Wall Street remained well oriented following a long three-day Christmas weekend. The S&P 500 gained another 0.42%, not far from its historic peaks, to 4,774 points, the Dow Jones gained 0.43% to 37,545.33 points and the Nasdaq climbed 0.54% to 15,074, 57 points. Remember that the American indices were shaken last Wednesday but recovered quickly with cheap purchases to end the week before Christmas… The record levels of the Dow Jones and the Nasdaq 100 are now encouraging operators to invest a little more caution, which also explains the meager exchanges. Friday before the break, Nike had also somewhat dampened investor enthusiasm following lackluster forecasts.
On the Nymex, a barrel of WTI crude gained 0.9% to $75.55. The dollar index fell 0.3% against a basket of currencies, while the euro rose above 1.10/$.
The S&P500 reached a peak in session for almost two years, while investors more than ever anticipate a rate cut from the American Federal Reserve in H1 2024, possibly as early as the first quarter. In this final week of the year, Wall Street’s main indices remained in positive territory in the wake of high-growth stocks, sensitive to interest rates, and semiconductor manufacturers.
While it recorded an eighth consecutive week of increase on Friday, an unprecedented series for years, Wall Street is heading towards overall gains over the year of around 13%, in a context of slowdown in the inflation which is approaching the Fed’s 2% objective.
The S&P500 is heading towards its strongest quarterly increase in three years, as it moved closer to its closing record set in January 2022…
The progression of the main Wall Street indexes has accelerated since the last Fed policy meeting two weeks ago, after which the American central bank indicated that its monetary tightening campaign was nearing an end. and signaled a rate cut in 2024.
According to FedWatch, markets are banking on a 25 basis point rate cut starting next March…
Among the latest US indicators published, the personal income of American households for the month of November 2023 increased by 0.4% compared to the previous month, as expected, after an increase of 0.3% in revised data for October. .. Personal consumption expenditure for the month of November increased by 0.2% compared to the previous month, against +0.3% consensus and +0.1% for the revised reading for October. Last but not least, the ‘core PCE’ price index monitored by the Fed increased by a modest 0.1% compared to the previous month, against +0.2% consensus. The index climbed 3.2% over one year against +3.4% consensus, which therefore represents good news on the inflation front across the Atlantic.
The University of Michigan’s final U.S. Consumer Sentiment Index for December came in at 69.7, compared with a consensus of 69.6 measured by FactSet and a previous reading of 69.4. The index of inflation expectations for the coming year linked to this indicator stands at 3.1%, as expected.
New home sales in the United States for the month of November 2023 stood at a rate of 590,000 units, compared to nearly 690,000 consensus and 672,000 for the revised reading of the previous month, according to today’s report.
American GDP for the third quarter of 2023 had previously been revised downward for its final reading: It still shows strong expansion at a rate of 4.9%, compared to 5.2% consensus and 5.2% for the previous assessment. Personal consumption expenditure increased at a rate of 3.1% in the third quarter, compared to +3.6% consensus. The price index rose by 3.3%, in line with the consensus.
Patrick Harker, the head of the Philadelphia Fed, indicated during a radio interview that the American central bank should begin to reduce its rates, “but not immediately”… According to him, it is important that the Fed reduces its rates. rate, but she wouldn’t have to do it so quickly and right now…
Austan Goolsbee, president of the Chicago Fed, had previously explained that the American central bank “would 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…
Raphael Bostic, who heads the Atlanta Fed, also spoke about the level of rates. 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. 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 views inflation as more stubborn than the average person, and therefore cannot predict where the data will head…
Values
Manchester United rose 3.4% as businessman Jim Ratcliffe completed a long-awaited deal to take a stake in the English Premier League football club.
Intel ended up 5.2% after the Israeli government approved a $3.2 billion subsidy for a $25 billion factory the semiconductor maker plans to build in southern Israel. ‘Israel…
Nike (stable) had declined at the end of last week on Wall Street, while the giant of sports shoes and accessories disappointed with its financial publication… The group has in fact lowered its revenue guidance and presented a reduction plan spending $2 billion over three years, favoring profitability rather than sales. For its second fiscal quarter just ended, the group posted revenues of 13.39 billion dollars compared to 13.32 billion a year before. These quarterly revenues are slightly lower than expected… Wholesale revenues declined 2% to 7.1 billion. Sales in Greater China rose 4%, but that represented a slowdown from the previous quarter’s 5% rise. Direct sales revenues were 5.7 billion, an increase of 6%. Gross margin increased by 170 basis points to 44.6%. Diluted earnings per share rose 21% to $1.03.
“Our second quarter results demonstrated how we are gaining momentum in our key areas of innovation and growth,” said John Donahoe, CEO. “This quarter demonstrated strong execution from our team as we focus on our winning formula of innovative product, distinctive storytelling and differentiated market experiences.” Matthew Friend, executive vice president and chief financial officer, said: “The financial performance in the second quarter was a turning point in creating more profitable growth. As we see a weaker revenue outlook in the second half, we remain focused on strong gross margin execution and disciplined cost management.” The Company is identifying opportunities to realize up to $2 billion in cumulative savings over the next three years. Areas of potential savings include simplifying product assortment, increasing automation and use of technology, streamlining the organization, and leveraging scale to increase efficiency.
Nike certainly clearly exceeded the profit consensus for the closed quarter, but very cautious macroeconomic comments from management weighed down the value, the group reporting weaker demand outside of key holiday events, digital traffic also more moderate (.. .). In a more difficult economic context, Nike reduced its revenue growth forecast for the financial year to +1%. The group expects the third quarter to be slightly down due to difficult comparisons. More positive comments focused on the savings program, planned acceleration of the innovation pipeline, margin expansion and inventory control.
US Steel timidly recovered 0.8% on Wall Street, while the Biden administration indicated that careful examination was necessary following the offer of the Japanese group Nippon Steel for the American steel giant… Home Blanche indeed evokes “the central role of the American group in the production of steel in the United States, an essential element for national security”.
Remember that Nippon Steel announced a few days ago an offer for the American steelmaker worth $14.9 billion, including debt. This announcement came a few months after the American went on sale. Nippon’s offer is priced at $55 per security, which represents a 142% premium to prices prior to the announcement of a strategic review process on August 11. Nippon Steel, the world’s fourth largest player in the steel industry, is therefore betting big on the United States, in order to compensate for the drop in demand in Japan. The Japanese have obtained financial commitments for the agreement and thus intend to reach 100 million tonnes of global crude steel capacity.
Tesla (+1.6%) purchased a plot of land in Shanghai to set up a factory where the group would build its Megapack mega-batteries, according to the local Xinhua news agency. The American automaker would produce 10,000 massive batteries per year in the factory located in the Lingang free trade zone in Shanghai, once construction of the factory is completed. A land acquisition agreement was signed Friday morning, Xinhua said. “After securing the site, Tesla will officially launch the project with substantial steps taken to get production up and running,” said Gao Shen, an independent analyst in Shanghai cited by the South China Morning Post…
