Wall Street appears hesitant before the market this Friday, like the day before. The S&P 500 lost 0.1% and the Dow Jones 0.3%, while the Nasdaq stabilized, following a positive indicator concerning producer price inflation and contrasting banking publications. On the Nymex, a barrel of WTI crude gained 3.2% to over $74. An ounce of fine gold advances 2% to $2,058. The dollar index advances 0.1% against a basket of reference currencies.
Yesterday’s publication of an American consumer price index showing growth slightly higher than expected did not significantly change expectations of monetary easing, nor did today’s announcement of a decline in producer price in the same month.
According to the FedWatch barometer, the probability is more than 93% that the Fed will opt for a monetary status quo on January 31, leaving its rates unchanged between 5.25 and 5.50%, while the first easing would take place on March 20 (73% probability). The same tool shows that rates could end the year in a range of 3.75 to 4% (approximately 37% probability), or between 3.5 and 3.75% (also 37% ‘probability’).
Yesterday, the American inflation figures for the month of December were somewhat disappointing. Thus, the report showed a consumer price index increasing by 0.3% compared to the previous month, against 0.2% market consensus. Over one year, this indicator increased by 3.4% compared to 3.2% consensus. Excluding food and energy, the December CPI increased by 0.3% compared to the previous month, in line with market expectations, and by 3.9% year-on-year.
The American producer price index for December, however, was a very pleasant surprise this Friday. Thus, the PPI fell by 0.1% compared to the previous month, against +0.2% consensus. It only increases by 1% over one year against +1.3% consensus. Excluding food and energy, the indicator was stable compared to November, against +0.2% market consensus. It increased by 1.8% over one year excluding volatile elements, compared to +2% market consensus.
Loretta Mester, head of the Cleveland Fed, said yesterday on Bloomberg that March would likely be too early for a rate cut because the December CPI report shows there is still work to do . She also said it would be appropriate to begin negotiations on ending ‘QT’ (quantitative monetary tightening by reducing the Fed’s balance sheet) this year, but not imminently. Thomas Barkin, another voting member of the Fed and head of the Richmond branch, also offered a cautious outlook on the rate cut timetable, saying he still had to be convinced that inflation is stabilizing and that he would be open to a rate cut once inflation is on track to reach the famous 2% – the objective of the American central bank.
Mester and Barkin thus maintained a cautious posture, as did John Williams, president of the New York Fed, on Wednesday, who declared that the policy was restrictive enough to bring inflation back to the 2% target, but that the Fed would need to maintain a restrictive policy for some time to fully achieve this goal.
Neel Kashkari, head of the Minneapolis Fed, will speak today.
The barrel of oil is skyrocketing against a backdrop of persistent tensions in the Middle East. The United States and its allies have launched airstrikes against Houthi rebels in Yemen, in retaliation for attacks on Western ships in the Red Sea. President Joe Biden said strikes had been carried out against a number of targets used by the Iran-backed group, with US officials saying radar sites and missile launchers had been hit, ‘Bloomberg’ points out.
In corporate news on Wall Street, banks and financial institutions are kicking off the 4th quarter results season today. UnitedHealth, JP Morgan Chase, Bank of America, Wells Fargo, BlackRock, Citigroup and Bank of New York Mellon, revealed their accounts. The airline Delta Air Lines also published…
Values
JP Morgan Chase is gaining ground before the market on Wall Street, as Jamie Dimon’s bank has just posted a huge annual profit of $49.6 billion for the 2023 financial year. Even if the performance appears more mixed in the fourth quarter, the annual results show a historic profit for the establishment. This annual record is all the more surprising given that the year was extremely delicate for the sector, with the regional banking crisis, from which JP Morgan emerged stronger, once again. In comparison, Wells Fargo made “only” 30 billion in annual profits and Bank of America “barely” 23 billion.
For the fourth quarter alone, JP Morgan posted a profit of $9.3 billion, down 15% year-on-year, after a one-time charge of $3 billion corresponding to a special assessment charged by the Federal Deposit Insurance Corporation , the supervisory body for bank deposits in the United States. The bank posted quarterly earnings per share of $3.04 on revenues of $38.6 billion (+12%). A year before, EPS stood at $3.57 and net profit at $11 billion. For the full year, revenues increased 3% to more than $158 billion.
JPM and several large banks, however, had to replenish the deposit insurance fund (DIF) of the Federal Deposit Insurance Corporation, emptied by the bankruptcies of Silicon Valley Bank and Signature Bank last year…
Jamie Dimon also delivered his latest comments on the economic situation, praising the resilience of the American economy, while the markets are hoping for a soft landing. He was nevertheless cautious regarding inflation.
Bank of America reported fourth-quarter profit falling to $3.1 billion, including FDIC bailout charges and other items. Net interest income declined 5% to $13.9 billion, as the bank spent slightly more to retain customer deposits. BofA passed a quarterly charge of $2.1 billion for the special fee owed to the FDIC, the American deposit guarantee agency which faced the crisis of regional banks in 2023. The second largest American credit institution finally generated a profit of 3.1 billion dollars and 35 cents per share for the quarter ended at the end of December, compared to 7.1 billion profits a year before. In total, non-recurring charges reached 3.7 billion over the closed period.
The group reported a drop in unrealized losses on securities held to maturity, with the recovery of bond markets. The bank recorded unrealized losses of nearly $98 billion in the fourth quarter compared to… $131.6 billion in the third quarter.
Wells Fargo announced fourth-quarter profits up 9%, despite increased provisions for credit losses. Fourth-quarter revenue rose 2% to $20.5 billion, while net income rose to $3.45 billion or 86 cents per stock. A year before, the American banking establishment had posted a quarterly profit of 3.16 billion. Wells paid $1.9 billion in special fees to the FDIC in the quarter. The group nevertheless benefited from cost reduction measures during the quarter ended. He finally warned that its 2024 net interest income could decline by 7 to 9%.
BlackRock announced revenues and profits above expectations for its fourth quarter. Adjusted earnings per share were $9.66, compared to $8.8 consensus and $8.93 a year earlier. Revenues totaled $4.63 billion, compared to $4.34 billion a year earlier. In addition, the asset management giant also announced the acquisition of Global Infrastructure Partners, an independent infrastructure fund manager, in a cash and stock transaction worth more than $12 billion. The deal includes $3 billion in cash and about 12 million shares of BlackRock stock. Approximately 30% of the total consideration, entirely in shares, will be deferred and is expected to be issued in approximately five years.
UnitedHealth, the American health insurance giant, stumbled 5% before the market on Wall Street, with operators mainly worried about rising expenses. The group nevertheless published a profit above market expectations for the fourth fiscal quarter, with adjusted earnings per share of $6.16 and revenues totaling $94.4 billion. The market consensus was for $5.98 earnings per share and $92.1 billion in revenue. Over the financial year, revenues increased by 15% to $371.6 billion, while operating profit increased by 14%. UnitedHealth finally reaffirmed its profit forecasts for 2024, expecting EPS ranging from $27.5 to $28.
Citigroup posted a net loss in the fiscal fourth quarter due to non-recurring charges. The bank reported a net loss of $1.8 billion in the fourth quarter. It notably recorded charges of $780 million due to severance and other costs related to restructuring efforts. The group achieved a turnover of 17.4 billion dollars. Analysts had expected Citi to report earnings per share of 10 cents and revenue of $18.7 billion. The bank is in the midst of a turnaround effort under Jane Fraser, who has decided to cut layers of management and staff and reorganize the business. Citi also paid a special assessment of $1.7 billion to the FDIC. The bank also mentioned reserves of $1.3 billion associated with risks in Russia and Argentina, and a charge of $880 million for the devaluation of the Argentine peso. Excluding items, adjusted EPS would have been 84 cents.
Tesla is reducing the prices of its two locally manufactured models in China, according to Bloomberg. According to Tesla’s local website, the starting price of the base Model 3 sedan was reduced by 5.9 percent to 245,900 yuan, while the starting price of the Model Y SUV was lowered by 2.8 % to 258,900 yuan. “The movement could trigger additional price cuts, putting pressure on margins,” worries Bloomberg, as the world’s leading electric automobile market slows down. Elon Musk’s group will also suspend most of its production at the Berlin site for two weeks – from January 29 to February 11 – due to component supply constraints following the attacks in the Red Sea, which caused changes in transport routes between Europe and Asia.
