). The Swedish electric vehicle designer listed on Wall Street announced a decline in its 2023 revenues, against a backdrop of slowing demand. Annual revenues thus 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.
