Wall Street remains under pressure this Wednesday, after resilient consumption or production figures and a new series of quarterly publications. The S&P 500 returned 0.56% to 4,739 pts, while the Dow Jones lost 0.08% to 37,330 pts. The Nasdaq fell 1.14% to 14,775 pts. Markets were already uncertain following very cautious comments from central bankers and mixed figures for British and European inflation. Operators are now starting to wonder if they did not move a little too quickly in anticipating rapid rate drops.
Retail sales in the USA for the month of December increased by 0.6% compared to the previous month, against +0.4% consensus and +0.3% for the previous month’s reading. Retail sales of the ‘control group’ were up 0.8%. Finally, excluding automobiles, sales rose by 0.4%, compared to +0.2% expected.
The import price index for the month of December in the United States remained stable compared to the previous month, against -0.5% consensus. It fell by 1.6% over one year. The export price index fell by 0.9% month-on-month (-0.6% consensus) and by 3.2% year-on-year.
Industrial production in December increased 0.1% compared to the previous month, according to the Fed report. The consensus was forecasting a drop of 0.1%, after stability in November (+0.2% previously announced). The production capacity utilization rate stands at 78.6%, compared to 78.7% consensus and 78.6% a month earlier (vs. 78.8% at first reading).
According to today’s report in the United States, business inventories for the month of November 2023 were down 0.1% compared to the previous month, in line with the market consensus, after a comparable decline in October. .
The National Association of Home Builders’ American real estate market index for the month of January 2024 stood at 44, compared to the market consensus of 38 and 37 a month earlier.
The Fed’s economic Beige Book will be published in the evening. John Williams, Michael Barr and Michelle Bowman from the Fed speak during the day on various topics. Barr did not comment on monetary policy. Bowman ruled that proposals to strengthen banks’ capital requirements needed significant changes. However, she says she is confident that a compromise will be reached on the subject.
Regarding rate expectations, the CME Group’s FedWatch tool now shows a 97% probability that the Fed will opt for a status quo on January 31 at its next meeting. The probability of a quarter-point rate cut on March 20, following the next meeting, stands at 56%. It fell back somewhat following today’s statistics.
Yesterday, the fall in the New York Fed’s Empire State manufacturing index was impressive! The indicator collapsed to -43.7 in January 2024, compared to -6.5 market consensus and -14.5 a month earlier. The index therefore reflects a complete collapse of manufacturing activity in the region considered at the start of 2024. This is also the lowest level of this indicator since May 2020 and one of the worst periods of covid. ..
Christopher Waller, Governor of the Fed, indicated yesterday that there was no need to act as quickly as in the past to lower rates. He noted, however, that the US central bank could cut rates later this year if inflation does not rebound. Waller said the PCE inflation index of 2% was now “within striking distance”, but he noted there was a risk that rate cuts could be delayed if the economy continues to moderate. was not confirmed in the fourth quarter. Atlanta Fed President Raphael Bostic (non-voter) said this weekend that he expected much slower progress on inflation going forward and that he hoped to reach the Fed’s 2% target in 2025.
Elsewhere in the world, the annual inflation rate in the euro zone was indeed established at 2.9% in December, compared to 2.4% in November according to final data from Eurostat. The lowest annual rates were observed in Denmark (0.4%), Italy and Belgium (0.5% each). Conversely, the highest annual rates were recorded in Czechia (7.6%), Romania (7.0%) and Slovakia (6.6%). In December the largest contributions to the annual inflation rate came from services (+1.74 percentage points, pp), followed by food, alcohol & tobacco (+1.21 pp), industrial goods excluding energy ( +0.66 pp) and energy (-0.68 pp), details Eurostat. Annual ‘core’ inflation, which excludes the most volatile elements, is confirmed at 3.4% compared to 3.6% in November. Over one month, the ICPH index increased by 0.5% compared to +0.4% initially announced.
The markets are not helping Christine Lagarde and the ECB in their task. Speaking at Bloomberg House in Davos, the European Central Bank president said authorities were on the right track in their fight to rein in consumer prices, but investors’ bets were a distraction. “It doesn’t help us in our fight against inflation if expectations are such that they are far too high compared to what is likely to happen,” she stressed. “We are on the right track, we are heading towards 2%, but unless and until we are sure that it is sustainably at 2% – in the medium term – and we have the data to support it, I’m not going to declare victory,” she added. “Not yet”.
The British consumer price index for December is also worrying, up +4% year-on-year in harmonized European data compared to a consensus of 3.7%. The British adjusted CPI thus climbs by 5.1% against a consensus of 4.8%. The producer price index, for its part, reflects a calmer situation.
In Asia, Chinese GDP figures for the fourth quarter came out in line with expectations (+5.2%). Chinese industrial production in December increased more than expected (+6.8%). Retail sales showed an increase of 7.4% over the same month against +7.6% consensus.
On Thursday, investors will follow housing starts and building permits in the United States, weekly US unemployment claims, the Philadelphia Fed manufacturing index, the weekly report on US domestic oil stocks, as well as two interventions by Raphael Bostic of the Fed.
Finally, on Friday, resales of existing homes, the consumer sentiment index from the University of Michigan, as well as speeches from Michael Barr and Mary Daly of the Fed, will be to follow.
This week, the results announcements will accelerate. Morgan Stanley, Goldman Sachs and PNC Financial announced yesterday. Prologis, Charles Schwab, US Bancorp, Kinder Morgan, Discover Financial Services, Citizens Financial and Alcoa will be there this Wednesday. Truist Financial, Fastenal, M&T Bank, JB Hunt, Northern Trust, KeyCorp, Birkenstock, First Horizon and PPG will release Thursday. Schlumberger, The Travelers Companies, Fifth Third Bancorp, State Street, Comerica, Huntington Bancshares and Regions Financial, among others, will announce Friday.
On the Nymex this Tuesday, a barrel of WTI crude fell 1% to $71.8. An ounce of gold lost 1% to $2,009. The dollar index rose by 0.2% against a basket of reference currencies.
Values
Tesla (-3%) would have lowered the prices of its Model Y in Germany, just a few days after price reductions in China on the Model 3 and Y, indicates Reuters. The Texan manufacturer lowered the prices of the Model Y Long Range and the Model Y Performance by 5,000 euros, to 49,990 euros and 55,990 euros respectively, which, Reuters calculates, are equivalent to reductions of 9% and 8.1%. Tesla has also reportedly reduced the price of rear-wheel drive Model Ys by 1,900 euros, a drop of 4.2%, to 42,990 euros. Reuters cites data published on the group’s website. These adjustments come as Tesla previously clarified that it would suspend almost all of its production at the Berlin site from January 29 to February 11, due to the shortage of components caused by changes in shipping routes. , changes linked to attacks in the Red Sea.
US Bancorp (-1%), the last American bank to publish its accounts, announced for its fourth fiscal quarter adjusted earnings per share of 99 cents per share and revenues of $6.73 billion. Adjusted revenues represented 6.88 billion. The market consensus was 98 cents in adjusted earnings per share for $6.85 billion in revenue. Net interest income was $4.14 billion, slightly below expectations. The average total level of deposits represented $503 billion, compared to the consensus of $516 billion. Net profit reached $1.63 billion for the period, on an adjusted basis, while net profit group share was $847 million.
Charles Schwab (-3%) announced bank deposits for its fourth fiscal quarter above expectations at $290 billion, compared to a consensus of $280 billion. Total client assets represented approximately $8.52 trillion versus the consensus of $8.43 trillion. Quarterly adjusted earnings per share were 68 cents, compared to the market consensus of 64 cents. Revenues, however, were slightly lower than market expectations, at $4.46 billion for the closed period. Net new assets reached $66.3 billion over the period. Net interest income was $2.13 billion, slightly lower than expected. Net profit exceeded $1 billion.
Spirit Airlines fell by more than 23% on Wall Street after its plunge of almost 50% on Tuesday. American justice has vetoed the merger between the Florida carrier and JetBlue Airways. A $3.8 billion deal that would have hurt competition by eliminating the country’s leading discount airline and driving up prices across the industry. “If JetBlue were allowed to gobble up Spirit – at least as proposed – it would eliminate one of the airline industry’s few primary competitors that offers unique innovation and pricing discipline,” Judge William G. Young asserted. “Worse, the merger would likely cause JetBlue to further abandon its roots as a maverick low-cost carrier.”
The move represents a major victory for antitrust enforcers in the Biden administration, who have taken a more aggressive approach to M&A and are currently reviewing Alaska Air Group’s proposed $1.9 billion acquisition of Hawaiian Holdings. JetBlue and Spirit have argued that consolidation is the only way small airlines can compete effectively with dominant carriers.
Walt Disney (-2%) declared that it did not support candidates for its board of directors proposed by activist shareholders, in a document filed with the SEC, the American stock market watchdog.
Alibaba (-2%) and other Chinese companies listed in the United States are falling, following mixed Chinese economic data.
