Wall Street is hesitant this Wednesday, uncertain as Nvidia struggles to find its direction. The AI chip giant gained 6.8% last night, after a 15% penalty on its recent historic peaks of more than $140. The S&P 500 now loses 0.10% to 5,464 pts and the Dow Jones 0.33% to 38,988 pts, while the Nasdaq gains 0.29% to 17,770 pts. On the Nymex, a barrel of WTI crude fell 0.4% to $80.5. An ounce of fine gold dropped 1% to $2,308. The dollar index gained 0.4% against a basket of reference currencies.
New home sales in the United States for the month of May 2024 stood at 619,000, compared to a consensus of 648,000 measured by FactSet and a revised level of 698,000 for the previous month. The previous reading for April was 634,000.
Oil prices are falling into the red after the announcement of a sharp increase in crude oil reserves in the United States last week. According to the US Department of Energy, domestic crude stocks, excluding strategic reserves, increased by 3.6 million barrels during the week ended June 21 to 460.7 mb. The consensus was for a drop of 2.6 mb. Stocks of gasoline increased by 2.7 mb (vs -1.1 mb consensus), and those of distilled products decreased by 0.4 mb (vs -1.5 mb expected).
Tomorrow, the economic program will be quite busy, with durable goods orders for the month of May (expected stable), the final GDP for the first quarter (3rd estimate expected at +2.9%), the balance of international trade in goods, weekly unemployment registrations for the week ending June 22 (consensus 233,500), as well as wholesale stocks or promises of housing sales for the month of May (consensus +1% compared to the previous month).
Finally, on Friday, it will be necessary to monitor household income and spending for the month of May as well as the associated “core” inflation index, closely followed by the Fed, but also the Chicago PMI manufacturing index and the of American Consumer Sentiment from the University of Michigan. Thomas Barkin and Michelle Bowman of the Fed will also have their say.
Janet Yellen, former head of the Fed and now US Treasury Secretary, told Yahoo! Finance that she did not see the basis for a recession in the United States and that she also expected inflation to return towards the Fed’s 2% objective next year, i.e. a faster pace than anticipated by central bankers. The median projection of Fed members last week showed a return of the Fed’s preferred inflation measure to 2% in 2026. The Fed’s ‘dot plot’ also showed the prospect of a single rate cut this year.
Mary Daly, head of the San Francisco Fed, clarified the day before yesterday that there were risks for the labor market, which would be close to an inflection point where a further slowdown could result in a rise in unemployment. She also discussed various topics and noted that artificial intelligence reduces costs and therefore could be a deflationary force. Cautious, she still judges that the turbulence in inflation data so far this year has not inspired confidence. However, there is also no evidence that stagflation or recession is coming. “We must fully restore price stability without painful disruption to the economy,” Daly also said.
“So far, the labor market has slowly adjusted … But we are getting closer to a point where this benign outcome may be less likely,” Daly said Monday in a speech prepared for delivery at the Commonwealth Club World Affairs of California in San Francisco. “The future slowdown in the labor market could result in higher unemployment, as companies have to adjust not only vacancies but also actual jobs,” she said. “At this stage, inflation is not the only risk we face,” said the official.
Governor Michelle Bowman said rates need to be held for some time to get inflation under control. In prepared remarks for a speech in London, she said U.S. inflation remains elevated, with a number of upside risks to prices. “The supply chain improvements and the increase in labor supply from immigrants that helped lower inflation last year are unlikely to continue,” she said. Regional conflicts could also put upward pressure on energy and food prices. Looser financial conditions or fiscal stimulus could also fuel inflation. Immigrant housing needs, as well as labor market tightness, could also push up prices…
“If the available data indicate that inflation is moving sustainably toward our 2% target, it may eventually become appropriate to gradually lower the federal funds rate to prevent monetary policy from becoming too restrictive,” Bowman added.
In corporate news on Wall Street, FedEx released strong financials last night and indicated it was studying its options regarding the freight business. Micron (after the close), Paychex (pre-session), General Mills (before the close), Jefferies Financial, Levi Strauss (after the close) and BlackBerry (after the close), announce their results this Wednesday… Note that the Annual general meeting of happy Nvidia shareholders is also being held today.
Nike (after market), McCormick and Walgreens Boots Alliance release tomorrow.
Values
FedEx gains 14% on Wall Street. For its fourth fiscal quarter just ended, the delivery giant posted adjusted earnings per share of $5.41, compared to $5.34 consensus and $4.94 a year earlier. Revenues totaled $22.11 billion over the period, in line with market expectations, compared to $21.93 billion a year earlier. Thus, revenues increased by 1% and earnings per share by 9.5% over the quarter. For the year ended, earnings per share increased 19% to $17.8, while revenues fell 3% to $87.7 billion.
In addition, the group delivered solid initial guidance for fiscal 2025, excluding the US Postal contract. 2025 revenue growth is expected in the low to mid single digits, while adjusted earnings per share are anticipated between $20 and $22. FedEx finally plans $2.5 billion in share repurchases for the year, including $1 billion in the first quarter alone. Furthermore, the group has suggested that it will explore a sale or spin-off of its freight business, which could prove to create value.
General Mills (-5%), the American food group, published sales for its fourth fiscal quarter totaling $4.7 billion, down 6% and below market expectations, with an organic decline of 6% as well. . Adjusted operating profit declined 10% to $800 million. Adjusted diluted profit fell 10% at constant currencies to $1.01. The consensus was for 99 cents quarterly adjusted EPS on $4.85 billion in revenue.
For the year ended, revenues were $19.9 billion, down 1%, while adjusted operating profit increased 4% to $3.6 billion at constant currencies. Adjusted diluted earnings per share increased 6% to $4.52. For the 2025 financial year this time, sales are expected stable or up up to 1% organically, while adjusted diluted earnings per share are expected between -1% and +1% at constant currencies, compared to the 4 $.52 in 2024.
Paychex (-4%), the specialist in payroll management services, announced solid revenue growth and an expansion of its operating margin for its fourth fiscal quarter. Revenue totaled $1.295 billion, bringing full-year revenue to $5.28 billion, up 5%. Adjusted diluted earnings per share increased 15% in the quarter to $1.12, for annual adjusted EPS of $4.72, an increase of 11%. Revenues for the current financial year are expected to increase by 4 to 5.5%, while adjusted EPS is expected to increase by 5 to 7%.
Southwest Airlines (-2%), the American airline, lowered its revenue forecast per available seat mile for the second quarter, citing uneven demand. Southwest, whose fleet is entirely composed of Boeing, is facing the manufacturer’s current crisis which has delayed deliveries of its new planes on order. On Wednesday, the company said changing travel habits were preventing it from selling the expected number of seats. Thus, the carrier now expects a decline in revenue per available seat mile for the current quarter ranging from 4 to 4.5 percent, compared to its previous estimate of a decline of 1.5 to 3.5 %. Regardless, the group still anticipates historic operating revenues for its second quarter.
DoorDash (stable), the American food delivery company, expressed interest in a possible acquisition of the British group Deliveroo last month, according to two sources familiar with the matter cited by Reuters. The San Francisco group would have made an approach, but the discussions would have ended due to a disagreement concerning the valuation. At least that’s what one of Reuters’ sources said on condition of anonymity. The same source specifies that there would be no more negotiations in progress.
Whirlpool gains 13% on Wall Street, while according to Reuters, the German group Robert Bosch is considering a purchase offer for the American group. The agency cites three people familiar with the matter. Such an operation would allow Bosch to strengthen its position in the household appliances market. The German group is said to be discussing with potential advisers the possibility of making an offer. Whirlpool was worth just under $5 billion on Wall Street before this rumor. Reuters sources add that it is not certain whether an offer will ultimately be made.
Rivian, the American manufacturer of electric vehicles, which climbed 8.6% last night at the close on Wall Street on a broker’s note deeming the achievement of profitability credible, accelerates today with a jump of 28%! It must be said that the German automobile giant Volkswagen has announced that it will invest up to 5 billion dollars in an alliance with the American group. The joint venture agreement would therefore provide very useful liquidity to the Irving Californian group. Volkswagen intends to work with Rivian to create next-generation software-defined vehicle architectures, which will be used in future EVs from both partners. The joint venture will use ‘zonal hardware design’ and the Rivian platform for the foundation of future vehicles, as well as Rivian’s expertise in electrical architecture.
Rivian will license its existing intellectual property rights to the joint venture. In exchange, Volkswagen will invest an initial $4 billion in Rivian through an unsecured convertible bond that will be converted into common stock, with up to $4 billion in additional investments phased through 2026.
