Wall Street consolidates on its pre-market highs this Tuesday, with the S&P 500 and the Dow Jones expected to be practically stable, compared to a decline of 0.2% in the Nasdaq. The trend appears a little more hesitant on the eve of the quarterly results of the stock market star of recent months, Nvidia, the driving force behind the rally in AI stocks. Crude prices corrected today, with a barrel of WTI crude dropping 1.7% to $78. An ounce of gold fell 0.2% to $2,433. The dollar index stabilizes against a basket of reference currencies.
Many Fed officials spoke throughout the week. Yesterday, operators were monitoring comments from Raphael Bostic, Michael Barr and Philip Jefferson in particular. This Tuesday, Thomas Barkin, Christopher Waller, John Williams, Raphael Bostic and Michael Barr speak.
Michael Barr, the Fed’s vice chairman for supervision, said yesterday that he was disappointed with inflation data from the first months of the year, suggesting that rates should be given more time at current high levels. to ensure that inflation is brought back towards the central bank’s objective. The current restrictive policy should therefore be given more time. Barr also said the economy remained strong and the unemployment rate remained low. It would therefore be a question of leaving rates at their current levels to take the time to observe the evolution of conditions…
Raphael Bostic, president of the Atlanta Fed, for his part estimated that inflation should continue to fall this year and in 2025, but also judged that interest rates could remain above the levels observed during the last decade. On Bloomberg, Bostic noted that it would take time for inflation to return to target. He noted that the job market was a little less tight than 12 months ago but was not weak.
Philip Jefferson, vice-president of the Fed, indicated for his part that restrictive monetary policy had weighed on the real estate market. He said rates were in restrictive territory and April consumer price inflation data was encouraging. This involves evaluating future data to measure the balance of risks and implement the appropriate monetary policy. Jefferson judges for the moment that the economy is growing at a solid pace and that employment also remains robust. Long-term inflation expectations show that Americans believe the Fed is capable of achieving its 2% target. Jefferson expects consumption to grow at a slower pace later this year. The official sees a better balance in the labor market and a decline in inflation, but this remains far from what is desired and progress is slower than expected…
Remember that Jerome Powell, head of the Fed, set the tone last week by displaying his confidence and his determination to bring inflation back towards the 2% objective, even if this could be done at the cost of maintaining it more long-than-expected rates at a 23-year high, between 5.25 and 5.50%.
The FedWatch tool shows an additional Fed status quo probability of more than 96% on June 12, after the next meeting. This status quo should persist in July according to this same tool (more than 76% ‘proba’), but the Fed could then relax its policy from September or November. Obviously, as the Fed has often emphasized, monetary policy remains very dependent on new economic data. The latest consumer price figures last week were reassuring, but nothing says that this trend is sustainable…
There will be no significant statistics on Wall Street until tomorrow, with existing home sales, the Atlanta Fed’s inflation index, the weekly report on US domestic oil stocks and the FOMC Minutes. .
Jobless claims, the Chicago Fed’s national activity index, the US composite flash PMI, new home sales and the Kansas City Fed’s manufacturing index will be released on Thursday. Durable goods orders and the University of Michigan Consumer Sentiment Index are due Friday.
In corporate news on Wall Street, Palo Alto Networks and Zoom Video Communications released mixed forecasts last night. Lowe’s, AutoZone, James Hardie, Macy’s, Toll Brothers and Urban Outfitters, are releasing this Tuesday.
Tomorrow, Nvidia will take the spotlight after the close with its latest figures. PDD, TJX, Analog Devices, Synopsys, Target, Snowflake, Williams-Sonoma and VF Corporation are also announcing this Wednesday.
On Thursday, operators will follow publications from Medtronic, Intuit, Workday, NetEase, Autodesk, Ross Stores, Dollar Tree, Deckers Outdoor, Burlington Stores, BJ’s Wholesale and even Ralph Lauren.
Values
Nvidia is at its pre-market highs on Wall Street at $950. The stock has gained more than 90% this year and tripled over 12 months, with the continuing enthusiasm around artificial intelligence, a field in which Jensen Huang’s group is the key player. Nvidia will announce its financial results for the first fiscal quarter on Wednesday evening, after trading on Wall Street. The consensus is $5.57 in adjusted earnings per share and $24.6 billion in revenue for the period. It reached $5.92 in adjusted EPS and $26.6 billion in revenue for the following quarter.
The graphics and AI chip giant easily beat the consensus for the previous quarter, posting adjusted earnings per share of $5.16 compared to a consensus of $4.60, for revenues of $22.1 billion. dollars compared to a market consensus of 20.4 billion. Data center revenues were 18.4 billion, much higher than the consensus of 17.2 billion and up more than 400% from the previous year. Quarterly net profit soared by almost… 770% to $12.3 billion. The Santa Clara group thus achieved a turnover for the fourth quarter ended January 28, 2024 of 22.1 billion dollars, up 22% compared to the previous quarter and… 265% compared to Last year.
For the first fiscal quarter, the group then envisaged, in February, during the previous quarterly publication, revenues of 24 billion dollars, plus or minus 2%. Adjusted gross margin was expected at 77%, plus or minus 50 basis points. The question is therefore whether Nvidia will still manage to clearly beat the consensus tomorrow and convince Wall Street of its ability to maintain its dominance in AI chips and thus continue its growth at a sustained pace.
Palo Alto Networks corrects by 6% before market on Wall Street. The Californian computer security giant, now a member of the S&P 500, posted a 3% increase in billings for the closed quarter, the smallest gain since its IPO in 2012. Revenues for this third fiscal quarter increased by 15 % to $1.98 billion, the weakest increase since 2020. Adjusted earnings per share were $1.32, beating consensus. The Santa Clara group posts cautious forecasts for the fourth quarter, rekindling fears of a slowdown in cybersecurity services. Fourth-quarter revenues are forecast at $2.15 billion to $2.17 billion, below consensus, while billings are forecast at $3.43 billion to $3.48 billion, also worse than expected for the middle of the range.
Zoom Video Communications lost 3% before market. The remote conferencing services group’s initiatives in artificial intelligence do not seem sufficient to convince for the moment. For the first fiscal quarter, the group posted revenues of $1.14 billion, an increase of 3.2% compared to last year and 3.5% at constant currencies. The adjusted operating margin was 40%. Adjusted net profit was $426 million, or $1.35 per share, compared to $353 million a year earlier. The consensus was $1.19 adjusted EPS for $1.13 billion in revenue. For the quarter ending in July, the group expects revenues of around $1.15 billion and adjusted EPS of $1.21. The consensus was for $1.23 adjusted EPS and $1.15 billion in revenue.
Trump Media & Technology Group, owner of Donald Trump’s Truth Social social media network, lost more than $327 million in the quarter ended at the end of March, with non-cash charges of $311 million linked to the merger with the SPAC Digital World Acquisition. A year earlier, TMTG posted a much smaller deficit of $0.2 million. Quarterly adjusted Ebitda operating loss was $12.1 million for the past quarter compared to $3.6 million a year earlier. At the end of March, the level of cash and equivalents was $274 million.
Microsoft, which already seems to have taken a certain lead in the field of artificial intelligence with its investment in OpenAI, is continuing the offensive. The Redmond software giant announced yesterday a new category of PC “Copilot+”. These PCs will be equipped with AI chips and will run on the latest Windows 11 version with the AI Copilot software. Copilot+ PCs will properly use OpenAI’s latest GPT-4o model, allowing the assistant to best interact with the computer via text, video and voice. Microsoft anticipates that more than 50 million of these AI PCs will be purchased over the next year.
Alibaba, the Chinese online commerce giant, would have cut the prices of some of its artificial intelligence services, according to Bloomberg, which mentions reductions of up to 97% which would have provoked an immediate response from rival Baidu. Thus, Baidu Cloud announced its intention to provide free services based on its Ernie AI models. Alibaba previously reduced prices on nine products. ByteDance, for its part, announced last week prices for AI services which, according to the group, would be 99% lower than Chinese industry standards. Bloomberg thus evokes what could constitute the start of a local price war in AI.
Lowe’s, the American distribution group for home-related products, is gaining ground before the market on Wall Street. The group’s profits and sales for the closed quarter actually exceeded expectations. Revenue declined 4.4% to $21.36 billion, but the consensus was for $21.1 billion. Earnings per share, of $3.06, also exceeded consensus. Adjusted earnings per share represented $3.67 over the comparable period last year. Free cash flow more than doubled to $3.88 billion. Like-for-like sales declined 4.1%. For fiscal 2024, Lowe’s expects revenues ranging from $84 billion to $85 billion, with diluted EPS ranging from $12 to $12.30.
AutoZone, the American auto parts giant, announced revenues of $4.2 billion for its third fiscal quarter, ending in early May, up 3.5% year-on-year, with a like-for-like performance of 1.9 %. The evolution of comparable sales is zero in the American domestic market, compared to an expansion of 18.1% internationally. Quarterly operating profit increased 5% to $900 million. Net profit represented 652 million dollars compared to 648 million a year earlier. Diluted earnings per share improved 7.5% to $36.69. The consensus was around $36 in earnings per share and $4.3 billion in revenue.
Macy’s, the American clothing and beauty products distribution chain, exceeded expectations for its first quarter and raised its forecasts. For the quarter ended at the beginning of May, the group posted a profit of $62 million or 22 cents per share, compared to $155 million or 56 cents per share for the comparable period last year. Adjusted earnings per share were 27 cents, compared to the consensus estimate of 16 cents. Total revenues declined 3% to $4.85 billion, compared to the market consensus of $4.8 billion. Annual adjusted earnings per share are expected between $2.55 and $2.90.
