Wall Street is now in slightly positive territory at the start of the day this Tuesday, with the S&P 500 rising 0.10% to 4,555 pts, the Nasdaq 0.07% to 14,251 pts and the Dow Jones 0.29% to 35,447 pts. Market sentiment remains rather positive for the moment, supported by the recent easing of financial conditions, while operators are still playing the scenario of a peak in rates being reached and a controlled economic landing. This has led to a significant decline in bond yields, although the curves have inverted further and fuel debate over the ability of policymakers to achieve this soft landing. Central banks continue to promote the idea of higher rates for longer, while markets anticipate multiple rate cuts next year.
Christopher Waller, Governor of the Fed, fueled market optimism today by indicating that if inflation falls steadily, there will be no reason to insist on high rates. He also believes “that apart from a shock”, there is no reason why the Fed cannot achieve a soft landing… Austan Goolsbee, head of the Chicago Fed, indicates for his part that inflation is reducing but has not yet returned to the target. The official highlights the progress at this stage on the price front… Governor Michelle Bowman of the Fed specifies for her part that she would be in favor of an additional increase in rates if progress on inflation were to occur. ‘interrupt…
Citi judges that the rally that led the S&P 500 to one of its best November gains in a century is now running out of steam. The broker judges that futures flows last week were mixed, which would reflect a slightly bearish net positioning on the broad American index, the S&P. The positioning on Nasdaq 100 futures would be neutral. However, Citi does not rule out that short-selling position coverings may still support stocks at the end of the year.
On the Nymex, a barrel of WTI crude climbed 2% to $76.3. An ounce of gold rose 0.9% to $2,031. The dollar index lost 0.2% against a basket of currencies. On the bond markets, the yield on the 2-year T-Bond is 4.82%, compared to 4.37% on the 10-year and 4.53% on the 30-year.
Today’s economic news across the Atlantic is marked by the S&P Case-Shiller and FHFA house price indices for the month of September. The FHFA index rose 0.6% month-over-month and 6.1% year-over-year, while the S&P Case-Shiller ’20-City’ index of the top 20 metro areas rose 0. 7% on an adjusted basis compared to the previous month (+0.2% excluding adjustments, i.e. +3.9% year-on-year).
The Conference Board’s U.S. Consumer Confidence Index for November 2023 came in at 102, compared to a FactSet consensus of 100.9 and a revised reading of 99.1 for October.
The Richmond Fed’s regional manufacturing index for November 2023 was in the red at -5, compared to a FactSet consensus of +1 and a reading of +3 a month earlier. The indicator therefore comes out negative, which reflects a contraction in manufacturing activity in the region considered.
Tomorrow Wednesday, investors will follow the third quarter GDP figures (second estimate out of three), the balance of international trade in goods, the weekly report on domestic oil stocks, as well as the Fed’s Beige Book. Thursday, the day will be marked by the OPEC meeting, but also in the USA by the publication of weekly unemployment registrations, that of household income and expenditure, that of the Chicago PMI and that of promises for housing sales. On Friday, markets will track the final US manufacturing PMI and ISM manufacturing, as well as construction spending.
Online sales for Cyber Monday in the US surpassed $12 billion with increased promotions, with Adobe Analytics data now putting the performance at $12.4 billion. This represents an increase of almost 10% compared to 11.3 billion last year. A new historic peak was already reached last week for Black Friday, with online spending jumping 7.5%, reaching a record $9.8 billion in the United States.
Concerning the publication of results, Zscaler announced yesterday, after market trading, solid accounts but coldly received by the markets. Intuit, Workday, CrowdStrike, Splunk, Hewlett Packard Enterprise and NetApp, are releasing tonight.
Salesforce, Synopsys, Snowflake, Dollar Tree, Hormel Foods, PVH, Okta, Pure Storage or Donaldson Company, announced Wednesday. Dell Technologies, Marvell Technology, Johnson Controls, Kroger and Ulta Beauty, report Thursday.
Values
Zscaler (unchanged) stabilizes, after its fall at the start of the session. The American cloud security specialist announced quarterly accounts significantly above market expectations and guidance that was also solid. Operators, for their part, noted the increased level of expenses, fearing an impact on margins. Zscaler still raised its annual revenue and profit estimates, expecting annual sales ranging from $2.09 billion to $2.10 billion, compared to previous guidance ranging from $2.05 billion to $2.07 billion. . The Californian group anticipates adjusted EPS for the year ranging from $2.45 to $2.48, well above previous forecasts which ranged from $2.20 to $2.25. For the second fiscal quarter alone, which has just begun, Zscaler expects revenues of $505-507 million, compared to a consensus of $497 million.
In the just-ended first fiscal quarter of 2024, revenues improved 40% to $497 million, while “calculated billings” increased 34% to $457 million. GAAP net loss was $33.5 million, while non-GAAP net income was $106.5 million, 67 cents per share, compared to 29 cents a year earlier. The consensus for the ended quarter was 49 cents in adjusted EPS and $473 million in revenue.
PDD, a Chinese online retailer listed on Wall Street, previously known as Pinduoduo, soared 16% on the American market. The group, which specializes in the sale of food products at discount prices, also benefits from the popularity of its Temu application for the sale of appliances and electronics at discount prices. PDD posted revenues of 68.8 billion yuan, about $9.62 billion, in the quarter ended at the end of September, compared to a consensus of just 55 billion yuan. Net profit attributable to ordinary shareholders for the quarter was 15.5 billion yuan, compared to 10.6 billion for the comparable period last year. The recently launched Temu app is already gaining significant market share in the United States, despite tough competition from Shein and Amazon. PDD’s net profit for the past quarter increased by 47%. PDD also stood out against Chinese giants such as Alibaba.
Note also that the Chinese e-commerce group Shein has confidentially filed an application for an IPO in the United States, according to a report from the Wall Street Journal. According to the newspaper, the offering could take place in 2024 and the group was reportedly valued at around $66 billion earlier this year.
Micron (-3%) weakens on Wall Street, as the group has just adjusted its revenue, gross margin, operating expenses and EPS forecasts for the first quarter of fiscal 2024, which ends on November 30, 2023. The company previously forecast revenue of $4.4 billion, plus or minus $200 million, and a non-GAAP gross margin of -4%, plus or minus 2%. With a better balance between supply and demand and improved pricing, Micron now expects its revenue to approach $4.7 billion and its gross margin to approach of the break-even point for the first quarter of fiscal year 2024. The adjusted gross margin is therefore now expected to be between -0.5% and 0%. Quarterly operating expenses are expected at $990 million. The adjusted loss per share is estimated at $1, compared to around $1.07 previously.
3M (+1%) and Dupont (Corteva – stable) are under scrutiny, as a US appeals court decided to overturn a lower court’s ruling that allowed Ohioans to seek compensation via collective action against the chemical groups behind the “eternal pollutants”, due to their responsibility in this matter. Although 3M settled drinking water pollution claims for $10.3 billion and other similar settlements have been reached, the appeals court’s decision represents a relief for manufacturers.
