Wall Street, which consolidated last night with McDonald’s and Tesla, and in the wake of cautious comments from Jerome Powell, remains hesitant before the market this Tuesday. The S&P 500 rose 0.1%, while the Dow Jones lost a few points. The Nasdaq gained 0.2%, while Nvidia, already boosted yesterday by Goldman Sachs, gained another 1% in pre-session today, to its all-time high around $700.
Jerome Powell spoke on the CBS show 60 Minutes broadcast Sunday evening and recorded on February 1, before the latest report on American employment. Asked whether inflation is dead, he said: “I wouldn’t go that far. What I can say is that inflation has really come down over the last year, and quite strongly over the last six months. We are making good progress. The work is not finished and we are determined to ensure that we fully restore price stability for the benefit of the public.”
Asked why the Fed isn’t cutting rates now, Powell responds: “Well, we have a strong economy. Growth continues at a healthy pace. The labor market is strong: 3.7% unemployment. And inflation is coming down. With the economy this strong, we think we can approach the question of when to start cutting interest rates cautiously. And, you know, we want to see more evidence that inflation is coming down sustainably at 2%. We have some confidence in that. Our confidence is growing. We just want a little more confidence before we take this very important step of starting to reduce interest rates.”
Thus, Powell indicates that the Fed wants to see more “good data”, but admits that the members of the Fed’s monetary committee mainly anticipate a rate cut this year. The timing will therefore depend on the data. “The risk of acting too soon is that the work is not quite finished and the very good figures we have achieved over the last six months do not prove to be a true indicator of where the “inflation. We don’t think that’s the case. But the prudent thing to do is to just give it some time and see that the data continues to confirm that inflation is coming down to 2% sustainably.” Powell insists. “I think it’s more likely that if you act too early, you’ll see inflation stabilize well above our 2% target. So we think we can be cautious in approaching this move simply because of the strength we are seeing in the economy.” “If you act too late, the policy will be too strict. And that could easily weigh on economic activity and the job market,” adds the Fed president.
Neel Kashkari, head of the Minneapolis Fed, was also quite measured yesterday, noting the rapid progress in adjusted inflation towards the Fed’s target, but noting that there is no rush to lower rates. According to him, the American central bank may take more time to measure the incoming data before possibly starting to relax its policy. According to him, current monetary policy is not as austere as it seems.
Raphael Bostic, head of the Atlanta Fed, for his part, yesterday delivered comments revolving more around the analysis of the labor market than monetary policy.
On the economic front yesterday on Wall Street, the final US composite PMI for January 2024 came in at 52, compared to a FactSet consensus of 52.3 and a preliminary reading of 52.3 as well. The final services PMI for January stood at 52.5, compared to 52.9 for the consensus and flash reading… The ISM US services index for January 2024 stood at 53.4, compared to the FactSet consensus of 52 and 50.5 a month before, in revised reading. This reflects an acceleration of expansion in services at the national level. The new orders index in January is very strong at 55.
There will be many more Fed officials speaking this week, including Loretta Mester, Neel Kashkari, Susan Collins and Patrick Harker this Tuesday, then Adriana Kugler, Susan Collins, Thomas Barkin and Michelle Bowman tomorrow.
Elsewhere in the world, we note this morning a strong unexpected increase in German industrial orders in December (+8.9% compared to the previous month), but also a larger than expected decline in December retail sales in the euro zone ( -1.1%).
In corporate news, NXP Semiconductors, Palantir Technologies and Symbotic announced last night. Eli Lilly, Amgen, Gilead Sciences, Fiserv, KKR, Chipotle Mexican Grill, Ford Motor, Fortinet, Spotify, Centene, Cognizant, Prudential Financial, Gartner, Cummins, DuPont, GE HealthCare, Snap and Omnicom, reveal their results today.
Alibaba, Walt Disney, Uber Technologies, CVS Health, Arm Holdings, PayPal, McKesson, Emerson Electric, Hilton Worldwide, Allstate, Yum! Brands, Roblox, The Carlyle Group and Fox Corporation, release Wednesday.
S&P Global, Philip Morris International, ConocoPhillips, Duke Energy, Intercontinental Exchange, Thomson Reuters, Apollo Global Management, Motorola Solutions, Hershey, Archer-Daniels-Midland, Zimmer Biomet, Pinterest, Expedia, Take-Two Interactive and Interpublic, will reveal their latest figures Thursday. PepsiCo, Newell Brands and Catalent will finally announce Friday, before market.
On the Nymex, a barrel of WTI crude rose 0.6% to $73.2. An ounce of fine gold stabilizes at $2,044 today. The dollar index changes little against a basket of reference currencies.
Values
Palantir, the American software group, whose software notably equips the US intelligence services, is on fire before the market on Wall Street. The group posted relatively solid quarterly accounts, generating positive adjusted earnings per share of 8 cents, in line with market expectations, for revenues better than expected at 608 million dollars against 603 million consensus. For the closed financial year, the Denver group generated a net profit of $210 million, marking its first year of profitability. Alex Karp, general manager of the business, also indicates that his company is observing a surge in demand from industries and sectors for its artificial intelligence offerings.
Karp therefore once again manages to galvanize his troops. Revenues for the fourth quarter increased by 20%, and Palantir now anticipates an adjusted profit from operations of 834 to 850 million for this year, against 760 million consensus.
Vertex Pharmaceuticals, the Massachusetts biotechnology laboratory, which now weighs more than $110 billion on Wall Street, was rather convincing last night by publishing revenues of $2.52 billion (+9%) for its fourth fiscal quarter. Sales of the group’s blockbuster, Trikafta, in cystic fibrosis, were solid. Adjusted earnings per share were $4.20 for the closed quarter versus $4.10 consensus. Vertex now expects total product revenues ranging from $10.55 billion to $10.75 billion for fiscal year 2024.
NXP Semiconductors, the Dutch semiconductor designer listed on Wall Street, published its accounts last night, beating consensus for the fourth quarter. Adjusted earnings per share were $3.71, compared to a market consensus of $3.64 and a level of $3.73 a year earlier. Revenue was $3.42 billion, 1% better than consensus. They are up 3.3% year-on-year. The group benefited over the period from solid sales of automotive chips. This strong demand from the automotive market allows NXP to provide guidance above expectations. Adjusted EPS for the current period is anticipated between $2.97 and $3.38, i.e. a mid-range of $3.38 versus a consensus of $3.15.
Eli Lilly, the Indianapolis laboratory, is gaining ground on Wall Street following its quarterly publication. The group reported revenue growth of 28% over the period to $9.35 billion, for adjusted earnings per share up 19% to $2.49. The group cites a significant contribution from new products, notably Mounjaro (diabetes) and Zepbound (weight loss). In terms of outlook, Lilly forecasts fiscal 2024 revenues ranging from $40.4 billion to $41.6 billion, while earnings per share are anticipated between $11.80 and $12.30. Annual adjusted EPS is expected between $12.20 and $12.70, compared to $12.4 market consensus.
Spotify, the Swedish music streaming giant, listed on Wall Street, jumped before the market on the American market. For its fourth fiscal quarter, the group nevertheless announced profits lower than expectations. The company even deplored an operational loss of 75 million euros and a net loss of 70 million euros, but is clearly more optimistic for the first quarter which has just started, anticipating an operating profit of 180 million euros. Revenues totaled 3.67 billion euros for the closed quarter, up 16% year-on-year, against 3.72 billion consensus. For its first quarter, the group is forecasting a turnover of 3.6 billion euros. The number of monthly active users is anticipated at 618 million in the first quarter, compared to 602 million for the closed period.
Fiserv, an American player in the payments field, announced for its fourth quarter GAAP revenues of $4.92 billion, an increase of 6%, for a GAAP EPS of $1.45, an increase of 18%. On an adjusted basis, earnings per share rose 15% to $2.19 and revenue was $4.64 billion (+6%). The consensus was $2.15 adjusted EPS for $4.69 billion in revenue. Fiserv now says it anticipates organic revenue growth of 15 to 17% for 2024, for adjusted earnings per share of $8.55 to $8.70, up from 14 to 16%.
KKR revealed fourth-quarter profit above market expectations, with historically high commission profits. Distributable profit after tax rose 4% to $888 million, or $1 per share, compared to a Bloomberg consensus of 93 cents. Fee profits increased 21% to $675 million. Revenue rose 2% to $1.63 billion for the quarter, also above market expectations.
DuPont is holding strong on Wall Street, as the American chemical group published revenues of $12.1 billion for its 2023 fiscal year, down 7%, as well as GAAP profit from continuing operations of $533 million. down by half compared to the previous year. Adjusted earnings per share increased slightly to $3.48. Operating Ebitda declined 10% to $2.9 billion. Adjusted free cash flow still more than doubled to $1.6 billion. The first quarter dividend is increased by 6%.
