Wall Street is on a sharp decline this Monday with the ‘Magnificent Seven’, the S&P 500 falling by 0.96% to 4,550 pts, the Dow Jones by 0.45% to 36,083 pts and the Nasdaq by 1.59% to 14,076 pts. The American market is consolidating strongly, while the month of November ended with a copious rebound in the main indices against a backdrop of hopes of peaking rates, controlled inflation and a soft economic landing – which may seem optimistic . Jerome Powell, the head of the Fed, tried to temper market enthusiasm a little on Friday by signaling that the work was not finished and that the central bank was still likely to raise rates depending on new data, but operators keep in mind a rather positive scenario which could even allow the start of monetary easing at the end of the first quarter of 2024…
On the Nymex, a barrel of WTI crude stabilizes at $74.1. An ounce of gold lost 2.2% to $2,043. The dollar index gained 0.5% against a basket of currencies. The yield on the 2-year T-Bond is 4.65%, compared to 4.29% on the 10-year and 4.45% on the 30-year.
On the economic front across the Atlantic, American industrial orders for the month of October 2023 were down 3.6% compared to the previous month, compared to a market consensus of -2.6% and a reading revised to +2.3% for the month of September. The previous reading for September was +2.8%.
Tomorrow, investors will be watching the final US Composite PMI and Services ISM for November, as well as the JOLTS job openings report for October. ADP’s report on private employment for the month of November, the balance of international trade in goods and services, as well as quarterly productivity figures and the weekly report on domestic oil stocks, will be revealed on Wednesday. Weekly jobless claims, wholesale inventories and consumer credit figures are due Thursday.
Finally, the markets will follow on Friday the monthly US government report on the employment situation for November, as well as the preliminary consumer sentiment index from the University of Michigan for December.
In corporate news, Uber will join the S&P 500, along with Jabil and Builders FirstSource. GitLab will release its quarterly financial results this evening.
AutoZone, JM Smucker, Toll Brothers and Box Inc, will announce their latest accounts on Tuesday. Brown-Forman, Veeva, Campbell Soup, Chewy, Braze and C3.ai, will release Wednesday. Broadcom, Lululemon Athletica, Dollar General, The Cooper Companies, DocuSign and Ciena will be there on Thursday. Hello Group and Johnson Outdoors will finally announce on Friday.
Values
Uber takes 5% on Wall Street, from its historic highs. S&P Dow Jones Indices announced several changes to the S&P 500, S&P MidCap 400 and S&P SmallCap 600 indices, changes that will take effect before markets open on Monday, December 18, to coincide with the quarterly rebalancing. “All companies added to the S&P 500 are more representative of the large-cap market space, all companies added to the S&P MidCap 400 are more representative of the mid-cap market space, and all companies added to the S&P SmallCap 600 are more representative of the small-cap market space,” adds S&P Dow Jones Indices.
Thus, Uber Technologies, along with S&P MidCap 400 constituents Jabil and Builders FirstSource, will respectively replace Sealed Air, Alaska Air and SolarEdge Technologies in the S&P 500. S&P SmallCap 600 constituents Rambus and Comfort Systems will replace Jabil and Builders FirstSource in the S&P MidCap 400. Sealed Air, Alaska Air and SolarEdge will replace Orthofix Medical, Rambus and Comfort Systems USA, respectively, in the S&P SmallCap 600. Additionally, Houlihan Lokey and Equitable Holdings will replace Topgolf Callaway Brands and Vestis in the S&P MidCap 400, and Topgolf Callaway Brands and Vestis will replace Clearfield and OneSpan, respectively, in the S&P SmallCap 600. Alkermes plc, Armstrong World Industries, National HealthCare Corp. and PJT Partners, will replace Community Health Systems, Invesco Mortgage Capital, Avid Bioservices and James River Group Holdings Ltd in the S&P SmallCap 600.
Speculation regarding the inclusion of Uber in the broad American index is therefore confirmed. This will push index management to weight their positions accordingly on the issue, which is already quite well off this year with a stock market performance of almost 130%!
Alaska Air (-15%) announced yesterday Sunday the planned acquisition of the Hawaiian Holdings group (+179%) for $1.9 billion including debt. Alaska Air will pay $18 per share of its prey in cash, while Hawaiian shares closed at only $4.86 on Friday on the Nasdaq. The premium thus reaches 270%! Alaska Air notes that the deal values Hawaiian at 0.7 times its annual revenues, which is still well below the industry average of 1.7 times. Anticipated annual savings are estimated at at least $235 million. Alaska Air approached Hawaiian during the summer to discuss a merger, Reuters understands. Hawaiian posted a net loss of $159 million for the first nine months of 2023, compared to $190 million a year before.
Spotify (+8%), the Swedish streaming music giant, listed on Wall Street, will reduce its workforce by 17% in order to adjust to lower growth. The employees concerned, numbering around 1,500, will be informed this Monday and will meet with human resources at the start of the week. “More people need to focus on satisfying our key stakeholders: creators and consumers,” said CEO and founder Daniel Ek, who wants to promote jobs “contributing to opportunities with real impact.”
Spotify intends to focus on a leaner structure that will allow it to be more strategic in how it reinvests profits into the business, Ek added. “I realize that for many, a reduction of this magnitude will seem surprisingly large given the recent positive earnings report and our performance. We have discussed more modest reductions throughout 2024 and 2025. Yet given of the gap between our financial objective and our current operational costs, I decided that a substantial measure aimed at rescaling our costs was the best option to achieve our objectives. Although I am convinced that this is the good deed for our company, I also understand that this will be incredibly painful for our team,” says Ek.
Tesla (-2%). Sales of the group’s electric vehicles manufactured in China plunged 17.8% in November, compared to the same month of 2022, to 82,432 units according to the China Passenger Car Association (CPCA). This is the largest correction since December 2022, when sales of Tesla EVs designed in China fell 21%. The group then reduced its production and prices to cope with the increase in stocks. Deliveries of Model 3 and Y manufactured in China still increased by 14.3% compared to those in October. In comparison, Chinese competitor BYD posted historic deliveries with 301,378 units in November, up 31% from the previous year.
Google (Alphabet -3%) would have postponed the launch of Gemini, according to ‘The Information’. People with knowledge of the matter told The Information that the group’s CEO, Sundar Pichai, had postponed yet-to-be-announced public events regarding the AI system scheduled for next week. Indeed, Gemini would not be reliable on certain queries not provided in English. Sources told The Information that the launch is now expected to take place in January. The Information previously reported on November 16 that the release of the large language model had been delayed until the first quarter.
Virgin Galactic (-17%) stumbles on Wall Street this Monday, while billionaire Richard Branson, cited by the Financial Times, indicated that he did not intend to inject more cash into the space travel firm.
Coinbase (+5%) and other major stocks in the cryptocurrency sector are jumping on Wall Street, while Bitcoin crossed $40,000 for the first time this year and is even approaching $42,000 now. The gain is 6% over 24 hours and almost 14% over seven days for the queen of digital currencies. In less than two months, Bitcoin has increased by more than 50%, with the hopes of US spot ETFs and the anticipation of a less austere monetary policy.
Among the ‘Magnificent Seven’, Meta (-3%) stumbles while Mark Zuckerberg sold shares for the first time in two years, following a 170% rally. About 682,000 securities were sold worth $185 million in November, according to data compiled by Bloomberg. Nvidia (-3%) is also losing ground on sales by “insiders” (managers and directors) which the Washington Service estimates at $180 million and nearly 370,000 titles over one month.
