(Boursier.com) – Wall Street ends the session in scattered order. While investors question the viability of the regional bank PacWest, some heavyweights are stumbling like Disney. It’s true… The figures for jobless claims and the producer price index were not reassuring while the US budget deficit is causing talk, even on the side of the IMF!
The S&P 500 thus fell -0.17% to 4,130 pts. The Dow Jones drops 0.66% to 33,309 pts. Alone, the Nasdaq takes a little height and climbs by +0.18% to 12,328 pts.
The return of banking fears is weighing on the market with the PacWest case in particular. JP Morgan boss Jamie Dimon has even called for a ban on short selling of bank stocks. He admits, however, that the commercial real estate crisis could still falter “a few banks”… JP Morgan has convened a weekly ‘war room’ to plan its reaction to a potential US default as the Negotiations in Congress over the debt ceiling are dragging on, Dimon also told Bloomberg. The debt ceiling “is one more thing that ‘Donald Trump’ doesn’t know much about,” the CEO said, adding that a default would be “potentially catastrophic.”
The US producer price index for April rose by 0.2% compared to the previous month against a consensus of +0.3%. Over one year, it increased by 2.3% against 2.5% consensus. Excluding food and energy this time, the index rose as expected by 0.2% compared to the previous month and by 3.2% over one year (+0.2% and +3.3% consensus).
Jobless claims came out higher than expected last week in the United States and reached a level more observed since October 2021. The US Department of Labor has just announced, for the week ended May 5, that jobless claims unemployed numbered 264,000, up 22,000 from the previous week. The consensus was positioned at 245,000. The four-week average was 245,250, up 6,000. Finally, the number of unemployed people receiving benefits for the week ended April 29 stands at 1.813 million, up 12,000 over seven days (1.820 million consensus).
On the monetary front, Christopher Waller, Fed Governor, said nothing transcendent, referring to the issue of climate change and risks to financial stability, which could involve short-term effects and potential losses affecting the macroeconomics. . Waller says the Fed’s focus is on the overall resilience of the system and not on protecting against all the shocks that may arise… Minneapolis Fed chief Neel Kashkari stayed the course earlier today saying that if inflation appears to be “anchored”, rates should remain high for longer. Kashkari believes inflation is still too high and sees no sign of a slowdown in services or a drop in consumption.
For the first 7 months of the fiscal year, the US budget deficit reached $924.5 billion, more than double the same period of 2022, according to figures released last night by the Treasury Department. Lower incomes – including lower transfers from the Federal Reserve – and higher spending on public debt interest, education and social security are among the aggravating factors. April’s surplus was $176.2 billion ($308.2 billion last year), down 43%, with lower tax receipts.
Treasury Secretary Janet Yellen said failure to avert an imminent federal default would undermine Washington’s ability to provide international leadership and defend US national security, Bloomberg reports. Yellen warned that a default could cause “economic and financial disaster”.
The International Monetary Fund (IMF) for its part stressed that a default by the United States on its debt would have “very serious repercussions” on the world economy, in particular an increase in borrowing costs. IMF spokeswoman Julie Kozack also said that the US authorities should remain vigilant about the risks that the US banking sector could face if interest rates increased.
On the oil side, a barrel of WTI crude fell -1.79% to $71.46. Brent also fell -1.33% to $75.57.
The dollar advanced by +0.63% against the euro, at 0.9161.
The ounce of gold returns -1% to $2,014. Bitcoin fell -2.18% to $26,936.
Values
* PacWest Bancorp (-22.7% to $4.7). The American regional bank is in turn in turmoil, after the successive collapses of Silicon Valley Bank, Signature Bank and First Republic. The establishment indicated on Thursday that it had $15 billion in immediate liquidity available and sufficient resources to meet its needs. At the end of the first quarter, the bank posted a level of cash and cash equivalents of $342 million, which it considers sufficient for its needs for the next 12 months. However, the group also reported an acceleration in withdrawals, with deposits declining 9.5% in the week to May 5, with most of the decline occurring on May 4-5.
On May 3, PacWest had made headlines in the Anglo-Saxon financial media, with reports indicating that the bank was exploring all options and had discussions with potential investors or partners. This ‘stress’ came after the takeover of First Republic by JP Morgan, with the markets looking for the next domino.
* Polestar (-7.93% to $0.72). The Swedish automaker, active in the electric vehicle market, achieved record deliveries in the 1st quarter with 12,076 cars, up 26% year-on-year. It is entering the second quarter with “good commercial momentum”. The company recalls that it has experienced strong growth over the past five years, establishing a global footprint with more than 100,000 cars on the road. It recently launched two new cars – the Polestar 3 and the Polestar 4 – to cater to the popular SUV segment… Over the past quarter, revenues rose 21% to $546 million, but the consensus was 589 M$. The loss per share, of only one cent, is much lower than expected. The net loss was reduced to $9 million ($274 million a year earlier). The operating loss is reduced to $199 million. The group is finally postponing the start of production of its Polestar 3 until the first quarter of 2024.
* waltz disney (-8.73% to $92.31). The American entertainment giant did not really convince last night with its latest figures. The group’s revenues grew with the strength of the theme park business, but the number of streaming subscribers declined. Streaming losses, however, have been reduced as subscription prices have increased. The trend may not be sustainable, as Disney sees increased losses in this segment with marketing costs. Management thus forecasts a widening of streaming losses of $100 million over the period started. For the quarter ended early April 2023, the group reported total revenues up 13% to $21.8 billion. Adjusted earnings per share were 93 cents. The consensus was precisely 93 cents of adjusted EPS, for 21.78 billion in revenue.
* Icahn Enterprises LP (-1.77% to $31.65). Hindenburg Research, which specializes in short selling, took a short position in Icahn Enterprises (IEP) bonds, believing that billionaire Carl Icahn’s investment firm has failed to respond to questions raised about its “opaque investment portfolio”. Hindenburg had accused Icahn Enterprises last week of overvaluing certain assets and relying for the payment of dividends on a “Ponzi pyramid type” structure. Carl Icahn then retorted that the “interested” report from Hindenburg Research was intended to generate profits at the expense of his company’s long-term shareholders. Icahn Enterprises has, however, been contacted by federal prosecutors, who want information on “corporate governance, capitalization, dividends, valuation and marketing materials.”
* tapestry (+8.27% to $40.21). The American luxury group, known for its Coach and Kate Spade brands, raised its profit estimates on Thursday as prices and demand for its bags rose. The group now expects full-year 2023 earnings per share to be between $3.85 and $3.90, compared to its earlier guidance of $3.70 to $3.75. Tapestry now expects annual revenue approaching $6.7 billion, up from around $6.6 billion previously. For the 3rd fiscal quarter ended in early April, revenues improved by 5% to $1.51 billion ($1.44 billion consensus). Earnings per share were 78 cents versus market consensus of 59 cents. The group benefited in particular from the Chinese recovery, with a 20% jump in revenues in Greater China.
* JD.com (+7.21% to $37.63). The Chinese e-commerce giant posted a 1.4% growth in its activity in the first fiscal quarter to 243 billion yuan, approximately $35.4 billion. In the quarter ended in March, the group posted a net profit attributable to ordinary shareholders of 6.3 billion yuan, against a loss of 3 billion a year earlier. Non-GAAP profit was 7.6 billion yuan. Earnings per ADS were 3.93 yuan and non-GAAP EPS was 4.76 yuan, or $0.69 per share. The consensus was $0.51 adjusted EPS per share and $34.6 billion in revenue. The group also indicated that its general manager Lei Xu would bow out in June for personal reasons.
* robinhood (+6.39% to $9.65). The American online broker unveiled first quarter revenues above market expectations and an adjusted loss per share lower than expected at 57 cents (61 cents consensus). Total revenues, including those from ‘crypto’ transactions, were $441 million, a strong increase of almost 50% compared to the previous year and a sequential increase of 16%. The net loss remains massive at $511 million. It even widened by $345 million compared to the 4th quarter… The group also intends to launch ’24-hour trading’ services. The firm’s crypto revenue was close to the prior quarter, but fell 30% year-over-year to $38m. Transaction income reached $207 million, a sequential increase of 11%, while net interest income totaled $208 million, up 25% compared to the previous quarter.
The group also plans to buy back $500 million in securities from the hilarious Sam Bankman-Fried. This is the redemption of a block of 55 million shares representing 7.6% of the capital, held by the fallen founder of FTX and his sidekick Gary Wang.