(Boursier.com) — Wall Street is now erasing its initial rise on Tuesday, even falling slightly into the red, cautious on the eve of the Fed’s verdict. The S&P 500 dropped 0.4% to 3,856 pts, the Dow Jones 0.48% to 32,575 pts and the Nasdaq 0.54% to 10,928 pts. Operators are playing it safe while waiting for the outcome of the FOMC, and after a new series of quarterly results. The rather solid statistics of the day would tend to comfort the US central bank in its tough position. A barrel of WTI crude rebounded 2.1% to $88.3 on the Nymex. The ounce of gold takes 0.4%. The dollar index fell 0.2% against a basket of currencies.
Stock markets have therefore been buoyed over the past two weeks by a new narrative around the famous “pivot” theory of monetary policy. CME Group’s FedWatch tool now shows an 88% chance of a 75 basis point rate hike by the Fed tomorrow, after the monetary meeting, which would take the fed funds rate between 3 .75% and 4%. It would be the Fed’s fourth oversized rate hike, reacting vigorously to record inflation. The same FedWatch tool gives for December 14 (last FOMC meeting of the year) probabilities roughly equivalent to the rate ranges 4.25-4.5% (48% probability) and 4.5-4.75% ( 47% of ‘probability’). In other words, the Fed would increase its rates by another 50 or 75 bp on this occasion. The ceiling could be reached at the February or March 2023 meetings, with maximum rate ranges between 4.75 and 5% or 5 and 5.25%.
The next few months could therefore prove to be calmer on the Fed side, after the December tightening, with the recognition of the lagged effects of policy tightening and the downside risks to growth in the event of monetary overreaction. .
A recent Wall Street Journal article indicated that some Fed officials may be eyeing a 50 basis point rate hike in December, fearing that moving too quickly could cause a sharp slowdown. The Fed’s Mary Daly also flagged some risks from over-tightening. Additionally, the ECB said on Thursday that it had made “substantial progress in withdrawing accommodative monetary policy.”
On the US inflation side, the core PCE price index for September linked to household spending rose 0.5% compared to the previous month, in line with the consensus and the downwardly revised level of August (lowered to 0.5% from the initial rise of 0.6%). The ‘core PCE’ index thus emerged up 5.1% over one year, according to data published at the end of last week.
This Tuesday, on the economic front in the USA, the final manufacturing PMI index for October (consensus Factset 49.9), the ISM manufacturing index for the same month (consensus 50), construction spending for September ( consensus -0.5%) and the JOLTS report on job openings (consensus 9.85 million). Tomorrow, traders will be watching monthly auto sales, ADP’s private non-farm payroll report, weekly domestic oil inventories report, and of course the Fed’s monetary statement and the Fed’s press conference. Jerome Powell.
Crude prices rose sharply on Tuesday and erased their losses from the day before. Despite heightened fears of lower demand in China (the world’s largest crude importer) as the country persists with its zero Covid policy, black gold is supported by the weaker dollar as well as tensions persistent on the supply with in particular the forthcoming entry into force of the European embargo on Russian oil.
The season for quarterly financial publications continues on Wall Street. Before market on Tuesday, operators will notably follow the latest accounts of Pfizer, Eli Lilly, eaton, Marathon Petroleum, Uber Technologies, Thomson Reuters, Phillips 66, Sysco, KKR, Newmont, SiriusXM Holdings, Gartner Where Fox Corporation. After the US listing closes, AMD, Mondelez International, Airbnb, Devon Energy, AIG, Prudential Financial, Electronic Arts, Edison International, Paycom Where Cloroxwill announce their latest figures.
Values
Phillips 66 (+4%), the Texas group active in the production of natural gas and oil, revealed for its third fiscal quarter a profit of 5.4 billion dollars or $11.16 per share, as well as an adjusted profit of $3.1 billion and $6.46 per title. The group generated $3.1 billion in operating cash flow over the period. The consensus was $5.04 adjusted earnings per share.
Marathon Petroleum (+1%), the American group of refining, transport and sale of oil, published for its third fiscal quarter a net profit group share of 4.5 billion dollars and 9.06$ per title. Adjusted EBITDA was $6.8 billion. Adjusted earnings were $3.9 billion or $7.81 per share, compared to $464 million a year earlier. Revenue reached $45.8 billion in the quarter ended September, compared to $32.3 billion a year earlier. The consensus was set at $6.95 in adjusted earnings per share for $41.73 billion in revenue.
Thomson Reuters (-3%) published for its third fiscal quarter revenues of 1.574 billion dollars, up 3% year-on-year, an operating profit up sharply by 41% to 398 million dollars, as well as a diluted EPS back in the green at 47 cents, against a loss of 49 cents per share a year before. On an adjusted basis, earnings per share rose 24% to 57 cents, beating expectations. The consensus was $0.5 of adjusted EPS for $1.59 billion in revenue. The group maintains its 2022 and 2023 financial forecasts. “While we recognize the growing macroeconomic uncertainty, our underlying businesses are resilient and we remain focused on long-term investment”, summarizes the group’s CEO, Steve Hasker.
Uber Technologies (+15%) climbed on Wall Street, following its publication. For the third quarter, the group deplored a net loss of 1.2 billion dollars or 61 cents per title, against 2.4 billion dollars a year earlier. Adjusted Ebitda, however, represented $516 million, against the consensus of $462 million. Revenues increased by 72% to 8.34 billion dollars, compared to a consensus of 8.12 billion, and despite a slowdown in food deliveries (+24% against +37% a quarter before). The group expects fourth-quarter operating profit to exceed Wall Street expectations, with demand for groceries and the resumption of travel spending. Carpooling drove revenues over the quarter ended with an increase of 73%. For the fourth quarter, the adjusted Ebitda is expected between 600 and 630 million dollars, while the consensus was at 569 million. The level of gross reservations is expected to increase by 23 to 27%, after a 26% increase in the quarter ended at the end of September.
Eli Lilly (-4%), the Indianapolis laboratory, beat the market consensus in terms of profits and revenues for the quarter ended, but the group is adjusting its 2022 estimates. Over the quarter ended, Lilly posted a net profit in increase of 31% to 1.45 billion dollars or $1.61 per share, against 1.11 billion a year earlier. Quarterly adjusted earnings per share were $1.98. Revenue rose 2% to $6.94 billion. The consensus was $1.91 in adjusted earnings per share for $6.89 billion in revenue. The group is however cautious for the year, reducing its earnings per share guidance to between $7.7 and $7.85, against a previous range of $7.9 to $8.05. This is the third time that Lilly has lowered this guidance, victim of the strong dollar, the drop in insulin prices and generic competition in its cancer treatment.
Pfizer (+3%) announced for its third fiscal quarter revenues totaling $22.6 billion, down 2% on an operational basis due to the extremely high comparison base. Excluding contributions from Paxlovid and Comirnaty, revenues would have increased by 2%. Diluted earnings per share were $1.51, up 6% year-on-year. Adjusted earnings per share represented $1.78, up 40% – and even 44% excluding currency effects. The market consensus was $1.39 in adjusted earnings per share for $21.04 billion in revenue. Pfizer took the opportunity to raise the lower end of its annual revenue guidance, now counting on a level ranging from 99.5 to 102 billion dollars, reflecting the improvement in the operating environment. The 2022 revenue guidance for Comirnaty has been raised from 2 billion to around 34 billion. The group is still targeting around 22 billion in revenue on Paxlovid. Finally, the adjusted EPS guidance is raised between $6.4 and $6.5.
Apple (-2%) is rumored to have asked Pegatron and Luxshare Precision to produce the iPhone 14 Pro and iPhone 14 Pro Max due to the Zhengzhou factory incident at Hon Hai Precision Industry (foxconn), reports Taiwan’s Economic Daily News. Yesterday on Wall Street, fears over Apple centered precisely on the covid outbreak in China in the area of key supplier Foxconn’s assembly plant, which could affect iPhone shipments during the crucial holiday season of end of the year.
AbioMed (+50%!) jumped, while Johnson & Johnson (-1%) announced a plan to acquire the medical technology group for $380 per share in cash, representing an enterprise value of $16.6 billion.
You’re here (+1%). The Reuters agency reports that the electric car designer intends to start mass production of its Cybertruck at the end of next year, two years later than initially planned.