Wall Street is recovering a little this Friday, after a new battery of statistics. The S&P 500 rose by 0.64% to 4,718 pts. The Dow Jones advanced 0.34% to 37,569 pts. The Nasdaq gained 0.70% to 14,612 pts. The American market is therefore trying to recover at the end of a delicate first stock market week of 2024, marked by corrections in the stocks of the ‘Magnificent Seven’ and in particular Apple to the lowest of eight weeks following two downgrades by brokers. The latest robust US employment figures have also been differently appreciated, while operators consider that an overly resilient labor market limits the Fed’s capacity for action. The ISM for services reflects a slowdown…
According to the US Department of Labor this Friday, non-agricultural job creations for the month of December 2023 stood at 216,000, well above the consensus which was only 160,000. The unemployment rate stood at 3.7% against a consensus of 3.8%. The average hourly wage increased by 0.4% compared to the previous month against 0.3% consensus. The labor force participation rate was 62.5%. Job creations in the private sector totaled 164,000, compared to 130,000 consensus and 136,000 for the revised reading of the previous month. Total job creations for November were posted at 173,000 in revised reading against 199,000 previously estimated.
The latest ADP report on American private employment showed 164,000 job creations for the month of December, against a FactSet consensus of 125,000 and a revised reading of 101,000 for the previous month. “We are returning to a labor market very much in line with pre-pandemic hiring levels. Although wages were not the cause of the recent surge in inflation, now that wage growth has “reduced, any risk of a wage-price spiral has practically disappeared”, judges Nela Richardson, chief economist at ADP. Job creation increased for the fourth consecutive month, thanks to strong growth in hiring in the leisure and hospitality sectors. Construction held up despite high interest rates, but the manufacturing industry continued to struggle, posting another month of losses. Small businesses with 1 to 49 employees created 74,000 jobs in December, while businesses with 50 to 249 employees created 58,000 positions. Companies with 500 people or more or generated 40,000 jobs.
The ISM American services index for December 2023 stood at 50.6, compared to the FactSet consensus of 52.6 and 52.7 a month before. The indicator therefore signals a clear slowdown in growth. The new orders index for December stood at 52.8 compared to 55.5 in November.
American industrial orders for the month of November 2023 increased by 2.6% compared to the previous month, compared to +1.8% market consensus and -3.4% a month earlier.
Elsewhere in the world this morning, the Japanese services PMI for December was in expansion territory at 51.5. German retail sales, on the other hand, corrected much more than expected (-2% excluding adjustments and year-on-year for the month of November, -2.5% month-on-month and after adjustments). Preliminary figures for consumer prices in the euro zone showed a rebound in line with expectations. The annual inflation rate in the region is in fact estimated at 2.9% in December, compared to 2.4% the previous month according to preliminary data from Eurostat. Regarding the main components of inflation, food, alcohol & tobacco should experience the highest annual rate in December (6.1%, compared to 6.9% in November), followed by services (4. 0%, stable compared to November), industrial goods excluding energy (2.5%, compared to 2.9% in November) and energy (-6.7%, compared to -11.5% in November ). Sequentially, prices should have increased by 0.2%… Annual ‘core’ inflation, which excludes the most volatile elements, should reach 3.4% compared to 3.6% in November. A level in line with market expectations.
On the Nymex, a barrel of WTI crude rose 1.7% today to $73.4. An ounce of gold gained 0.9% to $2,067. The dollar index lost 0.4% against a basket of reference currencies. On the bond markets, the yield on the 2-year T-Bond now stands at 4.32%, compared to 3.96% on the 10-year and 4.13% on the 30-year… The FedWatch tool of CME Group highlights a 93% probability of a new monetary status quo on January 31 following the next FOMC meeting. For the meeting on March 19 and 20, the tool gives a 69% probability of a rate cut to 5-5.25% and a 26% ‘probability’ of a status quo. Note that expectations of a rate cut have increased considerably over the past two hours.
Values
Apple (stable) is hesitant on Wall Street after deploring two broker downgrades this week. Taiwanese electronics production subcontractor Foxconn, the main assembler of Apple’s iPhone, warned this Friday that it expected a decline in revenues in the first quarter, on a demanding comparison basis and in a context of weak demand. However, the first quarter is traditionally lower for the group, and revenues reached a record last year, at the same time, with the post-covid recovery. Foxconn also published revenues for its fourth quarter down 5.4% to 1,851 billion Taiwan dollars, narrowly beating the consensus. Revenue last month was 460 billion Taiwan dollars, or about 14.8 billion dollars. Fourth-quarter revenue from the consumer electronics business including smartphones was flat, reflecting slowing demand.
Tesla (+1%) is “recalling” 1.6 million cars in China due to a risk of accident linked to Autopilot, indicates Bloomberg. Tesla will actually use remote vehicle upgrade technology to provide newly developed functions to vehicles to reduce risks. Bloomberg observes that the “recall” applies to virtually every car Tesla has ever sold in the country. This decision echoes that concerning 2 million vehicles in the United States last month. The affected cars in China were produced between August 2014 and December 2023, including locally produced Model 3 and Y and imported premium models, according to the local administration.
Tesla drivers could abuse Autopilot functions, increasing the risk of collision and posing a safety risk, the Chinese regulator said. The “recall” therefore reflects the Texas automaker’s response last month to the US National Highway Traffic Safety Administration, determining that Elon Musk’s group was not doing enough to ensure that drivers were using Autopilot correctly. . NHTSA had said it would keep open a years-long defect investigation to monitor the effectiveness of Tesla’s fixes to 2 million cars.
Costco Wholesale (+1%), the American distribution giant, posted revenues totaling $26.15 billion for the month of December, an increase of 9.9% year-on-year. Over the 17 weeks ending at the end of December 2023, the group posted total revenue of $82.9 billion, an increase of 5.9% compared to the previous year.
Constellation Brands (+3%), known for its Corona beer, published disappointing revenues and a profit above expectations for its third fiscal quarter. The group lowers its annual revenue forecasts. For the closed quarter, adjusted earnings per share were $3.19 versus $3 consensus. Quarterly revenues stood at $2.47 billion versus the consensus of $2.54 billion. The group maintains guidance for annual adjusted earnings per share ranging from $12 to $12.2, but now only expects $9.15 to $9.35 billion in annual revenue, compared to $9.6 to $9.8 billion. billion before.
Microsoft (+1%). OpenAI, the Microsoft-backed firm behind chatbot ChatGPT, is talking to dozens of publishers about licensing deals, Bloomberg reports. In an interview, an OpenAI official calls the discussions “active” and “positive” and says, “You’ve seen some deals announced, and there will be more in the future.” The article reminds readers that OpenAI has already signed agreements with Axel Springer and the Associated Press. The executive further claims that OpenAI was “in the midst of a very active and productive negotiation” with the New York Times until the newspaper filed a copyright infringement lawsuit last month. The OpenAI store will also soon open its doors. After a slight delay, the startup behind ChatGPT should launch its GPT online store next week, announced during the DevDay conference last November, as indicated in an email addressed to GPT Builder users, relayed by ‘ The Verge’. “Dear GPT Builder, we would like to inform you that we will launch the GPT Store next week,” OpenAI announced, inviting users who wish to share their GPT in the store to “review our updated usage policies and GPT brand guidelines to ensure (its) GPT is compliant.”
ExxonMobil (+1%) indicated that it would write down approximately $2.5 billion of California assets in the fourth quarter and also specified that the drop in energy prices would reduce its operating profit. Operating profit could fall to around $8.9 billion, down 30% year-on-year. Exxon said oil and gas properties along the Southern California coast are expected to experience depreciation ranging from $2.4 billion to $2.6 billion. Energy startup Sable Offshore agreed more than a year ago to pay $643 million for the assets. Ongoing challenges in the state’s regulatory environment have hampered progress in resuming operations, the group lamented. Oil majors are turning away from California due to mature oil fields and the state’s environmental policies…
Exxon also indicated its intention to write down approximately $250 million in its chemicals business. Lower oil prices affected profits by $600 million, but this was partially offset by rising natural gas markets. The $1.6 billion decline in refining profits was partly offset by a $1.2 billion gain in derivatives.
