Wall Street continued its rebound on Tuesday that began the day before, while the American market had corrected significantly last week, notably with Netflix. The S&P 500 rose 1.2% to 5,070 pts, the Dow Jones climbed 0.69% to 38,503 pts and the Nasdaq +1.59% to 15,696 pts. The relative easing of geopolitical tensions in the Middle East has somewhat reassured investors. In addition, the weakness of the American PMI indices has renewed hope in future rate cuts from the Fed this year… The week will still be lively, with many statistics planned, but also several essential quarterly publications, including those from the technology giants Tesla (Tuesday evening)… On the Nymex, a barrel of WTI crude rose 1% to $83.55. The dollar index lost 0.4% against a basket of reference currencies. Bitcoin climbs to $66,700.
The preliminary US composite PMI for April came in at 50.9 versus the FactSet consensus of 52.5. The preliminary manufacturing index was 49.9 against 52 consensus. It therefore enters a contraction zone below the 50 mark. The preliminary services index was 50.9 compared to the consensus 52. The two sub-indexes as well as the composite indicator show a decline compared to the previous month.
New home sales in the United States for the month of March 2024 stood at a rate of 693,000 units according to today’s report, compared to a market consensus of 670,000 and a revised reading of 637,000 a month earlier. Note that the February reading is revised downward, since it was previously 662,000.
The Richmond Fed’s regional manufacturing index for April came in at -7, in contraction territory, compared to a FactSet consensus of -6 and a reading of -11 a month earlier.
Durable goods orders and the weekly report on US domestic oil stocks will be released on Wednesday. The US GDP for the first quarter, the balance of international trade in goods, weekly unemployment claims, as well as promises of housing sales and the manufacturing index of the Kansas City Fed, will be followed on Thursday. Household income and spending as well as the core PCE inflation index will be monitored on Friday, as will the University of Michigan Consumer Sentiment Index…
However, there will be no intervention from Fed officials this week, in the run-up to the monetary meeting on April 30 and May 1, which should result in a new status quo. According to the CME Group’s FedWatch tool, there is a greater than 95% chance that the Fed will leave rates unchanged in a range of 5.25 to 5.5% on May 1. The probability of a comparable range of 5.25-5.5% on June 12, at the end of the following FOMC meeting, stands at 83%… It has risen sharply following recent inflation figures leaving fear a lastingly high level of prices in a context of a resilient economy. It is possible, however, that the Fed will be able to lower its rates on July 31, at the end of the next meeting, but the highest probability for the moment is still that of a status quo (53% ‘probability’ of an unchanged range on the fed funds rate).
Values
Apple (+0.6%) posted a drop of more than 19% in its smartphone sales in China in the first quarter, according to a Counterpoint Research study relayed by Reuters. Local competitor Huawei, for its part, posted very strong growth of more than 69% in its smartphone sales in China over the same period. Apple’s market share in China thus declined to 15.7% over the period compared to 19.7% a year earlier, while that of rival Huawei reached 15.5% compared to 9.3% a year earlier. .
Nvidia (+3.6%), the colossus of graphics and AI chips, is still regaining ground after a rebound of 4.3% on Monday. Reuters reports that Chinese universities and research institutes have recently obtained high-end AI chips from Jensen Huang’s group through resellers, despite the strengthening in November of the US embargo on exports of semiconductors. Reuters mentions on this subject the examination of “hundreds of tender documents”. These chips would have been integrated into products from Super Micro (+6%), Dell (+6.2%), as well as the Taiwanese group Gigabyte Technology.
Tesla (+1.8%) will announce its quarterly results this evening, after a stock market fall of 43% already this year… Victim of tough competition, particularly in China, and weakening demand, the group of Elon Musk announced last week a reduction in its workforce of more than 10% globally. Remember that the workforce of the Texan EV manufacturer reached more than 140,000 people at the end of 2023. Tesla even announced today its intention to cut 400 jobs in its factory near Berlin.
Furthermore, the group further lowered its prices in China, Germany and France. Musk explained on his social network X that Tesla’s prices had to change frequently in order to adapt to demand. The price of the Model 3 first version has been reduced by 3,000 euros to 39,990 euros, according to data from the group’s website noted yesterday by Reuters. The price of the Model 3 in Germany increased from 42,990 to 40,990 euros. In China, the vehicle’s starting price was lowered by 14,000 yuan ($1,930) to 231,900 yuan, Reuters notes. U.S. prices for Model Y, X and S vehicles were reduced by $2,000 on Friday. On Saturday, Tesla also reduced the price of its fully autonomous driving assistance software, from $12,000 in the United States to $8,000.
Tesla must therefore publish its accounts on Tuesday evening, after the close of Wall Street, its financial results for the first quarter. Earlier this month, the group warned of a decline in global deliveries for this period, the first decline in four years reflecting weaker demand. Tesla could reveal a 40% drop in its quarterly operating profit tomorrow, Bloomberg indicates. Revenues are expected to decline for the first time in four years. The group is now banking on its autonomous robotaxi concept, and investors will therefore be watching Musk’s comments on the subject tomorrow evening. In the meantime, plans for the $25,000 consumer vehicle have been postponed.
PepsiCo (-2.9%). The Purchase group posted quarterly revenues above expectations with rising prices, growing 2% to 18.3 billion, with solid international activity. Net income rose 6% to around $2 billion, while adjusted earnings per share were $1.61 versus $1.52 consensus. Average prices increased by 5% over the period, year-on-year, while organic volumes declined by 2%.
GE Aerospace (+8.2%) raised its financial profit forecasts, with solid demand for aircraft engine equipment and services. The group now expects 2024 operating profit ranging from $6.2 to $6.6 billion. Earlier this month, GE finalized its split into three companies dedicated to aviation, energy and health respectively. GE Aerospace indicated last month the expectation of operating profit of around $10 billion in 2028. For the closed quarter, adjusted EPS was 82 cents compared to 65 cents in the FactSet consensus.
Danaher (+7.2%) reported revenues down 2.5% to $5.8 billion in the first fiscal quarter, ended at the end of March, and adjusted revenues down 4%. Net income was $1.1 billion or $1.45 per share, while adjusted earnings per share were $1.92. For the financial year, the group expects adjusted revenues to decline “in the low single digits”.
Philip Morris International (+3.8%) beat the profit consensus for the closed quarter. Revenues were $8.79 billion versus the consensus of $8.47 billion. Adjusted earnings per share were $1.50 versus $1.41 on average estimated by specialists. However, the group is reducing its annual guidance somewhat and is now counting on adjusted EPS ranging from $6.19 to $6.31. Excluding currency effects, however, the guidance is solid, between $6.55 and $6.67.
RTX (-0.2%) however exceeded expectations with military demand. The Arlington group posted revenues of 19.3 billion (+12%) against 18.4 billion consensus. Adjusted earnings per share were $1.34 (+10%) versus $1.23 market consensus. The group reaffirms its forecasts and anticipates annual sales of 78-79 billion, for adjusted EPS ranging from $5.25 to $5.40. Free cash flow is expected to be around 5.7 billion.
UPS (+3.8%) achieved revenues of $21.7 billion in the first quarter compared to $22.9 billion a year before. The adjusted consolidated operating margin was 8%. Adjusted earnings per share represented $1.43, compared to $2.20 over the corresponding period, a year earlier, and $1.28 consensus. The group reaffirms its annual financial forecasts.
Lockheed Martin (-0.2%) exceeded profit expectations for its first quarter. Revenue rose 14% to $17.2 billion. Earnings per share were $6.39 versus $5.8 consensus. The group reaffirms its January guidance, namely revenues of 68.5-70 billion, for an EPS of $25.65 to $26.35.
Spotify (+11.4%), the Swedish music streaming giant jumped after exceeding profit expectations for the quarter. However, the group also missed a key metric regarding the number of users. In any case, the group generated a positive operating profit of 168 million euros, compared to 156 million euros of losses a year before. For the second quarter, this same operating profit is expected at 250 million euros, well above the consensus.
General Motors (+4.3%) has raised its financial forecasts and is climbing on Wall Street. The manufacturer’s first quarter revenues increased by 7.6% to 43 billion, against 42 billion consensus. Net profit reached 3 billion dollars, an increase of 24%, against 2.5 billion consensus. Net profit for the year is now expected to be between $10.1 billion and $11.5 billion.
Kimberly-Clark (+5.5%) is gaining ground on the American market, while the group beat the consensus for the first quarter and raised its forecasts.
Halliburton (-0.3%), the oil services giant, exceeded revenue expectations for the closed quarter and posted robust profits, with international activity. Revenues were $5.8 billion versus the consensus of $5.7 billion. The Houston group’s adjusted earnings per share were 76 cents versus the market consensus of 74 cents.
