(Boursier.com) – The American rating is expected to rise before the market on Tuesday, after two painful sessions. The Dow Jones rose painfully by 0.6% and the S&P 500 by 0.8%, against a gain of 1.2% on the Nasdaq. 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 1.2% to $122.4. The ounce of gold yields 0.5% to $1,822. The dollar index returns 0.1% against a basket of currencies. Bitcoin finally unscrews on $22,000.
On the bond markets, the yield on the 2-year T-Bond stood at 3.29%, against 3.32% for the 10-year and 3.34% 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 91%! 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% (nearly 87% 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 35%) 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 higher-than-expected US consumer price index rekindled fears of long-lasting inflation, which would require monetary policy pushed further into restrictive territory and heighten the risk of a global recession. According to 70% of academic economists participating in an FT-IGM survey, the United States is expected to enter a recession in 2023. Nearly 40% predict that the recession will occur in the first half of 2023, while a third of specialists believe that it will be delayed until the second semester. The World Bank and the OECD had already recently lowered their global growth forecasts, with the World Bank warning of stagflation. The IMF also announced that it would cut its forecast for global growth next month. Recession forecasters point to headwinds from war in Ukraine, energy and food price inflation, rising interest rates and Covid lockdowns in China. However, many argue the recession could be avoided, citing low unemployment, strong household and corporate balance sheets, China’s stimulus power and the belief that central banks can pull off a soft landing. .
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 real estate market, the Atlanta Fed’s inflation expectations index, the Energy Department’s weekly report on domestic oil stocks, and of course the Fed’s press release and Jerome Powell’s conference.
Values
Oracle. 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. 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 has just announced a huge restructuring plan, involving 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. 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 rises somewhat before stock market on Tuesday on Wall Street, after losing 8.8% yesterday. Industry-wide demand for aircraft would be strong and continue to improve as airlines work to replace aging fleets, purchase more efficient models and watch the growth of the number of passengers, Boeing Chief Executive Dave Calhoun said yesterday Monday, expressing great 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.