(Boursier.com) – Wall Street is oriented in the red this Friday. The S&P 500 lost 0.86% to 3,754 pts, the Dow Jones 0.89% to 30,500 pts and the Nasdaq 0.96% to 10,922 pts. The trend therefore remains depressed for the time being, after a disastrous first half of the stock market. On the Nymex, a barrel of WTI crude rebounded 1.2% to $107. The ounce of gold drops 0.4% to $1,800. The dollar index gained 0.9% against a basket of currencies. Bitcoin is recovering very timidly at $19,000.
The end-of-June 2022 Markit US Manufacturing PMI came out at 52.7, compared to a consensus of 52.4 and an earlier reading of 52.4 as well. The indicator still signals a fairly clear expansion.
The American ISM manufacturing index for the month of June 2022 came out at 53, against a market consensus of 55 and a level of 56.1 a month earlier, which reflects a slowdown in expansion. The price index for its part declined to 78.5, against 80 consensus and 82.2 a month before.
Construction spending for May, which has also just been revealed, showed an unexpected drop of 0.1% compared to the previous month, while the FactSet consensus was at +0.3%. The rise for April is however revised to +0.8%, against +0.2%.
The morning was also marked by the publication of the final European PMI manufacturing indices. The Spanish manufacturing PMI slightly beat expectations at 52.6 in June, as did the Italian index at 50.9. The French index stood at 51.4, against the FactSet consensus of 51. The German indicator was 52, in line with expectations. Finally, the European indicator remained close to expectations at 52.1.
Inflation is accelerating to new highs in the eurozone. According to preliminary data from Eurostat, the annual inflation rate in the region is estimated at 8.6% in June, against 8.1% in May, and a consensus of 8.5%. As for the main components of inflation, energy is expected to experience the highest annual rate in June (41.9%, compared to 39.1% in May), followed by food, alcohol & tobacco ( 8.9%, compared to 7.5% in May), industrial goods excluding energy (4.3%, compared to 4.2% in May) and services (3.4%, compared to 3.5% in May), details Eurostat. Sequentially, prices are up 0.8%. Core annual inflation, on the other hand, slowed slightly to 3.7%, against 3.8% in May and 3.9% consensus.
The broad S&P 500 index therefore recorded its worst quarterly performance since the height of pandemic concerns in the first quarter of 2020, as well as the worst first-half performance since 1970 – with a drop of more than 1,000 points or 21%. . The tightening of financial conditions intended to counter inflation is therefore weighing heavily on the markets. Monetary policy makers have clearly given priority for the time being to the fight against inflation, at the risk of a very probable recession. The bullish talking points continue to revolve around peak inflation/peak Fed, more attractive valuations, strong balance sheets, and economic normalization (including the reopening of China).
The weakening macro outlook bolsters the ‘peak Fed’ thesis, as concerns grow that policymakers are tightening too aggressively amid an economic slowdown. While in the short term the trend is for accelerated monetary tightening, the market increasingly sees the Fed swinging towards an easing stance in 2023. The CME Group’s FedWatch tool provides good guidance on this. First, it shows a probability of almost 78% of a rate hike of 75 basis points on July 27 (which would bring rates into a range of 2.25 to 2.5%). This same tool indicates a 48% probability of a range of 3.25 to 3.5% on December 14 (last FOMC meeting of the year) and a probability of almost 24% of a rate ranging from 3, 5 to 3.75%. The peak in rates could be reached after the February meeting, since the probabilities are quite similar (42% for the 3.25 to 3.5% range, and 28% for the 3.5 to 3 range, 75%). The March or May 2023 meetings could therefore mark a shift and a return to monetary easing, if economic conditions justify it.
Values
Micron (-6%) revealed record quarterly results that exceeded market expectations, but very weak guidance, due to a drying up of demand for ‘chips’. The American designer of memory chips expects revenues of 7.2 billion dollars, more or less 400 million dollars, for the quarter started. The consensus was more than 9 billion dollars! Micron expects quarterly adjusted earnings per share of $1.63, plus or minus 20 cents, against $2.6 consensus. The designer of DRAM chips (for data centers or PCs) and NAND memory chips (data storage) intends to reduce its chip production expenses in the 2023 fiscal year, which begins in September.
For the third fiscal quarter of 2022, ending at the end of May, the group achieved revenues of 8.64 billion dollars, against 7.79 billion in the previous quarter and 7.42 billion a year earlier. GAAP net income was $2.63 billion and $2.34 per share. Adjusted net income reached $2.94 billion, or $2.59 per share. The consensus was $2.44 adjusted EPS and $8.6 billion in sales. “Micron achieved record revenue in the third fiscal quarter thanks to the excellent execution of our team across technology, product and manufacturing,” said group leader Sanjay Mehrotra. “Recently, the industry demand environment has weakened and we are taking steps to moderate our supply growth in fiscal year 2023. We are confident about long-term secular demand for memory and storage and are well positioned to deliver strong financial performance over multiple cycles.”
Apple (-1%) loses some ground in the stock market, as the Californian apple giant intends to raise the price of its iPhones by almost a fifth in Japan, amid a weakening yen and rising inflation .
Meta Platforms (-3%) would expect slower growth in the second half amid “strong headwinds”, according to Reuters. The article cites an internal memo, in which Meta’s chief product officer, Chris Cox, said the company was going through tough times, headwinds were “fierce,” and Meta needed to execute perfectly in a slower growth environment, where teams shouldn’t expect large influxes of new engineers and budgets… Cox added that Meta needs to “more ruthlessly prioritize and leverage leaner, more aggressive and better,” while the company will need to quintuple the number of graphics processing units in its data centers by the end of 2022 to support Discovery’s push.
Cox noted that interest in Reels is growing rapidly, with users globally spending twice as much time as they spent on Reels a year ago, while around 80% of the growth since March is believed to come from Facebook. . According to Cox, Meta sees opportunities for revenue growth in in-app purchase tools, which could mitigate signal loss created by Apple-led privacy changes and commercial messaging.
Cox further said that Meta’s hardware division is focused on the successful launch of its mixed reality headset in the second half of this year, while the company will also focus on linking accounts between its virtual reality products and its customers. traditional social media apps.
Finally, Meta is said to have cut its recruitment forecast by at least 30% for the year. At least that is what the CEO of the Californian group, Mark Zuckerberg himself, would have told the employees, explaining that they should expect a sharp deterioration in the economic situation.
Kohlsthe American distribution chain, lost nearly 22% on Wall Street, while the group put an end to its negotiations for its possible takeover by Franchise Group, due to the current context and high market volatility. Kohl’s therefore evokes a significant deterioration in the retail environment since the start of the sale process. Worse, the group is also lowering its financial forecasts for the second fiscal quarter, citing weak consumer spending.
Citigroup (-1%) would have initiated discussions for the sale of its operations in Russia to local investors, indicated the well-informed Financial Times, citing sources familiar with the matter.
Amazon (+1%), the colossus of online commerce, will allow its ‘Prime’ subscribers to unsubscribe “in two clicks”, following complaints from consumer associations. This is what the European Commission has just announced on Friday.
Jetblue Airways (-1%) extends for an additional month, until the end of July, its acquisition offer for the rival Spirit Airlines – recently improved offer.