(Boursier.com) – The American rating fails again, after yet another attempt to rebound at the very start of the session this Friday. The Dow Jones is now frankly in the red and drops 0.77% to 29,695 pts, after having sunk the psychological bar of 30,000 pts yesterday. The S&P 500, now in “bear” territory, fell 0.66% to 3,644 pts. The Nasdaq floats on the other hand and grabs 0.14% to 10,659 pts. Yesterday evening, the US indices had copiously unscrewed, the Dow giving up 2.4% and the Nasdaq 4.1%. Operators remain extremely nervous, faced with the prospect of further monetary tightening, in a context of record inflation and while the economy is already showing significant signs of weakness. On the Nymex, the barrel of WTI crude has however fallen by 5.2% currently at $111. The ounce of gold yields 0.4% to $1,842. The dollar index jumped 1.3% against a basket of currencies. Bitcoin is hovering around $20,000, after the recent drop.
It’s Four Witches Day this Friday on Wall Street, which sometimes (but less and less) leads to increased market volatility. This stock market event, which occurs 4 times a year (the 3rd Friday of June, March, September and December), corresponds to the simultaneous expiry of 4 types of contracts: options on indices and on shares, as well as futures on indices and stocks.
According to the Fed on Friday, US industrial production for May 2022 increased by only 0.2% compared to the previous month, against 0.4% market consensus and 1.4% for the reading revised from the previous month. Manufacturing production fell by 0.1% compared to April, compared to a consensus of +0.4%. Finally, the production capacity utilization rate stood at 79%, against 79.2% consensus and 78.9% a month earlier.
The Conference Board’s index of American leading indicators for the month of May 2022 is, as expected, down 0.4% compared to the previous month, in line with the consensus, after an equivalent decline in April – in revised data.
Finally, Jerome Powell, the head of the Fed, intervenes in Washington, even though the American central bank has just raised its rates by 75 basis points on the federal funds, between 1.5 and 1.75%, a measure of on a scale not seen since 1994, in order of course to fight galloping inflation. The markets fear that this accelerated monetary tightening by the Fed will trigger a recession.
Powell’s speech today for introductory remarks to a conference on the international roles of the dollar did not provide any new guidance on monetary policy. The Fed leader just confirmed the bank’s commitment to bringing inflation back to the 2% target and ensuring financial stability, in order to encourage the international community to hold and use the dollar.
For his part, Neel Kashkari of the Minneapolis Fed spoke of the strong likelihood of another rate hike of 75 basis points in July. The Fed and the ECB would have sufficient credibility to curb inflation without causing a deep recession as it happened 40 years ago, for his part asserted today the president of the St. Louis Fed, James Bullard. “The Fed and the ECB have considerable credibility, which suggests that a soft landing is possible,” said Bullard, who may not have read the latest US statistics well.
“The Committee’s commitment to restoring the price stability necessary to maintain a strong labor market is unconditional,” the Fed said in its semi-annual monetary policy report to Congress, as Jerome Powell will testify next week before the lawmakers about the Fed’s plans to fight inflation while maximizing employment.
Values
Adobe (-4%) published Thursday evening results and sales exceeding market expectations for its 2nd fiscal quarter, but disappointed by making cautious forecasts, citing an “uncertain” context, and citing negative currency effects and the fallout from the war in Ukraine. For its second fiscal quarter ended on June 3, the group known for its InDesign, Photoshop and Acrobat products, generated a net profit of 1.18 billion dollars, up 6% over one year. Adjusted net earnings per share came in at $3.35, versus $3.31 expected by FactSet consensus analysts. Quarterly sales reached $4.39 billion, up 14% year on year, slightly above expectations, housed at $4.34 billion.
On the other hand, management revised down its annual forecast to $13.50 in earnings per share for revenue of $17.65 billion, while analysts had hoped for $13.66 and $17.85 billion respectively. In December, Adobe had forecast EPS of $13.70 and sales of $17.90 billion for the fiscal year ending at the end of November. Adobe thus joins a cohort of technology companies, including Microsoft and Salesforce, which reported a negative impact of the strong dollar on their revenues, leading to a downward revision of their annual forecasts. The dollar, supported by rate hikes from the Federal Reserve to curb inflation, has in recent days hit 20-year highs against a basket of currencies including the euro, yen and pound sterling.
A strong dollar makes American exports less competitive on the one hand, and on the other hand reduces income earned in other currencies and converted into dollars in the accounts of multinationals.
Twitter (-1%). Elon Musk, who now intends to acquire Twitter, spoke yesterday to the platform’s staff, for the first time since his initial offer of $ 44 billion made two months ago. During the virtual town hall meeting, Musk hinted that Twitter should downsize, saying some streamlining is needed. He was also questioned about moderation on the site and its political leanings. He described himself as moderate and open to freedom of expression, the social network having according to him to tolerate the extremes “within the limits of the law”. The billionaire expressed the wish that the network reaches a billion users at least, against 229 million currently. He also indicated that publicity will remain important in the group’s model, going back a bit on his previous comments on this subject. “I’m not against advertising. I would probably talk to advertisers and say something like, hey, let’s just make sure the ads are as entertaining as possible.”
Musk did not give details about the finalization of the deal, nor a possible revision of the price expected by Wall Street. In response to a question about possible layoffs, he clarified that there would be need “for some rationalization of staffing and expenditure”. Employees also wanted to know more about Musk’s vision for telecommuting, while for the time being, they have a great deal of freedom in remote work, and the multi-billionaire has already expressed his hostility. about this about You’re heredeeming it impossible to design superb products by telecommuting and calling on employees to return or risk being considered as resigning.
Musk said he thinks Twitter staff should move towards working in an office, but expressed a willingness to make a few exceptions. The bias should be “strongly in favor of in-person work, but if someone is exceptional, remote work may be acceptable.”
Snap (-1%), the parent company of the application for the free hour of Snapchat video and photo sharing, would test paid subscription features, indicates The Verge. A spokeswoman, Liz Markman, told The Verge that the company is doing “initial internal testing” of Snapchat Plus, which will give users early access to features and other benefits. Remember that Snap continues to unscrew on Wall Street, especially since the publication at the end of May of mixed quarterly results with a warning on the income and profits of the second fiscal quarter, which ended at the end of June.
Ali Baba (+1%) is progressing on Wall Street, while according to Bloomberg, the People’s Bank of China has accepted Ant Group’s request for a potential IPO. Reuters is also relaying this rumor, according to which the Chinese central bank has therefore accepted Ant’s request for authorization to set up a financial holding company, which would relaunch the plan to introduce the fintech giant, long delayed by the authorities. regulatory barriers. Ant Group is a subsidiary of e-commerce giant Alibaba.
JD.com, the Chinese e-commerce group, jumped 4% on Wall Street. JD.com would indeed explore a possible expansion in food delivery. These plans were confirmed by JD Retail General Manager Xin Lijun in an interview with Bloomberg. This would put the Chinese e-commerce giant in direct competition with Alibaba and Meituan, which dominate this business in China.
US Steel (stable), the American steel group, resists, on solid forecasts for the second fiscal quarter. Yesterday evening, the group therefore announced that it expects adjusted net earnings per share for the period ranging from $3.83 to $3.88. “We expect to continue to deliver record performance in the second quarter, with each business segment contributing significantly to profitability,” commented US Steel President and CEO David B. Burritt. “Our broad end-market exposure allows us to remain resilient, with demand coming from a diverse customer base, including in the resurgent energy market.”
Centennial (steady). The health insurer has just raised its financial estimates in terms of profits and added $3 billion to its share buyback program. The group also intends to reduce its real estate footprint. These fine intentions to create value are therefore welcomed. The group now expects, for 2022, adjusted earnings per share ranging from $5.55 to $5.7. A billion dollar debt buyback plan is also announced. 2022 Premium and Services revenues are now expected to be between $134.3 billion and $136.3 billion.
seagen climbed 16%, while according to the Wall Street Journal, the American pharmaceutical giant Merck (stable) would have studied a takeover of the biotechnology firm. The WSJ cites sources familiar with the matter. Talks have been going on for some time, but no deal is imminent, according to the newspaper. Seagen currently weighs nearly 30 billion dollars on Wall Street, against 215 billion dollars for Merck & Co. The WSJ also indicates that other suitors would also evaluate the Seagen file.