Wall Street declines this Tuesday, consolidating quickly after its rally the day before led by Nvidia and the Nasdaq. The S&P 500 lost 0.45% to 4,742 pts, the Dow Jones 0.70% to 37,419 pts and the Nasdaq 0.38% to 14,787 pts. Operators are showing a certain caution while awaiting the latest inflation figures which will be revealed at the end of the week, and the first quarterly figures of the “season”.
On the Fed side, Governor Michelle Bowman estimated yesterday that inflation could return to the Fed’s 2% target with rates maintained at current levels. Atlanta Fed President Raphael Bostic, like Bowman, believes it is possible to lower rates later if inflation continues to decline. He is still counting on two rate cuts this year, the first of which will be in the third quarter.
After a delicate first stock market week of 2024, the American stock rebounded strongly yesterday, the Nasdaq having soared by 2.2% with a rally of 6.4% from Nvidia which presented new products ahead of the CES 2024 show in Las Vegas, asserting its leadership in the AI PC segment. The trend should in any case remain volatile in the coming days. Apple, battered last week, climbed 2.4% yesterday with the official announcement by Tim Cook of the availability date of its very expensive Vision Pro mixed reality headset…
On the Nymex, the barrel of crude rose 1.2% today to $71.6 after a major weakness yesterday following announcements from Saudi Arabia, which on Sunday lowered the official selling price of its oil for February. An ounce of gold advances 0.2% to $2,039. The dollar index gains 0.2% against a basket of reference currencies. On the bond markets, the yield on the 2-year T-Bond is 4.37%, compared to 4.02% on the 10-year bond and 4.18% on the 30-year bond.
According to the CME Group’s FedWatch tool, it is very likely (95%) that the Fed will leave its rates unchanged on January 31 after its next monetary meeting, between 5.25 and 5.5%. The first relaxation could take place on March 20 during the next meeting (probability of around 60% according to the same tool). The latest economic statistics showed, across the Atlantic, a fairly resilient job market but some additional signals of economic slowdown.
In economic news this Tuesday, the US deficit in international trade in goods and services for the month of November stood at $63.2 billion, compared to a FactSet consensus of $64.7 billion and a revised reading. from $64.5 billion a month earlier.
On Wednesday, wholesale stocks and weekly report on US domestic oil stocks will be monitored. John Williams of the Fed will also speak on Wednesday. The news will be a little more extensive on Thursday, with the American consumer price index for December, weekly unemployment claims, as well as the American budgetary balance. On Friday, markets will follow the producer price index and a speech from the Fed’s Neel Kashkari.
Regarding companies listed on Wall Street, Albertsons, Tilray and PriceSmart are publishing their quarterly reports today. KB Home will announce on Wednesday, while Taiwan Semiconductor Manufacturing Company and Infosys will publish on Thursday.
On Friday, banks and financial institutions will kick off the fourth quarter results season. UnitedHealth, JP Morgan Chase, Bank of America, Wells Fargo, BlackRock, Citigroup and Bank of New York Mellon will reveal their accounts before the market. Delta Air Lines will also release Friday. Major US banks are expected to see a sharp increase in bad loans due to unpaid debts and the impact of high interest rates, says the Financial Times…
Values
Tilray (-4%), the North American cannabis producer, announced record revenues of $194 million for its second fiscal quarter of 2024, an increase of 34% year-on-year. Gross margin increased 11% to $47 million. Adjusted gross margin was 27%, with a 43% margin in cannabis and a 38% margin in alcoholic beverages. The quarterly net loss narrowed to $46 million, compared to $62 million a year before. The adjusted loss was $2.7 million, or almost zero EPS.
The group claims to be a leader in cannabis with a dominant market share in Canada and 31% growth in net cannabis sales in Canada. It is also establishing itself as a leader in medical cannabis in Europe with 55% growth in net international cannabis sales. Tilray also says it is on track to achieve annual savings of $30 million to $35 million related to the integration of the HEXO acquisition. Finally, the group reiterates its financial guidelines for the 2024 financial year.
Jefferies (-2%), a Wall Street firm which published its latest quarterly accounts last night, was somewhat disappointing. For the quarter ended at the end of November 2023, the group posted a profit halving to $66 million, 29 cents per share, compared to a consensus of 34 cents. Investment banking revenue was $2.29 billion in 2023, above 2019 levels. Investment banking revenue for the fourth quarter increased 2.5% to $577 million , while total quarterly revenues corrected to $1.2 billion, below expectations.
Unity Software (-8%), the San Francisco software group which has just replaced its CEO, plans to reduce its workforce by 25% by eliminating around 1,800 jobs as part of new restructuring measures. The group designs software used by video game creators. It is not yet possible to estimate the costs of the new workforce reduction. Management indicates that the decision “was not taken lightly”. In October, CEO John Riccitiello was replaced by technology veteran James Whitehurst. The group is struggling to recover, after having decided last year on price increases which were poorly received by many customers.
Hewlett Packard Enterprise (-8%) is reportedly in advanced talks to buy networking equipment maker Juniper Networks (+21%), a small rival to Cisco, for around $13 billion, to bolster artificial intelligence offerings . At least that’s what the Wall Street Journal says, which therefore emphasizes the “AI” orientation of the merger. Hewlett Packard Enterprise, based in Texas, is a cloud services provider serving customers ranging from small businesses to large enterprises and governments. HPE is an offshoot of the emblematic technology company founded in 1939 by William Hewlett and David Packard, Hewlett-Packard, recalls the WSJ, according to which the almost century-old group would therefore like to give itself a facelift by developing its AI offerings and surfing on the current wave. An agreement between the two companies could be announced as early as this week according to the newspaper.
U.S. semiconductor maker Microchip Technology (stable) warned of a further decline in revenue in the fiscal third quarter, citing lower shipping levels and a lackluster economy. Microchip now expects a sequential decline of around 22% in revenue for the quarter ending in December, compared to previously forecasting a decline of between 15% and 20%. “The weakening economic environment our customers and distributors faced during the December quarter led many to want to receive a lower level of deliveries as they took steps to further reduce risk linked to their stocks,” said the group’s CEO, Ganesh Moorthy.
Match Group (+6%) climbs on Wall Street, on capital speculation. Thus, the Wall Street Journal indicates that the activist investor Elliott Investment Management has built a stake of approximately one billion dollars in the capital of the giant of dating applications.
BioNTech (-3%), the German biotechnology group partner of Pfizer, indicated that it would be necessary to wait until 2025 to return to growth. Sales of Covid-19 vaccines should then bottom out, while oncology activities could gain momentum.
Netflix (-1%) is suffering on Wall Street, following a downgrade of the firm Citigroup which has just gone from ‘buy’ to ‘neutral’. The broker is concerned about the evolution of revenues and the level of expenses of the streaming giant.
