(Boursier.com) – The American rating rose sharply on Friday, while operators have now integrated the idea of a significant risk of recession due to monetary tightening and inflation. The Dow Jones offers a jump of 1.84% to 31,242 pts, while the S&P 500 takes 2.07% to 3,873 pts and the Nasdaq 2.14% to 11,474 pts. The barrel of WTI crude recovered 3.7% to $108.1 on the Nymex. The ounce of gold consolidates at $1,828. The dollar index lost 0.3% against a basket of benchmark currencies. Bitcoin is recovering a little at $21,000.
According to the government report of the day, new home sales in the United States for the month of May came out at a rate of 696,000 units, against 590,000 market consensus and 629,000 for the revised reading – up – for the month of April.
The final US consumer sentiment index for the month of June 2022, measured by the University of Michigan, came in at 50, versus 50.2 consensus and 50.2 also for its preliminary reading.
For the second day yesterday, operators were following the remarks of Federal Reserve Chairman Jerome Powell, who was heard by the Senate on Wednesday and by the House of Representatives on Thursday. On Thursday, he was once again very tough on soaring inflation, saying the Fed’s determination to bring prices under control was “unconditional”, while admitting that the fight against rising prices is getting worse. accompanied by a risk of rising unemployment and economic slowdown. The day before, before the Senate, the boss of the Fed had admitted that it was “possible” that the rise in rates would lead to a recession. “It is not at all the desired effect, but it is certainly a possibility”, he added, acknowledging that a soft landing was going to be “very difficult”.
Yesterday, the leader of the Fed reiterated that the bank’s intention was to achieve a soft landing, even if the path is increasingly difficult. He admitted that in hindsight, inflation had been underestimated by the US central bank. To calm prices, “we have no precision tool” other than raising rates, he explained, adding that he was aware that monetary tightening should reduce growth and affect employment. “It is significantly more difficult to reduce inflation without impacting the labor market,” he acknowledged.
Recall that the Fed carried out a rate hike of 75 basis points last week (the largest hike since 1994), which took its federal funds rate between 1.5 and 1.75%, in order to counter inflation, which reached 8.6% over one year in May, the highest for 41 years in the United States. Jerome Powell and other central bank officials have signaled they will hike another 50bp or 75bp at the next meeting in July. New economic projections released on June 15 showed the Fed expecting the fed funds rate to hit 3.4% by the end of 2022, which would be its highest level since 2008, then 3 .8% at the end of 2023.
Jerome Powell confirmed that the pace of further rate hikes will depend on indicators and how the economic outlook evolves. “We will make our decisions meeting after meeting,” explained the leader of the American central bank.
Mike Wilson, chief investment officer of Morgan Stanley, indicates, quoted by Bloomberg, that the chances of a recession are still less than 50% in the United States. “It’s not our base case, it’s our bearish case,” the strategist says. The risk-reward ratio for investing in the S&P 500 nevertheless remains, according to him, “rather mediocre”. Wilson currently sees a 35% probability of a recession. The specialist, reputed to be generally bearish, who had well anticipated the stock market fall this year, is therefore more moderate about the hypothesis now widely put forward by experts of a potential recession caused by very rapid monetary tightening by the Fed in a context of record inflation.
Values
CarMax (+7%), the American retailer of used vehicles, announced for its first fiscal quarter profits in decline, but higher than market expectations. Revenues rose above expectations, as vehicle prices rose. Net profit for this quarter ended at the end of May 2022 represented $252 million and $1.56 per share, compared to $437 million a year earlier. The FactSet consensus was at $1.49 EPS. Revenues appreciated by nearly 14% year-on-year and excluding wholesale sales (+21% in consolidated data) to reach 9.31 billion dollars, while the FactSet consensus was 9.06 billion. dollars.
carnival (+9%), the cruise giant, jumped on Wall Street after the publication of preliminary accounts for the second quarter. The operator posted a positive level of cash flow from operations over the period, but its revenues missed the consensus. The group still evokes a growth of nearly 50% in sequential activity, compared to the first fiscal quarter. The FactSet consensus of $2.76 billion showed a 70% expansion. The occupancy rate in the second quarter improved for its part to 69%, against 54% in the previous quarter. GAAP net loss was $1.8 billion, while adjusted loss was $1.9 billion. The group ended the quarter with a cash level of $7.5 billion. Reservation volumes in the quarter nearly doubled sequentially. The group evokes the best level of reservations since the start of the pandemic.
Bausch Health (+15%). Bausch Health President Joseph Papa has resigned effective immediately. This decision by Papa to resign from the board was not due to a dispute or disagreement with the company. The board named John Paulson as president. Paulson is currently an independent director of Bausch + Lomb and chairman of Paulson & Co.
Merck (stable) would continue on the path of an acquisition of seagen (+2%), believe to know people familiar with the question quoted by the Wall Street Journal. The discussions would have even accelerated before a scheduled meeting between the two companies. The American pharmaceutical company would therefore negotiate a possible takeover of the biotech Seagen, which specializes in cancer treatments. According to information previously provided by the WSJ, the two companies are aware of a risk of a blocking of their marriage by the competition authorities. With Seagen, Merck would strengthen its portfolio of cancer drugs, currently dominated by its blockbuster Keytruda. Seagen is developing targeted therapies, which aim to target cancer cells more precisely and reduce side effects, and is also working on treatments targeting solid tumors and hematologic cancers.
FedEx (+8%) raised its profit forecast for the current financial year 2023 on Thursday evening, causing the stock to jump on Wall Street in electronic trading after the close. The group, which has changed CEO since June 1, published after the close of markets accounts broadly in line with expectations for its fourth fiscal quarter of 2022, completed at the end of May, but was optimistic for the financial year which just started. For fiscal year 2023, Fedex expects net earnings per share (EPS) of $22.50 to $24.50. The midpoint, at $23.50, is above analyst consensus expectations, housed at $22.21. In the 4th fiscal quarter, the group’s adjusted EPS reached $6.87 (+37% over one year) and sales came out at $24.39 billion, up around 7.5% on a year. Refinitiv analyst consensus expected a little better, at $6.86 for EPS and $24.56 billion in sales.
netflix (+4%). The US streaming giant, which recently faced an unexpected decline in subscriptions, announced the layoffs of 300 employees, about 4% of its workforce, as part of a new round of workforce reductions aimed at lowering expenses.