(Boursier.com) — Wall Street progressed slightly before market this Friday, following an eventful session yesterday. Investors are trying to analyze the latest US employment figures, which were extremely robust in March. The S&P 500 is expected to rise by 0.3% and the Dow Jones by 0.1%. The Nasdaq advances 0.3%. A barrel of WTI crude advanced 0.1% on the Nymex to $86.6. An ounce of gold stabilizes at $2,308. The dollar index gained 0.4% against a basket of currencies.
According to the US Department of Labor this Friday, non-agricultural job creations in the United States for the month of March 2024 came out extremely solid at 303,000, well above the consensus which was close to 200,000. The unemployment rate stood as expected at 3.8% in March.
The unemployment rate, at 3.8%, and the number of unemployed, at 6.4 million, changed little in March. The unemployment rate has been in a narrow range of 3.7 to 3.9% since August 2023. The number of long-term unemployed (those who are out of work for 27 weeks or more), at 1.2 million, has little evolved. The labor force participation rate, at 62.7%, and the employment-population ratio, at 60.3%, have changed little.
Total non-agricultural payroll employment increased by 303,000 in March, a figure higher than the monthly average of 231,000 for the previous 12 months. In March, employment gains occurred in health care, government and construction. Health care created 72,000 jobs in March, public sector employment increased by 71,000, construction added 39,000 jobs, and leisure and hospitality employment was up +49,000 – returning its pre-pandemic level of February 2020.
Quoting…
Total job creations in the private sector in March came to 232,000, compared to 170,000 consensus and 207,000 for the revised reading of the previous month. Total job creations, at 303,000, compare to a revised level of 270,000 for the previous month.
Average hourly wages rose 0.3% month-over-month in March, in line with consensus, following a 0.2% gain in February. In March and compared to last year, this average hourly wage increased by 4.1%.
Neel Kashkari, the president of the Minneapolis Fed, weighed down the American stock market last night. While Wall Street was heading towards a nice rise, the markets suddenly turned downward at the end of the day. It must be said that Kashkari suggested that the rate cut was not assured this year. If inflation remains pressing, the official envisages a continuation of the monetary status quo rather than the start of easing. “If we continue to see inflation move erratically, it will make me question whether there is really a need to make these rate cuts,” Kashkari said in an interview with Pensions & Investments.
“There is a lot of momentum in the economy at the moment,” said the head of the Minneapolis branch, who had nevertheless considered two rate cuts this year during last month’s monetary meeting.
So, Kashkari now suggests that if inflation persists higher than expected, the Fed could keep rates in the current range of 5.25% to 5.50% for a longer period of time – and perhaps even all year. Worse, if it still doesn’t work, further rate hikes would not be ruled out, even if “they also do not constitute a likely scenario given what we currently know.” Wall Street also suffered last night from the firmness of crude oil prices against a backdrop of geopolitical tensions, also fueling fears of persistent inflation.
The boss of the Richmond Fed, Thomas Barkin, estimated yesterday that the institution had time ahead of it, before “the clouds” of inflation disappear, to start reducing rates… An approach cautious approach had already emerged from comments made on Wednesday by Fed Chairman Jerome Powell. The latter indicated that the Fed “had time to think about its first rate cut, after an accelerated cycle of monetary tightening then a period of status quo”. The Fed boss noted the strength of the economy and recent inflation data: “The recent numbers on job creation and inflation have been higher than expected,” Powell noted during a presentation at the Stanford Graduate School of Business. “Recent data does not, however, significantly change the overall picture, which remains that of solid growth, a robust but rebalancing labor market, and inflation which is certainly approaching 2%. on a sometimes bumpy road,” summed up Powell.
Given the strength of the economy and the progress made so far in terms of inflation, the head of the Fed believes that the American monetary institution “has time to let future data guide its decisions”. Thus, decisions will be taken meeting after meeting… “If the economy generally evolves as we expect,” noted the Fed president, a broad consensus is emerging to say that a rate cut would be appropriate. at one time or another of the year. But this will only happen if monetary officials “are more confident that inflation is sustainably approaching” the 2% objective. Thus, the Fed wants to find a balance between premature monetary easing and excessive damage to the economy…
The Fed’s next monetary policy meeting is scheduled for April 30 and May 1. At the end of the March meeting, monetary officials left the ‘fed funds’ rate target unchanged in a range of 5.25% to 5.5% and confirmed that they were still planning three rate cuts this year. Operators anticipate a first monetary easing in June, but this probability is tending to decrease. There is approximately 44% probability, according to the FedWatch tool, that the status quo persists after the June 11-12 meeting.
Consumer credit figures in the United States for the month of February 2024 will be announced this evening at 9 p.m. (FactSet consensus +$20 billion).
Among the Fed speakers this Friday are Susan Collins, Thomas Barkin, Lorie Logan and Michelle Bowman.
Values
Apple, the Californian colossus from Cupertino, is cutting more than 600 jobs in California following its decision to put an end to certain projects, including that concerning autonomous cars. This is at least what emerges from statements to the California Employment Development Department relayed by Bloomberg. Eight separate reports were thus delivered by Apple on this subject, in order to comply with the State’s reporting rules. Apart from Apple’s automotive project, a declaration corresponds to a group site which was dedicated to a new generation screen. “The automobile project was canceled due to executives’ indecision about its direction and costs. The screen program was interrupted due to engineering, supplier and cost problems,” details Bloomberg. 371 employees were affected in Apple’s main automotive office in Santa Clara, along with dozens more in several satellite offices.
Lamb Weston, the American food giant specializing in frozen fries and other potato products, plunged 19% last night on Wall Street. The group delivered mixed results for its third quarter and also lowered its annual estimates. The implementation of a new ERP in North America had a greater adverse impact than expected in the quarter ended and affected the group’s ability to fulfill orders. Quarterly adjusted earnings per share were $1.20, compared to $1.40 consensus and $1.43 a year earlier. Revenues totaled $1.46 billion, also largely missing the consensus, while they stood at $1.25 billion a year earlier.
Johnson & Johnson announces this Friday the acquisition of Shockwave Medical for an enterprise value of $13.1 billion or $335 per share. The premium appears modest on Shockwave’s latest listed prices, at around $320, but the stock had already soared by 27% over one month and 64% since the start of the year with speculation. We can estimate this premium at 17% compared to prices at the end of March, before the Wall Street Journal mentioned discussions between the two groups. The transaction will allow J&J to strengthen its portfolio of medical devices used in the treatment of heart disease. The transaction is also the largest for Johnson & Johnson since the acquisition of Abiomed for $16.6 billion in 2022. The finalization of the acquisition of Shockwave is expected in the middle of the year.
The transaction will be accretive to the operating margin of Johnson & Johnson and Johnson & Johnson MedTech. Johnson & Johnson expects the transaction to be operationally accretive upon closing, but given the impact of financing costs, it is expected to dilute adjusted earnings per share by approximately $0.10 in 2024 and $0.17 in 2025.