(Boursier.com) — Wall Street stumbled on Friday, the S&P 500 losing 1.49% to 3,615 pts, the Dow Jones 0.86% to 29,781 pts and the Nasdaq 1.86% to 10,449 pts. The markets are therefore regaining their senses, the day after an incredible rebound in the American rating, which had surprised sharply up despite extremely disappointing inflation figures. The Dow Jones had soared by 2.83% and the Nasdaq by 2.23%, against all expectations, without this technical jump accompanied by redemptions of short sales finding the slightest fundamental explanation.
This Friday, operators are taking note of a series of rather reassuring bank results overall, and US retail sales without much relief.
On the Nymex today, a barrel of WTI crude lost 3.5% to $86. An ounce of gold dropped 1.4% to $1,653. The dollar index climbed 0.6% against a basket of benchmark currencies.
The real-time FedWatch tool now gives a 97% probability of another 75 basis point rate hike from the Fed on Nov. 2 after the next meeting, which would mark the fourth rate hike consecutive oversize and would take the fed funds rate to between 3.75 and 4%. The hypothesis of a comparable rate increase on December 14 at the end of the last meeting of the year retains the majority of votes.
US retail sales for the month of September were stable, against a market consensus of +0.2% according to FactSet. Excluding automobiles, however, these same retail sales increased by 0.1% compared to the previous month, against -0.1% consensus. Finally, excluding cars and gasoline, retail sales are up 0.3%, against +0.2% consensus. For the month of August, in revised data, total retail sales had increased by 0.4% (-0.1% excluding cars, +0.6% excluding cars and gasoline).
Import and export prices for September were also released today. Import prices fell by 1.2% compared to August, against -1.1% consensus. Export prices fell by 0.8% against -0.9% expected.
The University of Michigan’s Preliminary Consumer Sentiment Index for October 2022 came in at 59.8, versus the market consensus’s 59 and 58.6 for the prior month’s reading.
Business inventories for the month of August 2022, which have also just been announced, grew by 0.8% against 0.9% consensus. A month before, the increase was 0.5% in revised data.
Finally, Esther George and Lisa Cook of the Fed, intervene this Friday. Governor Cook ruled on this occasion that US inflation remained “stubbornly high”, confirming the commitment of the US central bank to fight against this record and “unacceptable” rise in prices.
Financial and banking firms listed on Wall Street will be very numerous this Friday to publish their latest quarterly financial results. In descending order of market capitalization, we find on this day, UnitedHealth, JP Morgan Chase, Wells Fargo, Morgan Stanley, Citigroup, PNC Financial, U.S. Bancorp or First Republic Bank. A great introduction, which marks the start of the third quarter financial publication season on Wall Street.
Yesterday, the consumer price index in the United States for the month of September 2022 came out up 0.4% compared to the previous month, against a FactSet consensus of 0.2%. Year on year, the price index climbed 8.2%, against 8.1% market consensus and 8.3% a month earlier. Excluding food and energy, the consumer price index increased by 0.6% compared to the previous month, against 0.4% consensus. Its increase over one year is 6.6% against 6.5% consensus. Thus, US inflation excluding food and energy reached a 40-year high!
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JP Morgan Chase (+2%), the largest American bank, announced for its third fiscal quarter a net profit down 17%, but higher than market expectations. Net income thus stood at $9.74 billion or $3.12 per share, compared to $11.69 billion and $3.74 per share over the corresponding period last year. Revenue was $32.72 billion, down from $29.65 billion a year earlier. The consensus of analysts on the spot was $2.9 in earnings per share for $32.12 billion in revenue. Jamie Dimon, boss of the bank, still warns of “significant headwinds” on the economic level. JP Morgan has provisioned $808 million to cover potential credit defaults, for total credit costs of $1.5 billion.
Wells Fargo (+2%) recorded more losses due to the fake accounts scandal. Wells reported a fall of more than 30% in its profits in the third quarter, the fourth American bank by assets having also posted revenues up 3.6% to 19.5 billion dollars. Revenues far exceeded expectations, fueled by higher interest rates. However, a charge of $2 billion, 45 cents per security, weighed on results.
Morgan Stanley (-4%) posted declining profits for the third consecutive quarter. Profits fell 29% year-on-year to $2.63 billion and $1.47 per share. Revenue declined 12% to $13 billion, versus market consensus of $13.3 billion.
Citigroup (+3%) saw its third quarter profits decline by 25%. Revenue rose 6% to $18.51 billion, versus a consensus of $18.3 billion. Lower earnings were driven by higher reserves for credit losses, with net income of $3.5 billion and $1.63 per share, down from $4.6 billion a year earlier. The consensus, which was $1.42 EPS, is still exceeded.
UnitedHealth (+1%) announced for its third quarter profits and revenues above market expectations. Revenue improved 12% year-on-year to nearly $81 billion and adjusted earnings per share hit $5.79, versus $5.5 consensus. The health and insurance group has also raised its profit forecast.
Kroger (-4%) and Albertsons (-7%), two of the largest American retail chains, today confirmed their intention to merge and create a new supermarket leader. The two groups therefore report a definitive merger agreement. Albertsons shareholders will receive a total consideration of $34.1 per share, implying a total enterprise value of $24.6 billion, taking into account the group’s $4.7 billion debt. As part of this transaction, Albertsons will distribute an exceptional cash dividend of up to $4 billion, which would represent $6.85 per Albertsons share. The dividend will be payable on November 7 to shareholders of record at the October 24 close. The total acquisition price of Albertsons also represents a premium of approximately 32.8% on the price not yet affected by the rumors of October 12.
Together, Albertsons and Kroger operate nearly 5,000 stores, 66 distribution centers, 52 factories, 3,972 pharmacies and 2,015 fuel distribution points. Kroger is committed to rating agencies and is strongly committed to an investment grade credit rating. Kroger has already suspended its share buyback program to prioritize post-merger deleveraging to achieve its net leverage target of 2.5x EBITDA in the first 18-24 months post-closing.
Meta Platforms (-2%), the parent company of Facebook, urges a US district judge to reject the Federal Trade Commission’s attempt to block the acquisition of Within, reports Bloomberg. According to a court filing, Meta argues that the FTC failed to present evidence to show that acquiring Within would harm competition in a still-young VR fitness space. An FTC spokesperson said the Commission voted to allow FTC staff to file an amended complaint against Meta in the federal district court, and the FTC is confident that the complaint in the district court will not be successful. not dismissed and that this case will be heard.
Beyond Meat (-5%) will cut 19% of its workforce. The group is also reducing its financial forecasts. The plant-based food specialist explains that consumers are turning to less expensive alternatives, in this context of record inflation. The director of operations, Douglas W. Ramsey, is also leaving the company, after being suspended in September for allegedly… biting a man’s nose following an altercation in Arkansas.