(Boursier.com) — Wall Street seems to want to return to the path of increase before market this Friday, the day after a delicate session marked by a correction following the strict and determined speech of Jerome Powell. The S&P 500 recovered by 0.3% in pre-session today, the Dow Jones also by 0.3% and the Nasdaq by 0.2%. On the Nymex, a barrel of WTI crude rose 1% to $76.5. An ounce of gold lost 1% to $1,949. The dollar index fell by 0.1% against a basket of reference currencies. On the bond markets, the yield on the 2-year T-Bond is still close to 5% after its surge in recent days. The yield on the 10-year is 4.59% and that on the 30-year is 4.72%.
Dallas Fed President Lorie Logan said on Friday that the US central bank should consider ways to strengthen its liquidity infrastructure. She had previously estimated that the high level of bond yields was part of the Fed’s job in restricting financial conditions. Logan is one of the last officials of the US central bank to speak this week, the day after an intervention by Jerome Powell which somewhat tempered investors’ enthusiasm. Raphael Bostic, head of the Atlanta Fed, for his part judged this Friday that work remained to overcome inflation. He anticipates a continued slowdown in spending and demand, which will take time, and notes that monetary policy is indeed more restrictive and will remain so until the central bank is sure of a return of inflation towards the 2% objective.
On the economic front in the United States this Friday, the preliminary index of American consumer sentiment from the University of Michigan for the month of November will be communicated at 4 p.m. (FactSet consensus 64). The American Department of the Treasury will announce at 8 p.m. the figures for the budget balance for the month of October (Bloomberg consensus $65 billion deficit).
Fed Chairman Jerome Powell caused the indices on Wall Street to fall a little last night by reviving fears of an additional rate hike. Powell said monetary policy was in restrictive territory and putting downward pressure on inflation, but he also stressed that options remained on the table, which could include further interest rate hikes. “If it proves appropriate to further tighten our policy, we will not hesitate to do so,” the leader said during a speech to the International Monetary Fund in Washington. He clarified in his speech, briefly interrupted by climate protesters, that the central bank would adopt a ‘meeting by meeting’ approach. He also warned against overreacting to economic data. For the moment, however, the scenario is favorable, since the American economy is showing some signs of weakness despite strong GDP growth in the third quarter, and employment is easing. Powell, meanwhile, remains on guard, indicating that the Fed will continue to act cautiously, “which will allow us to address both the risk of being misled by a few good months of data and the risk of tightening excessive”.
Central bank officials are relatively divided on the course of action, with some advocating an end to the tightening cycle and others opting for a flexible posture like Powell. The Fed has kept rates unchanged at the last two monetary policy meetings, and financial markets are therefore now banking on an end to tightening. The Fed’s benchmark rate is in a range of 5.25 to 5.50%, the highest in 22 years.
Values
News Corp, the New York media group, published last night for its first fiscal quarter, ended in September, revenues totaling $2.5 billion, up 0.9% year-on-year. Earnings per share were 16 cents, compared to 12 cents a year before and 11 cents consensus. Revenues are in line with market expectations. Growth at Wall Street Journal parent company Dow Jones and book publisher HarperCollins offset weakness in real estate and video activities.
Illumina, the American biotechnology group, drops before market on Wall Street, after having lowered its annual profit forecasts. The group is suffering from low demand for sequencing instruments, consumables and services. It now expects annual adjusted earnings per share of 60 to 70 cents, compared to a previous range of 75 to 90 cents. In the third fiscal quarter just ended, the laboratory posted revenues of $1.12 billion, slightly below expectations, for adjusted EPS of 33 cents, which was higher than expectations. The group also expects consolidated revenues to decline by 2 to 3% for the year.
Trade Desk, the American group specializing in programmatic marketing products and services, dives before the opening of Wall Street. The digital advertising platform provided weak guidance for the quarter started, which should also weigh today on certain big Internet names such as Meta, Alphabet Or Snap. For the quarter ending in December, Trade Desk now sees revenue of “at least $580 million,” compared to a consensus of $610 million. The Californian group also works with some of the largest advertisers in the world, including Walmart. Jeff Green, boss of Trade Desk, indicated last night that the group had started to see a reduction in spending since October, particularly from companies in the automotive and consumer electronics industries. The leader mentions in particular mobile telephony, media and entertainment.
For its third fiscal quarter, the group posted revenues of $493 million, compared to $395 million last year. Net profit more than doubled to $39 million. On an adjusted basis, EBITDA rose to 200 million compared to 163 million a year before. Adjusted earnings per share were 33 cents, compared with 26 cents a year earlier. For the fourth quarter, adjusted Ebitda is expected to be around $270 million.
Meta would have concluded an agreement with Tencent Holdings with a view to marketing a new “low cost” virtual reality headset in China, according to the Wall Street Journal. This would thus be a return of Mark Zuckerberg’s group to the Chinese market, where Facebook or Instagram are blocked. Meta would then enter into competition with Bytedance, the owner of TikTok, which designs the Pico virtual reality headset. The WSJ does not mention the price of the Meta headset which would be offered in China. The group sells its Quest 2 headset in the United States for a starting price of $300, its Quest 3 from $500 and its Quest Pro for $1,000. The Chinese offensive comes as Meta faces the threat of Apple’s new Vision Pro mixed reality headset, which is said to go on sale early next year.
Unity Software corrects on Wall Street, while the video game developer posted sales for its third fiscal quarter up 68% to $544 million, but lower than the market consensus, for a GAAP loss. Following these contrasting results, the group refrained from providing annual guidance. The group is particularly suffering from a slowdown in new game launches and weakness in China.
Plug Power plunged on Wall Street, as the hydrogen fuel cell specialist missed fiscal third-quarter revenue consensus and withdrew its financial guidance, citing unprecedented supply difficulties. The group’s cash consumption is also starting to become problematic to the point of doubting the continuity of its operations.