Wall Street is recovering a little more before the market this Thursday, continuing its rebound from the day before, after having experienced a brutal correction the day before yesterday on disappointing American inflation figures. The S&P 500 rose by 0.1%, the Dow Jones by 0.2% and the Nasdaq by 0.1% in pre-session. On the Nymex, a barrel of WTI crude lost 0.1% to $76.5. An ounce of gold gained 0.4% to $2,013. The dollar index lost 0.2% against a basket of currencies.
Fears persist, however, of a slower-than-expected slowdown in inflation, which could prevent the Fed from quickly reducing rates, currently at a 23-year high… US inflation figures for January 2024 therefore came out disappointing on Tuesday. The consumer price index for January 2024 increased by 0.3% compared to the previous month and by 3.1% year-on-year, against respectively +0.2% and +3% of market consensus. .
According to the CME Group’s FedWatch tool, the probability is now 90% of a new status quo from the Fed on March 20, at the end of the next monetary meeting. It is also the hypothesis of a status quo which prevails for May 1, with a 55% probability of a range of 5.25-5.50%, unchanged, on fed funds, at the end of the following FOMC meeting…
Austan Goolsbee, the head of the Chicago Fed, made some comments yesterday. He is not alarmed by the latest reading of American inflation and judges that the Fed should not wait until inflation returns to 2% to reduce its rates. According to him, slightly higher inflation for a few months would still be consistent with a return to the central bank’s 2% objective…
Christopher Waller and Raphael Bostic from the Fed speak again today.
This Thursday, the economic program is quite busy. Jobless claims for the week ended February 10 stood at 212,000, compared to the FactSet consensus of 220,000 and the revised reading of 220,000 for the previous month.
Retail sales for the month of January were down 0.8% compared to the previous month, against a FactSet consensus of -0.1%. They declined by 0.6% compared to +0.2% consensus excluding automobiles. Finally, these sales are down 0.5% excluding automobiles and gasoline.
January import and export prices increased by 0.8% compared to the previous month, against -0.1% and -0.2% respectively of consensus.
The New York Fed’s Empire State Manufacturing Index for February was -2.4 (consensus -11) and the Philadelphia Fed’s Manufacturing Index for the same month was +5.2 ( consensus -8.5).
Also this Thursday, investors will follow the figures for American industrial production for the month of January at 3:15 p.m. (consensus +0.3% compared to the previous month, 78.8% capacity utilization rate). Inventories and sales of companies for the month of December, as well as the NAHB index of the American real estate market for February (consensus 46), will also be known on Thursday, at 4 p.m…. Note also that Raphael Bostic, head of the Fed ‘Atlanta, will take place the same day.
Finally, on Friday, operators will be attentive to the figures for construction starts and building permits for January (2:30 p.m., consensus 1.47 million for construction starts and 1.515 million for permits), to the producer price index of January (2:30 p.m., consensus +0.1% compared to the previous month or +0.7% over one year; +0.1% and +1.8% excluding food and energy), as well as the index preliminary US consumer sentiment from the University of Michigan for the month of February (4 p.m., consensus 80).
The quarterly financial release season is coming to an end on Wall Street, but there are still a few notable announcements this week. Cisco, Equinix, Occidental Petroleum, HubSpot and Arch Capital, published last night.
Deere, West Pharmaceutical Services, Hyatt Hotels and Southern Company, publish today, before market. Applied Materials, DoorDash, Digital Realty Trust, DraftKings, Ingersoll Rand, The Trade Desk, Coinbase, Consolidated Edison, Roku and Dropbox, reveal their accounts after the close.
Values
Cisco dropped 5.3% after trading on Wall Street last night. It must be said that the American network equipment giant has warned about its prospects and also announced a 5% reduction in its workforce. For its second fiscal quarter, the Californian group posted adjusted earnings per share of 87 cents versus 84 cents consensus. Consolidated net income was $2.6 billion, or 65 cents per share, a 5% year-over-year decline. Revenues came in line with market expectations at $12.79 billion, down 6%. The group is therefore very cautious for the future, counting on revenues for the third fiscal quarter ranging from 12.1 to 12.3 billion dollars, compared to a consensus of 13.1 billion dollars. Adjusted earnings per share for the period are expected between 84 and 86 cents, while analysts on average expected 92 cents.
Cisco is also reducing its annual profit and revenue forecasts. The group reacts and will eliminate more than 4,000 positions, around 5% of the workforce. In 2022, it had already cut 5,000 jobs from its workforce. The new measures come as the group is on the verge of finalizing the $28 billion acquisition of Splunk, which is due to close at the end of April. Cisco now expects annual revenues of $51.5-52.5 billion, compared to a previous range of $53.8-55 billion. Chuck Robbins, the company’s managing director, says continued weak demand from telco and cable customers. For fiscal 2024, adjusted earnings per share are anticipated between $3.68 and $3.74.
Equinix, a global interconnect and data center provider, reported revenues of $2.11 billion for its fiscal fourth quarter last night, up 13% year-over-year and in line with market consensus. Adjusted earnings per share stood at $7.30, compared to $1.39 a year earlier and $7.25 consensus. Over the closed financial year, revenues also increased by 13% on a consolidated basis and by 15% on a normalized basis and at constant currencies, to $8.19 billion. The group indicates that it has sealed nearly 17,000 agreements with more than 5,900 clients in 2023. Annual net profit increased by 38% to $969 million. Adjusted Ebitda increased 10% to $3.7 billion, a margin rate of 45%. For 2024, Equinix anticipates revenues ranging from $8.793 billion to $8.893 billion, representing growth of 8% in the middle of the range, for adjusted Ebitda ranging from $4.089 billion to $4.169 billion.
Occidental Petroleum announced last night, for its fourth fiscal quarter, revenues of $7.17 billion compared to a consensus of $6.84 billion. Adjusted earnings per share, of 74 cents, also beat the consensus of 67 cents. The American oil producer posted its best quarterly production in three years. The Texan group plans a marginal increase in its oil and gas production this year, to 1.25 million barrels of oil equivalent per day. The estimates do not include expected production of around 170,000 b/d from the $12 billion acquisition of CrownRock.
Apple, now the second largest market capitalization in the world behind Microsoft, at around 2,840 billion dollars in valuation compared to 3,040 billion for the software giant, is still suffering before the market on Wall Street. It must be said that the latest statements from Berkshire Hathaway, Warren Buffett’s firm, show that Berkshire has reduced its positions in Apple, HP and Paramount Global. The Omaha investment firm, however, strengthened its position on the Occidental Petroleum, Chevron and Sirius XM files. The statements concern Berkshire’s movements at the end of 2023. Thus, the firm sold around 10 million Apple shares during the fourth quarter. She still held 905 million shares of the Apple group at the end of the period, which would represent nearly $167 billion at current prices – if the participation has since been maintained…
The Nebraska conglomerate has therefore chosen to diversify its investments somewhat, but remains very exposed to Apple. Note that Berkshire has also obtained authorization from the Securities & Exchange Commission, the American market authority, to temporarily keep the names of one or more new investments confidential. Buffett’s group sometimes requests such treatment when it takes a multibillion-dollar stake in certain companies. This allows Berkshire to build up its position calmly…
Albemarle, a giant in the production of lithium for electric vehicle batteries, is falling before the market on Wall Street after revealing a net loss of $618 million for the fourth quarter. Over the entire year, revenues still increased by 31%, reaching a record $9.6 billion. Annual net profit reached $1.6 billion, despite the fourth quarter deficit. Annual adjusted Ebitda was $2.8 billion. Finally, adjusted earnings per share represented $15.22. For the fourth quarter, sales totaled $2.4 billion, but adjusted Ebitda therefore came out as a loss of $315 million.
Deere, the American colossus of agricultural machinery, is losing ground before the stock market on Wall Street. The group has in fact just issued warnings about its outlook for results, particularly due to the weakness in demand for tractors. For the current financial year, the group is now forecasting a net profit ranging from 7.5 to 7.75 billion dollars, a downward revision of the previous guidance. The consensus was 7.75 billion. For its first quarter, Deere achieved a net profit of $1.75 billion, down 11% year-on-year, for revenues down 4% to $12.18 billion. Earnings per share represented $6.23.
