(Boursier.com) — US stock markets are expected to rise sharply on Tuesday. Before the market, the S&P 500 thus took 1.6%, the Dow Jones 1.4% and the Nasdaq 1.7%. The barrel of WTI crude rose 2% to $110. The ounce of gold stabilizes at $1,840. The dollar index fell 0.2% against a basket of benchmark currencies. Bitcoin is hovering around $21,000. The American coast was closed on Monday to observe ‘Juneteenth’, for the first time in history. Thus, the New York Stock Exchange (NYSE) and the Nasdaq were closed in observance of the new federal holiday, adding to the list of market holidays.
The Chicago Fed National Activity Index for May 2022 came in at 0.01, versus a FactSet consensus of 0.35. Remember that a positive index signals above-trend growth.
Resales of existing homes (consensus 5.36 million for the month of May, announcement at 4 p.m.), as well as the intervention of Thomas Barkin, president of the Richmond Fed, are still expected today.
Barkin will also intervene tomorrow, Wednesday, like Patrick Harker and Charles Evans of the Fed, but it is above all Jerome Powell, the head of the American central bank who will hold all the attention. Powell will deliver his semi-annual monetary policy testimony to Senate lawmakers. Recall that the Fed proceeded with a rate hike of 75 basis points last week, raising its federal funds rate between 1.5 and 1.75% in order to counter inflation. Fed officials have also set an aggressive course of rate increases for the rest of the year. New economic projections released after the agency’s two-day meeting last week showed policymakers expected interest rates to hit 3.4% by the end of 2022, which would be the highest level since 2008.
Like President Joe Biden, Treasury Secretary and ex-Fed boss Janet Yellen believes recession is not inevitable, but inflation is too high. In an interview with ABC, the Treasury Secretary discussed growth and inflation, noting that recession was therefore “not at all inevitable”, as the Fed takes increasingly aggressive measures and has just hiked rates by 75 basis points, not seen since 1994. She expects US growth to slow in a natural transition to steady and stable growth, and thinks Jerome Powell, current leader of the Fed, can achieve its goal of reducing inflation while maintaining a strong labor market.
This inflation is “unacceptably high”, judges Yellen, who notes that President Biden’s top priority is to bring it down. She finds that “the impacts of energy prices actually represent half of inflation”. She also discusses the efforts of the Biden administration to stem further increases in oil prices. Asked about calls in Congress for gas tax exemptions, she replies that Biden wants to ease the burden on households and that is indeed an idea “to consider.” She also says the administration is considering lifting some Donald Trump-era tariffs on Chinese goods.
Some Fed comments are emerging following the FOMC’s decision on Wednesday to hike rates by 75 basis points. Explaining her dissent, Kansas City Fed President Esther George (voting member), who would have preferred to stick with a half-point tightening, said a 75bp move added political uncertainty given the simultaneous start of central bank balance sheet reduction. She notes that inflation has shown no signs of slowing down, but adds that policy changes affect the economy with a lag.
In a blog post, Neel Kashkari (non-voting) of the Minneapolis Fed said he supported the 75 basis point move and could support another 75 basis points in July, but indicated that the uncertainties the cautioned about greater anticipation. He said he could look at a 50 basis point hike per meeting until inflation is on track to hit 2%.
In an academic presentation, James Bullard (voting member) of the St. Louis Fed said that the Fed has…considerable credibility, which he said would suggest that a soft landing is possible if the policy change is well executed. Fed Governor Christopher Waller said in a speech that he would support another 75 basis point hike if the data comes out as expected.
Voting member Loretta Mester of Cleveland finally told CBS Face The Nation that the bank was looking at monthly data for signs of moderating demand, noting May CPI data was bad across the board, and also expecting a return to 2% inflation to take a few years.
Goldman Sachs raised its recession probability to 30% for the US economy over the coming year, from 15% previously, amid record inflation and economic weakness fueled by the Russian invasion of Ukraine. Goldman Sachs strategists are thus beginning to change their minds about the potential for a recession in the United States. “We now consider the risk of recession to be higher and more significant,” Goldman Sachs chief economist Jan Hatzius wrote in a new note to clients. “The main reasons are that our baseline growth path is now lower and we are increasingly concerned that the Fed will feel compelled to react forcefully to high headline inflation and consumer inflation expectations if prices energy still increase, even if the activity slows down sharply”.
Values
Twitter. Elon Musk, boss of Tesla and SpaceX, said at the Qatar Economic Forum that there were still some “unresolved questions” regarding the planned acquisition of Twitter. “There is the question of whether the debt part of the financing will be met and then whether the shareholders will vote in favor of the deal,” said Musk, who also wants to better assess the extent of the phenomenon of ‘bots’ and fake accounts on the platform.
You’re here. The richest man in the world also provided some updates on the job cuts at Tesla: “Tesla will reduce its salaried workforce by approximately 10% over the next approximately three months. We plan to increase our hourly workforce We’ve grown very fast on the employee side, a little too fast in some areas,” Musk said, noting that those cuts represent 3.5% of the automaker’s total workforce.
Supply constraints are the biggest drag on Tesla’s growth, rather than competition from rival automakers, Musk said: “Our constraints are much more in raw materials and the ability to scale up production.”
Kellogg jumped on Wall Street on Tuesday, after the food company announced a plan to split into three businesses: Global Snacking Co., which will account for about $11.4 billion in sales and include cereals and noodles internationally, as well as the North American frozen breakfast and snacks business; North America Cereal Co. which represents approximately $2.4 billion in sales and will include American, Canadian and Caribbean cereals; and Plant Co. The group born in 1894 from the creation of Corn Flakes by WK Kellogg, thus intends to create value.
The Global Snacking division is the major activity with 80% of sales. The final names of the three new companies will be determined later. The group mainly intends to focus on the snacks business, which will be headed by Steve Cahillane, current boss of Kellogg, and will include the Pringles, Cheez-It and Pop-Tarts brands.
Lennar, the American real estate developer, soared before the stock market on Wall Street. The group has just published accounts that exceed market expectations. Lennar is cautious about his market, seeing pressure on home buyers from rising interest rates. “The Fed’s stated determination to reduce inflation through interest rate hikes and quantitative tightening has begun to have the desired effect of slowing selling in some markets and stalling price hikes. nationwide,” said Lennar Executive Chairman Stuart Miller.
So far, rising home prices pushed net profit attributable to the U.S. homemaker to $1.32 billion, or $4.49 per share, in the second quarter ended May 31 from $831 million. one year earlier. Gross margin increased despite increased raw material and labor costs. Adjusted earnings per share were $4.69, versus a FactSet consensus of $3.95. Revenue climbed 30% to $8.36 billion, versus the consensus $8.12 billion.
Mondelez intends to buy energy cereal bar maker Clif Bar & Company for $2.9 billion.
Spirit Airlines jumped after the announcement of an improvement in the supply of JetBlue at $33.50 a share (vs. $31.5) on the low-cost carrier, also coveted by Frontier Airlines.
ExxonMobil signed a contract with QatarEnergy related to the expansion project of the Gulf State’s North Field offshore field, the largest liquefied gas project in the world, following agreements with TotalEnergies, Eni and ConocoPhillips.