(Boursier.com) – Wall Street appears in the red before the market on Wednesday, the S&P 500 giving up 0.4%, the Dow Jones 0.3% and the Nasdaq 0.4%. Caution prevails, following disappointing statistics in Asia and pending the vote of the House on the debt ceiling – while the Nasdaq has just recrossed 13,000 pts, boosted by stocks linked to artificial intelligence and GAFAM generally. On the Nymex, a barrel of WTI crude lost 3.2% to $67.3. An ounce of gold gained 0.2% to $1,980. The dollar index is still up 0.3% against a basket of benchmark currencies.
On the economic front, while waiting for the big meeting of the report on the situation of employment on Friday, the markets will follow today on Wall Street the Chicago PMI index for the month of May (3:45 p.m., consensus 46.8) , the JOLTS report on job openings for April (4 p.m., consensus 9.478 million according to FactSet), the State Street investor confidence index, as well as the Fed’s Beige Book (8 p.m.), summary of regional conditions. The Fed’s Susan Collins, Patrick Harker and Philip Jefferson also intervened during the day, as market expectations now point to another quarter-point rate hike on June 14, at the end of the next monetary meeting (67% chance of a range of 5.25 to 5.5% according to FedWatch, against 33% chance of a status quo).
Elsewhere in the world this morning, the Japanese industrial production and retail sales statistics for April disappointed, as did the Chinese CFLP PMI indicators (manufacturing index of 48.8 in May and non-manufacturing index of 54.5 , both below expectations).
The good news is linked to inflation in the euro zone. According to preliminary data from the German Federal Statistical Office, the annual inflation rate, calculated according to European standards, stood at 6.3% in May against 7.6% in April and against a consensus of 6.7%. Sequentially, consumer prices should fall by 0.2%, after +0.6% in April, and against +0.2% expected. By local standards, annual inflation should come out at 6.1%, after +7.2% the previous month, and against +6.5% consensus. Inflation figures in France also reassured today.
The agreement between Joe Biden and Kevin McCarthy on the American debt ceiling must now cross the two houses of Congress, with the vote of the House of Representatives this evening. Legislation negotiated by President Biden and House Speaker Kevin McCarthy to lift the US debt ceiling, currently around $31.4 trillion, and secure further federal spending cuts, reached an important milestone last night in for presentation to the full House of Representatives for debate and vote on Wednesday. The House Rules Committee voted 7 to 6 to approve rules allowing full chamber debate. Two Republicans on the committee still stood up to their leadership by opposing the bill. The vote shows the need for Democrats to help push the measure through the House, which is controlled by Republicans 222 to 213. House passage would send the bill to the Senate. The measure must be approved by Congress by June 5, when the US Treasury Department could run out of funds.
If the US Treasury is unable to meet all of its payments, or if it is forced to prioritize payments, this could trigger economic chaos. Biden and McCarthy wanted to be reassuring about them, believing that they would get enough votes to pass the bill before the fateful date.
The nonpartisan budget official, the CBO (Congressional Budget Office), said Tuesday the legislation would cut spending from its current projections by $1.5 trillion over 10 years starting in 2024. The CBO also said the Legislation, if enacted, would reduce interest on the public debt by $188 billion. McCarthy called the draft deal “the most conservative we’ve ever had.” Still, some of the more conservative Republicans in the House who wanted much deeper spending cuts were unconvinced. The other unknown is how many Democrats McCarthy will need to win Wednesday’s vote on the move.
In corporate news on Wall Street, after disappointing accounts of HP Inc. And Hewlett-Packard Enterprise yesterday evening, Salesforce (after scholarship), CrowdStrike (after closing), Veeva, NetApp, Okta, chewy, Donaldson Company, PureStorage And Advance Auto Partstoday announce their latest US listed accounts, as do C3.aione of the current stars of the AI wave.
HP Inc. lost 4% after trading on Wall Street last night. For the second fiscal quarter, the PC giant still posted adjusted earnings per share of 80 cents, beating the consensus, compared to a level of $1.08 a year earlier. Revenue was $12.9 billion, 1% below consensus, from $16.5 billion a year earlier. The group therefore remains affected by the depression in PC demand, with revenues having declined by 22% year-on-year. In the personal systems segment, sales fell 29% to 8.2 billion, compared to a consensus of 8.4 billion. Revenue from the printing segment fell 5% to $4.7 billion. Finally, management estimates that HP is on track to achieve 40% of its savings target of $1.4 billion by the end of the year.
Hewlett-Packard Enterprise plunged last night by 8% after trading on Wall Street. HPE was no more convincing than HP Inc. For its second fiscal quarter, the group posted adjusted earnings per share of 52 cents, against 47 cents consensus and 44 cents a year earlier, but revenues came out far too short to 6.97 billion dollars, against 6.71 billion a year earlier. The group nevertheless raised its annual estimates of operating profit and earnings per share. Annual adjusted earnings per share are expected to be between $2.06 and $2.14. The annual non-GAAP operating margin is expected between 6 and 7%. The group’s annual free cash flow, active in servers, storage and business services, is still expected to be between 1.9 and 2.1 billion dollars. HPE sees a big opportunity ahead in the need for high-powered systems for AI models.
Box Inc., a US group providing secure cloud solutions for enterprise file storage and sharing, announced last night a strong fiscal first quarter, beating expectations, with revenues of $252 million beating forecasts, a non-GAAP operating margin of 23% and operating cash flow of 125 million dollars, up 16%. Free cash flow increased by 19% to 108 million. Box has unveiled Box AI, a new feature set that will natively integrate advanced AI models into Box Content Cloud, bringing Box’s enterprise-grade standards for security, compliance and privacy to this “breakthrough technology”. At the same time, Box also announced that it will integrate OpenAI’s most advanced AI models with Box Content Cloud, enabling new ways to understand and create content on Box.
Donaldson, an American automotive supplier specializing in air and oil filters, announced record sales and profits for its third fiscal quarter of 2023. Quarterly revenue rose 2.6% to $876 million, for an operating margin of 14.2%, up 120 basis points. Earnings per share, of 76 cents, rose 14%. Quarterly net profit was $94 million, down from $83 million a year earlier. Donaldson is also maintaining its 2023 full-year guidance for revenue and earnings per share. “Our third quarter results continue Donaldson’s trend of delivering double-digit earnings growth and margin expansion this year,” said Tod Carpenter, chief executive.
Capri Holdings, owner of Michael Kors, Versace and Jimmy Choo, published quarterly results today that were supported by China and exceeded market expectations. For its fourth fiscal quarter of 2023, the group posted adjusted earnings per share of 97 cents, against 94 cents of consensus. Revenue over the period totaled $1.34 billion, also better than expected, while Michael Kors revenue fell 11% to $910 million. Total income thus fell by 10.5%. For the year started, the group is only counting on a turnover of 5.7 billion dollars, against 5.8 billion previously. John Idol, the case’s managing director, said there are short-term uncertainties in the Americas, but he said he was encouraged by trends elsewhere in Asia.
Advance Auto Parts fall of nearly 30% before market on Wall Street, while the American group lowered its profit forecast for the year due to high costs. The auto parts retailer is suffering from the impact on the industry of high prices for raw materials, labor and freight, as well as ongoing supply chain constraints. The group also lowered its sales forecast for the full year and its quarterly dividend. “We expect the competitive momentum we faced in the first quarter to continue, resulting in a shortfall from our 2023 expectations,” Chief Executive Tom Greco said. The Delaware group now expects net sales of between $11.2 billion and $11.3 billion for 2023. Earnings per share are expected between $6 and $6.5, down from $10.2 and $11.2 previously.