After some hesitation at the start of the session, Wall Street ended the week in disorganized order. This Friday, the S&P 500 returned -0.14% to 5,234 pts, but gained +1.65% over the week. The Dow Jones fell -0.77% to 39,475 pts (+1.77% over the week). The Nasdaq nibbles +0.16% to 16,428 pts (+2% weekly). In the absence of any notable economic statistics this Friday, a few big files like Tesla, Nike and Lululemon today led the way on Wall Street.
This week, the US central bank appeared to maintain its stance on further rate cuts this year, despite recent data being a little less positive than expected on inflation. Jerome Powell estimated that despite the recent statistics, the narrative relating to a gradual decline in inflation had not changed.
Jerome Powell, Michelle Bowman, Philip Jefferson, Michael Barr and Raphael Bostic from the Fed spoke this Friday. The Fed Chairman confirmed that the recent somewhat higher inflation figures have not changed the overall underlying scenario of a gradual easing of price pressures. He also maintains that the Fed anticipates a soft landing for the American economy. It also confirms the central bank’s forecasts, counting on three rate cuts this year, while inflation tends to ease and the economy remains strong.
Remember that this week, the Fed kept its interest rates unchanged, between 5.25 and 5.50% on ‘fed funds’. This is a fifth consecutive monetary status quo. This week’s announcements continue to call for three quarter-point rate cuts later this year. For now, rates remain at the highest since 2001. The Fed does not expect it will be appropriate to narrow the target range until it gains greater confidence in a sustainable return inflation towards 2%. Powell clarified, during his press conference on Wednesday, that the latest inflation figures had therefore not called into question the scenario of continued easing of prices in the United States. However, the central bank does not consider the battle won.
Nine FOMC officials who presented their forecasts on Wednesday estimate that the central bank will cut rates three times this year. Five officials judge that two reductions will be enough. One participant forecasts a rate cut of 100 basis points over the year. Two members of the FOMC, on the other hand, are considering a single rate cut, while the last two are counting… on a status quo all year.
The Fed considers inflation still high. Its new forecasts show that the consumer price index excluding food and energy is now expected to increase by 2.6% this year (2.4% previously). Adjusted inflation should fall to 2.2% in 2025 and 2% in 2026… American growth is expected at 2.1% this year (1.4% forecast in December). This economic expansion is expected at 2% in 2025 and 2026. According to the Fed, the unemployment rate should be at 4% at the end of the year (4.1% previously envisaged in December and 3.9% in February). The unemployment rate is forecast at 4.1% in 2025 and 4% in 2026.
On the oil side, a barrel of WTI crude fell slightly by 0.05% to $80.96, but fell by -2.56% over the week.
The greenback was relatively stable over the week, gaining +0.08%, trading at 0.921 euros for 1 dollar.
An ounce of gold ended at $2,165 and gained +0.24% week-on-week.
Bitcoin recovered by 0.19% to $65,548.
Values
* FedEx (+7.35% to $284.32). The group exceeded profit expectations for the closed quarter and announced a $5 billion share buyback program. Adjusted earnings per share for the quarter ended came to $3.86 ($3.45 consensus). Adjusted profit was $966 million. Revenues were $21.7 billion, down 2.1% year-on-year ($22 billion consensus). The Memphis group has tightened its earnings estimates, counting for fiscal 2024 on earnings ranging from $17.25 to $18.25 per share, compared to previous guidance ranging from $17 to $18.5. The group also indicated that it would know within a few weeks if it has a new contract with the USPS, while the current contract expires at the end of September.
* Lululemon (-15.8% to $403.19). The yoga clothing specialist announced, Thursday evening, quarterly accounts above market expectations, but disappointing guidance. Revenues for the first fiscal quarter are expected to be between $2.175 and $2.2 billion, growing 9 to 10%, for diluted earnings per share ranging from $2.35 to $2.40. The consensus was for $2.25 billion in revenue and $2.55 in EPS. The Canadian group forecasts a turnover for the entire fiscal year 2024 of between $10.7 and $10.8 billion (10.9 billion consensus). Full-year earnings are expected to be between $14 and $14.2 per share. For the quarter ended January, Q4 2023, revenues were $3.2 billion, up 16% year-on-year, compared to a consensus of $3.19 billion. Adjusted earnings per share were $5.29 ($5 consensus).
* Digital World Acquisition (-13.71% to $36.94). The SPAC is to vote on a merger agreement with Donald Trump’s social media firm Trump Media & Technology Group, owner of the Truth Social platform. If such an operation is approved, the former president of the United States would hold a stake of nearly 60% in the combined entity. The basis of valuation of the merged entity being of the order of $6 billion, Trump would find himself at the head of a stake of more than $3 billion. Voting for the operation is already virtually assured, according to Fortune. The deal has been in the works for a few years and has hit several obstacles along the way, including allegations of insider trading, but so it should finally come to fruition.
* Reddit (-8.8% to $46). Profit taking on this issue which soared last night by 48.3% on the NYSE, for its IPO on Wall Street, over $50 for a market capitalization of around $9.5 billion (taking into account stock options and restricted shares). The platform’s entry into the market had already been ‘priced’ at the top of the range. 22 million shares were sold at $34 each by the group and its existing shareholders. The indicative range was between $31 and $34. The proceeds of the operation are $748 million. The initial valuation was $6.4 billion. Excluding securities sold by existing shareholders, Reddit raised gross proceeds of $519 million. The operation was led by Morgan Stanley, Goldman Sachs, JP Morgan and Bank of America.
* Nike (-6.9% to $93.86). The sports footwear and accessories giant posted earnings per share of 77 cents for the period ended at the end of February, its third fiscal quarter, compared to a consensus of 74 cents. Revenues were $12.43 billion ($12.31 billion consensus). The gross margin, on the other hand, came out a little lower than expected at 44.8%, despite an increase of 150 basis points. Revenues in China, at $2.08 billion, were better than expected. Quarterly net profit fell 5% to $1.2 billion, while diluted EPS fell 3%. Earnings per share include 21 cents of restructuring charges. “We are making the necessary adjustments to drive Nike’s next chapter of growth,” said John Donahoe, group chief executive. “We are encouraged by the progress we have seen, as we build a multi-year cycle of new innovations, refine our brand storytelling and work with our wholesale partners to advance and grow the market.”
* Tesla (-1.15% to $170.83). According to the Bloomberg agency, Elon Musk’s group has reduced its production in China. The agency cited people familiar with the matter. This reduction in production revives fears of a slowdown in demand and those linked to the impact of intense competition on the main global automobile market. The Texan manufacturer therefore reportedly asked employees at its Shanghai factory earlier this month to reduce production of the Model Y and Model 3, the two vehicles manufactured by Tesla in China, by working five days a week instead of six. usual days and a half. Production lines operate in two shifts of 11.5 hours per day, which would remain unchanged. According to Bloomberg’s sources, production was reduced from the beginning of the month, and staff did not receive a clear indication of when production would return to normal.
Some production lines at the Shanghai site, including battery workshops, would be subject to longer suspensions. Tesla has reportedly asked its staff and some suppliers to prepare for extended production limits through April, Bloomberg also reports. Elon Musk’s group is facing increasingly tough competition in China, from BYD but also from many other electric vehicle manufacturers who produce more affordable vehicles. The group delivered just over 131,800 units in the first two months of the year, a drop of 6% year-on-year according to local data from the CPCA.
