The American market, closed yesterday for Memorial Day, reopened on a hesitant note on Tuesday, despite the continuation of Nvidia’s rally (+7.1%). The S&P 500 is trending towards a symbolic increase of 0.03% to 5,306 pts, while the Nasdaq gains 0.59% to 17,019 pts. The Dow Jones, on the other hand, consolidated by -0.55% to 38,852 pts.
Remember that the American stock markets ended last week at or near their peaks with Nvidia, the S&P 500 crossing 5,300 pts, and the Nasdaq 16,900 pts. The Dow Jones showed a little more reserve at 39,000 points, after briefly exceeding 40,000 points on May 17…
On the Nymex, the barrel of WTI crude advances 2.8% to reach $80. An ounce of gold rose 0.9% to $2,358. The dollar index lost 0.1% against a basket of reference currencies. Bitcoin is at $68,347.
In economic news on Wall Street, traders followed the S&P Case-Shiller and FHFA home price indexes. The S&P Case-Shiller ’20-City’ index adjusted for the month of March thus increased by 0.3% compared to the previous month. The unadjusted index rose 1.6% over one month and 7.4% over one year. The March FHFA index appreciated by 0.1% month-on-month and 6.7% year-on-year…
The Conference Board’s U.S. Consumer Confidence Index for May 2024 came in at 102, compared to a market consensus of 95.7 measured by FactSet and a level of 97.5 for the prior month’s revised reading. .
The Dallas Fed’s regional manufacturing index for May 2024 came in at -19.4, compared to a FactSet consensus of -12 and a reading of -14.5 a month prior. Remember that a negative index indicates a contraction in manufacturing activity.
Loretta Mester, Neel Kashkari and Lisa Cook of the Fed spoke during the day… Mester, in his prepared remarks, believes that the Fed’s monetary statements “would benefit from being longer”, with certain passages being able to be expanded “to describe the assessment of economic developments and their influence on the outlook”…”Even though simplicity is often seen as a virtue, it can also be a disadvantage, as policy-making must be done in a world “uncertain, in which the economy is constantly buffeted by shocks that can cause economic conditions to evolve differently than expected,” insisted Mester, head of the Cleveland Fed, in a speech prepared for a Bank of Japan conference in Tokyo. “With short statements, each word takes on increased meaning,” fears the manager.
“Short statements suffer from what I call the ‘Hotel California’ problem: We are reluctant to change certain words because of the possible signal it might send,” Mester added, referencing the 1970s Eagles song “The words ‘check-in’, but it’s difficult to make them ‘check-out’, even when it’s desirable,” says Mester, referring to the song’s lyrics: “You can check out any time you like. , but you can never leave.”
Mester also advocates for a sort of “anonymized matrix of economic and political projections” alongside the summary of SEP economic projections published each quarter. The SEP notably includes the famous ‘dot plot’ presenting the forecasts of Fed members concerning rates in the form of a dot graph. By publishing such a matrix, market participants could observe the connection between each participant’s outlook and their view of appropriate monetary policy. “Currently, the SEP variables are not linked between participants, and the median trajectories provided do not necessarily represent a coherent forecast,” notes the manager, who considers it preferable that policy makers “take control of the narrative by using more words to describe the current assessment of economic developments, the way in which they have influenced the outlook and the risks to those prospects.
Neel Kashkari, president of the Minneapolis Fed, indicated once again that the American central bank must take its time to assess the situation and the reality of the slowdown in inflation before lowering its rates. The official notes the remarkable resilience of the American economy and the strength of the labor market, particularly in services. In an interview with CNBC, he adds that nothing should be ruled out, but that the Fed would be wise to wait. “I don’t think we should rule anything out at this stage. We are all committed to bringing inflation back to our 2% target,” Kashkari summarized. “Most people thought we would be in a recession toward the end of last year, but that didn’t happen. Instead, we saw very strong growth. American consumers have remained remarkably resilient, just like the real estate market, I therefore see no need to rush and reduce rates,” adds the manager, who wants to “do things right.”
“At the beginning of this year, inflation moved sideways, which raised questions in my mind. Is the disinflationary process continuing or will we reach an inflation level above 3%? I think that it’s still too early to know and we have to wait and see to have more confidence,” insists Kashkari.
On Wednesday, the Fed will dominate the day, with interventions from John Williams and Raphael Bostic, as well as the publication in the evening of the Economic Beige Book, a summary of regional conditions. The Richmond Fed’s manufacturing index will be released the same day…
Thursday will be marked by the publication of the American GDP for the first quarter and that of the balance of international trade in goods. Jobless claims, wholesale inventories, the housing sales pledge index and the weekly report on US domestic oil stocks will also be released on Thursday. The Fed’s Lorie Logan and John Williams will speak on the same day.
The week will end with the publications of household income and spending (with the famous ‘core PCE’ price index, essential for the Fed) as well as the Chicago PMI index. Raphael Bostic will speak on Friday.
Values
Nvidia (+7.1%). Investors welcomed last week the group’s excellent results and the announcement of a tenfold split of the stock. They also seem to appreciate the announcements concerning xAI, Elon Musk’s artificial intelligence startup, which has just to raise $6 billion in additional Series B financing valuing the file at $20 billion. The funds were raised from Sequoia, Andreessen Horowitz, Fidelity Management & Research, Vy Capital, Valor Equity Partners, Saudi Prince Al-Walid bin Talal and Kingdom Holding. xAI’s previous valuation was $18 billion. The funding should allow xAI to better compete with Microsoft and OpenAI, notably via the AI chatbot Grok released in November. It is likely that the startup will have to invest massively in Nvidia chips… The file now capitalizes more than 2,700 billion dollars on Wall Street!
Apple (stable), the stock remains not far from its historic peaks, benefiting from the providential announcement of a strong rebound in sales in China in April – a month that is nevertheless generally quite low in terms of activity. The Californian apple group, which has granted significant discounts to its retail partners, posted Chinese deliveries up 52% last month according to the Bloomberg agency, which analyzes data from the China Academy of Information and Communications Technology in China smartphone market. Bloomberg calculated that 3.5 million units over the period came from foreign brands, the vast majority of which would be iPhones. The Cupertino group returned to growth in China in March after two months of sharp decline, Bloomberg recalls.
GameStop (+25%), after a speculative ‘meme stock’ episode in mid-May which saw the stock soar towards $50 before losing more than half of its value, is rising again today. The video game distribution chain, star of small American companies, raised more than $900 million by selling shares, taking advantage of the irrational rally in May. The short-lived rebound was fueled by messages from ‘Roaring Kitty’, or rather Keith Gill, his real name, an essential figure in the speculative madness of the year 2021.
Unfortunately for the small shareholders gathered en masse on social networks, the group seemed better prepared and took advantage of the recent rally to issue a warning on the results, while raising $933.4 million via an offering of 45 million shares. The group intends to use the disposal proceeds for general purposes, which could include acquisitions or investments. Recall that GameStop warned earlier this month that its first quarter turnover would be between $872 and $892 million, compared to $1.24 billion a year before.
T-Mobile US (+0.8%), the American telecom operator, announced today the planned acquisition of the majority of the mobile activities of the regional operator United States Cellular (+12.1%) in the part of a transaction worth approximately $4.4 billion. The deal includes US Cellular’s customers, stores and other assets. T-Mobile will finance the operation through cash and debt. The group anticipates operating expense and capital synergies of approximately $1 billion. Finalization is expected in the middle of next year, subject to customary approvals.
Tesla (-1.3%) remains under scrutiny on Wall Street, while proxy advisory firm Glass Lewis announced over the weekend its recommendation to shareholders to reject Tesla’s monumental $56 billion compensation package. ‘Elon Musk. The firm therefore considers the package excessive and dilutive and points out the numerous extremely time-consuming projects which also require the attention of the multi-billionaire. Glass Lewis also recommends that shareholders reject Tesla’s plans to incorporate in Texas, judging that it would add additional risks while the benefits of such a decision would be uncertain. Musk said earlier this year that he wasn’t comfortable making Tesla a leader in AI and robotics without having around 25% voting control…
