Wall Street, which hesitated at the start of the session on Thursday, accelerated in the second part of the day to finish in the green, after its rebound the day before. The S&P 500 rose again by 0.58% to 5,029 pts and the Dow Jones gained 0.91% to 38,773 pts. The Nasdaq rose 0.30% to 15,906 pts. On the Nymex, a barrel of WTI crude regained 1.5% to $78. An ounce of gold advances 0.4% to $2,004. The dollar index returns 0.4% against a basket of currencies with the euro at 1.0765/$.
According to the CME Group’s FedWatch tool, the probability is now 90% of a new status quo from the Fed on March 20, at the end of the next monetary meeting. It is also the hypothesis of a status quo which prevails for May 1, with 59% probability of a range of 5.25-5.50%, unchanged, on fed funds, at the end of the following FOMC meeting…
Austan Goolsbee, the head of the Chicago Fed, made some instructive comments regarding the future of rates: He is not alarmed by the latest reading of American inflation and judges that the Fed should not wait until the return inflation to 2% to reduce its rates… According to him, slightly higher inflation for a few months would still be consistent with a return to the central bank’s 2% objective…
In the meantime, the economic program of the day was quite busy: Unemployment claims for the week ended February 10 stood at 212,000, compared to the FactSet consensus of 220,000 and 220,000 for the revised reading of the previous month.
Above all, retail sales for the month of January were down 0.8% compared to the previous month, against a FactSet consensus of -0.1%. They declined by 0.6%, compared to +0.2% consensus excluding automobiles. Finally, these sales were down 0.5% excluding automobiles and gasoline. Enough to revive the hypothesis of a drop in US rates in the spring and not during next summer…
The New York Fed’s Empire State manufacturing index for the month of February was -2.4 (consensus -11) and the Philadelphia Fed’s manufacturing index for the same month was +5 .2 (consensus -8.5).
American industrial production for the month of January 2024 fell by 0.1% compared to the previous month according to the Fed, against +0.3% of the FactSet consensus, and after a stable reading for the month of December. Manufacturing production fell by 0.5% compared to the previous month, although it was expected to be stable. The production capacity utilization rate was 78.5% versus 78.8% consensus.
Inventories of American companies for the month of December, which have also just been announced, rose as expected by 0.4% compared to the previous month…
On Friday, operators will be attentive to the figures for construction starts and building permits for January (2:30 p.m., consensus 1.47 million for construction starts and 1.515 million for permits), to the January producer price index (2:30 p.m., consensus +0.1% compared to the previous month or +0.7% over one year; +0.1% and +1.8% excluding food and energy), as well as the preliminary index of US consumer sentiment from the University of Michigan for the month of February (4 p.m., consensus 80).
Values
Cisco (-2.4%). The American network equipment giant warned about its prospects and also announced a 5% reduction in its workforce… For its second fiscal quarter, the Californian group posted adjusted earnings per share of 87 cents compared to 84 cents of consensus. Consolidated net income was $2.6 billion, or 65 cents per share, a 5% year-over-year decline. Revenues came in line with market expectations at $12.79 billion, down 6%. The group is therefore very cautious for the future, counting on revenues for the third fiscal quarter ranging from 12.1 to 12.3 billion dollars, compared to a consensus of 13.1 billion dollars. Adjusted earnings per share for the period are expected between 84 and 86 cents, while analysts on average expected 92 cents.
Cisco also reduced its annual profit and revenue forecasts. The group reacts and will eliminate more than 4,000 positions, around 5% of the workforce. In 2022, it had already cut 5,000 jobs from its workforce. The new measures come as the group is on the verge of finalizing the $28 billion acquisition of Splunk, which is due to close at the end of April. Cisco now expects annual revenues of $51.5-52.5 billion, compared to a previous range of $53.8-55 billion. Chuck Robbins, the company’s managing director, says continued weak demand from telco and cable customers. For fiscal 2024, adjusted earnings per share are anticipated between $3.68 and $3.74.
Equinix (+5%), an international provider of interconnections and data centers, published last night for its fourth fiscal quarter revenues of $2.11 billion, an increase of 13% year-on-year and in line with the consensus of walk. Adjusted earnings per share stood at $7.30, compared to $1.39 a year earlier and $7.25 consensus. Over the closed financial year, revenues also increased by 13% on a consolidated basis and by 15% on a normalized basis and at constant currencies, to $8.19 billion. The group indicates that it has sealed nearly 17,000 agreements with more than 5,900 clients in 2023. Annual net profit increased by 38% to $969 million. Adjusted Ebitda increased 10% to $3.7 billion, a margin rate of 45%. For the year 2024, Equinix anticipates revenues ranging from 8.793 to 8.893 billion, for an adjusted Ebitda of 4.089 to 4.169 billion.
Occidental Petroleum (+4.9%) announced revenues of $7.17 billion for its fourth fiscal quarter, compared to a consensus of $6.84 billion. Adjusted earnings per share, of 74 cents, also beat the consensus of 67 cents. The American oil producer posted its best quarterly production in three years. The Texan group plans a marginal increase in its oil and gas production this year, to 1.25 million barrels of oil equivalent per day. The estimates do not include expected production of around 170,000 b/d from the $12 billion acquisition of CrownRock.
Apple (-0.1%), now the world’s second largest market capitalization behind Microsoft, is still suffering (a little) on Wall Street. It must be said that the latest statements from Berkshire Hathaway, Warren Buffett’s firm, show that Berkshire has reduced its positions in Apple, HP and Paramount Global. The Omaha investment firm, however, strengthened its position on the Occidental Petroleum, Chevron and Sirius XM files. The statements concern Berkshire’s movements at the end of 2023. Thus, the firm sold around 10 million Apple shares during the fourth quarter. She still held 905 million shares of the Apple group at the end of the period, which would represent nearly $167 billion at current prices – if the participation has since been maintained…
The Nebraska conglomerate has therefore chosen to diversify its investments somewhat, but remains very exposed to Apple. Note that Berkshire has also obtained authorization from the Securities & Exchange Commission, the American market authority, to temporarily keep the names of one or more new investments confidential. Buffett’s group sometimes requests such treatment when it takes a multibillion-dollar stake in certain companies. This allows Berkshire to build up its position calmly…
Albemarle (+2.7%), giant in the production of lithium intended for electric vehicle batteries, corrects on Wall Street after revealing a net loss of $618 million for the fourth quarter. Over the entire year, revenues still increased by 31%, reaching a record $9.6 billion. Annual net profit reached $1.6 billion, despite the fourth quarter deficit. Annual adjusted Ebitda was $2.8 billion. Finally, adjusted earnings per share represented $15.22. For the fourth quarter, sales totaled $2.4 billion, but adjusted Ebitda therefore came out as a loss of $315 million.
Deere (-5.2%), the American colossus of agricultural machinery, is losing ground on Wall Street. The group has in fact just issued warnings about its outlook for results, particularly due to the weakness in demand for tractors. For the current financial year, the group is now forecasting a net profit ranging from 7.5 to 7.75 billion dollars, a downward revision of the previous guidance. The consensus was 7.75 billion. For its first quarter, Deere achieved a net profit of $1.75 billion, down 11% year-on-year, for revenues down 4% to $12.18 billion. Earnings per share represented $6.23…
