(Boursier.com) — The American rating is trying to pull itself together on Tuesday, after two painful sessions. The Dow Jones rose by 0.08% to 30,542 pts and the S&P 500 by 0.26% to 3,759 pts, against a gain of 0.5% on the Nasdaq to 10,856 pts. Last night, the DJIA fell 2.8% and the Nasdaq 4.7% at the close. US markets remain undermined by fears of accelerated monetary tightening, following extremely worrying US inflation figures (at a 41-year high of 8.6%). On the Nymex today, a barrel of WTI crude recovered 2.2% to $123.6. An ounce of gold fell 0.8% to $1,816. The dollar index gained 0.2% against a basket of currencies. Bitcoin finally unscrews on $22,000.
On the bond markets, the yield of the 2-year T-Bond stands at 3.36%, against 3.39% for the 10-year and 3.37% for the 30-year…
The S&P 500 ended yesterday evening down almost 22% compared to its record close of 4,796 pts on January 3, which now places it in “bear market” territory since the fall exceeds 20%. The index had previously hit “bear market” levels during the day on May 20, but bounced off that level, rising nearly 10% through June 2. This is therefore the first real bear market since the start of 2020, when the S&P fell around 34% between February 19 and March 23. The index had then recovered in less than six months with the help of the covid plans and the largesse of the Fed era.
This time things are much more uncertain. Commentators observing bear markets have referred to a variety of depths (from nearly 20% to the 57% decline seen through October 2007) and durations. Reuters noted an average decline of 32.7% for the 13 bear markets since 1946, with recoveries taking between three and 69 months. Some specialists believe that the market could find support near the lows of May at 3800 pts on the S&P. Others mention the risk of an even larger correction, such as Morgan Stanley’s Mike Wilson who is considering a fall to 3400 pts (which would represent a drop of 29% compared to January 3).
Operators are now betting on a very strong gesture of 75 basis points from the Fed tomorrow evening. According to the CME Group’s FedWatch tool, the probability of such a rate hike is 95%! The current range of the fed funds rate, housed between 0.75 and 1%, would therefore go between 1.5 and 1.75%! The same tool shows that this range could reach 2.25 to 2.5% (86% probability) at the end of the meeting scheduled for the end of July, ie a further increase of 75 basis points!
The June 14-15 FOMC meeting will be the high point in terms of macroeconomics this week. The main local brokers, including Goldman Sachs and Morgan Stanley, are therefore now betting on a very strong move of 75 bp, even though expectations were only 50 bp a few days ago. Regarding the end-of-year monetary meeting (which ends on December 14), the FedWatch tool essentially shows forecasts of 3.5-3.75% (40% probability) and 3.75-4% (probability 36%) for the fed funds rate range.
It is unlikely that the US central bank will already give clear indications for September tomorrow. The Fed should nevertheless leave the door open to a move in increments of 50 or 75 bps. In addition, Jerome Powell, head of the institution, could explicitly reject the idea of a break from the Fed still hoped for a short time ago. Powell could confirm the strength of the labor market and further underline the Fed’s commitment to lower inflation. The June meeting also includes an update, where the focus would be on the expected rate trajectory over the next two years and the “terminal rate”.
The US producer price index for May 2022 was up 0.8% compared to the previous month, in line with the FactSet consensus. It climbed 10.8% over one year. Excluding food and energy, this indicator rose by 0.5% compared to April, against 0.6% consensus and 0.4% a month earlier. The increase over one year, excluding food and energy, is 8.3%, against 8.7% consensus.
Tomorrow Wednesday, the day will be very active, with US retail sales, the Empire State index of the New York Fed, import and export prices, inventories and sales of companies, the index the US real estate market, the Atlanta Fed’s inflation expectations index, the Department of Energy’s weekly report on domestic oil stocks, and of course the Fed’s press release and Jerome Powell’s conference.
Values
Oracle (+9%!). The American group based in Austin, Texas, has shown that its strategy of migrating its offer to the “cloud” is bearing fruit, posting profits and revenues above analysts’ expectations for its fourth fiscal quarter ended May 31. However, net profit fell 21% to $3.2 billion from $4 billion a year earlier. Net earnings per share, adjusted for non-recurring items, came out at $1.54, while the FactSet consensus was for $1.37. Quarterly sales rose 5% (and 10% at constant exchange rates) to total $11.8 billion, versus $11.6 billion expected by Wall Street. Total cloud-related sales jumped 19% to $2.9 billion (+22% at constant exchange rates).
“We have seen a surge in demand for our cloud infrastructure offering, which jumped 39% at constant currency,” Group Chief Executive Safra Catz said in a statement. “We believe this upward spurt of growth shows that our cloud infrastructure business has entered a phase of hyper-growth,” she added.
Twitter (+5%!). Elon Musk should address all employees of the social media network on Thursday Twitter for the first time since he presented his initial plan to buy back 44 billion dollars, Reuters learned yesterday Monday, from a source familiar with the matter. Business Insider, citing an email message from Twitter CEO Parag Agrawal, also reported on the June 16 meeting. Agrawal, in his message, says that staff members can submit their questions to the businessman in advance. The social network’s marketing director, Leslie Berland, will play the role of moderator during the event…
Recall that Musk had initially proposed to buy Twitter for 44 billion dollars, before suspending his proposal to obtain more data from the group concerning the evaluation of fake and bot accounts. The markets are betting on a reduced offer from Musk, while Twitter’s share price is moving to $37, a far cry from the $54.2 indicated when the billionaire approached in April.
Coinbase (-3%) has just announced a huge restructuring plan, including the elimination of 18% of its workforce, or 110 positions. The group evokes the economic turnaround, while cryptocurrencies have also just copiously unscrewed. The cryptocurrency exchange platform has lost 85% of its value since its debut on Wall Street. Most of the fall took place this year, with the plunge in Nasdaq technology stocks. “Today, I am making the difficult decision to reduce the size of our team by approximately 18%, to ensure that we remain healthy during this economic downturn,” said Brian Armstrong, chief executive and co-founder of the group.
Apple (+1%). The German Cartel Office has announced that it is investigating the rules imposed by the group on publishers of third-party applications in terms of tracking user data.
Boeing (-2%) remains under pressure, after losing 8.8% yesterday. Demand for aircraft industry-wide is said to be strong, however, and will continue to improve as airlines strive to replace aging fleets, purchase more efficient models and observe growth. of the number of passengers, said yesterday Monday the director general of Boeing, Dave Calhoun, expressing a good optimism. “The demand for planes is as strong as I’ve ever seen it. I think it’s going to get stronger,” Calhoun told Reuters and another outlet on the sidelines of an event at Boeing’s new headquarters. in Arlington.
FedEx jumped 13% on Tuesday on Wall Street, posting its largest increase in thirty years. The delivery giant has just announced a 53% increase in its quarterly dividend, along with other value-enhancing actions. Two administrators have been added to the board in agreement with the activist investor DE Shaw & Co, which also produces its small effect. The quarterly cash dividend is increased to $1.15. While Raj Subramaniam has just taken over the management of the group, the operators are apparently betting on strong resistance from FedEx in an economic context that promises to be difficult. The Memphis group intends to reduce its capital expenditure and review its executive compensation program.
Fred Smith, founder of the group who has therefore just left the general management, remains its largest shareholder with 7.5% of the shares. DE Shaw held 1 million shares at the end of March. The firm has already demonstrated its activist capabilities at ExxonMobil, Lowe’s and many others.