(Boursier.com) — The US rating fell on Friday following robust employment figures, once again sweeping away the feverish hopes of a ‘pivot of the Fed’. The S&P 500 lost 1.79% to 3,677 pts, the Dow Jones 1.37% to 29,515 pts and the Nasdaq 2.57% to 10,788 pts. The barrel of WTI crude regained 3.4% on the Nymex at $91.4. An ounce of gold fell 0.6% to $1,710. The dollar index climbed another 0.1% against a basket of benchmark currencies.
Non-farm job creations in the United States for the month of September 2022 came out at 263,000, against a consensus of 250,000. The unemployment rate fell to 3.5%, against 3.7% market consensus and 3.7% a month earlier. Job creations in the private sector stood at 288,000 in September against 280,000 consensus. Creations in the manufacturing sector were 22,000, also better than expected. The average hourly wage increased by 5% year on year, slightly less than expected since the consensus was 5.1%.
These good US employment figures pushed up rate hike expectations by 75 basis points for the November 1 and 2 Fed meeting (probability of more than 79% according to FedWatch). Thus, a fourth hike of 75 bps is now given for almost sure.
Jerome Powell had previously noted at his September FOMC press conference that the Fed had seen only modest signs of a slowdown in the labor market.
The day before yesterday, ADP reported job creations in the private sector for September slightly above expectations, at 208,000 against 200,000 FactSet consensus. According to the latest Challenger study on the subject, published yesterday, layoff announcements in the United States for the month of September concerned nearly 30,000 jobs, 29,989 to be precise, against 20,485 a month earlier.
Jobless claims also announced yesterday rebounded last week in the United States. The US Department of Labor reported jobless claims for the week ended October 1 at 219,000, up 29,000 from the downwardly revised level of the previous week. The consensus was counting on 204,000 new registrations. The four-week average stands at 206,500, up 250. Finally, the number of unemployed people receiving benefits for the week ended September 24 reached 1.361 million, up 15,000 over seven days (1.350 million consensus).
Earlier this week, traders hailed weak numbers from the JOLTS report, which measures job openings in the United States, considering that this other bad news on the American labor market limited the ability of the Fed to tighten its policy further. monetary.
The latest more solid employment figures published a few moments ago, on the other hand, tend to support the contrary thesis. The US central bank has already raised its rates three times by 75bp, the first time since the Volcker era. Jerome Powell and his teams have warned in recent weeks that this very tough policy should continue, the absolute priority being to bring inflation back towards the 2% target, at the cost of additional economic suffering.
Fed officials have therefore given no indication for the time being of a possible pivot, which would therefore constitute a change in monetary policy. However, on Monday and Tuesday, Wall Street played this scenario with a certain enthusiasm. Fed officials continue to warn of inflation and believe further rate hikes are needed.
Fed Governor Christopher Waller said yesterday that more needs to be done on rates and that the Fed should not stop “tightening” until inflation moderates. He played down concerns about financial stability, which could prompt the Fed to ‘pivot’. Lisa Cook (voting member), in her first remarks as Fed Governor, largely stuck to the main narrative, observing that inflation had been stubbornly persistent and that policy should remain tight until there is great confidence that inflation will return to the 2% target. Minneapolis Fed’s Neel Kashkari (non-voting) said the Fed was “very far” from suspending rate hikes and the bar should be set high for stance changes. He said he did not yet see evidence that the prices of wages and services are moving in the right direction. Chicago Fed’s Charles Evans (non-voting) said tighter policy is needed amid high inflation and sees rates headed towards 4.50-4.75% by spring 2023.
The Fed’s posture has obviously not changed. John Williams, Neel Kashkari and Raphael Bostic, intervene again this Friday.
On the business side, Tilray announced its pre-market accounts, after flying off to Wall Street last night with the cannabis sector, following the announcements of Joe Biden, who on Thursday pardoned thousands of Americans convicted at the federal level for simple possession of cannabis, relaunching the debate around the American approach to drugs. Yesterday Thursday, after closing, AMD issued a painful warning. Levi Strauss also disappointed with its latest results, as the group reduced its outlook due to macroeconomic pressures.
Values
AMD fall of 9% on Wall Street. The group, citing a weaker-than-expected PC market and a significant inventory correction across the supply chain, delivered particularly disappointing preliminary accounts. For the third fiscal quarter, AMD reports revenues of around $5.6 billion, a long way from previous guidance of $6.7 billion, plus or minus $200 million. Revenues from the Customer segment explain most of this unpleasant surprise. On the other hand, revenues from the Data Center, Gaming and “embedded” segments all increased significantly year-on-year, in line with the company’s expectations. At $5.6 billion, total revenue for the quarter still represents growth of 29%, but the group was previously expecting an expansion of 55% (for the middle of the range).
AMD thus evokes reduced deliveries of processors due to a weaker than expected PC market and the significant correction in stocks. Quarterly gross margin is expected to be around 42%, while non-GAAP gross margin is expected to be 50% – against 54% previously estimated. The disappointment on the adjusted gross margin stems from reduced volumes in the Customer segment and the impact of the average selling price. In addition, third quarter results are expected to include approximately $160 million of charges primarily for inventory, pricing and related reserves in graphics and client businesses.
Twitter (-1%) finally fell back 3.7% last night on Wall Street to $49.39, and is still returning 1% today, moving away from the price of $54.2 finally accepted by Elon Musk for his takeover. A judge has pushed back the Musk-Twitter lawsuit, after the billionaire had declared his intention to complete the takeover in the initial terms, for 44 billion dollars. But at the same time, the tone rises again between the businessman and the group with the blue bird.
A court in the US state of Delaware yesterday suspended until October 28 the proceedings brought by Twitter in an attempt to force Musk to honor his initial commitment to buy the social network, shows a court document seen by Reuters. Musk’s lawyers had requested the stay, arguing that the five-day trial that was supposed to begin on October 17 was no longer necessary, with the transaction expected to close around October 28. Therefore, “there is no need to organize an expedited trial to order the defendants to do what they are already doing”, underlined the lawyers for the boss of Tesla and SpaceX. “Incredibly, Twitter insists on continuing the procedure, endangering the operation and playing with the interests of the shareholders”, also criticized the teams of Musk. Twitter opposed the postponement, claiming that the operation be carried out next week and saying that it feared an “unfair maneuver” and a new postponement…
“Now, on the eve of the trial, he (Elon Musk) says he intends to finalize after all. ‘Trust us,’ they say, ‘we’re serious this time,’ and so they ask to be exempted from a judgment on the merits”, indicates another document filed by the lawyers of Twitter and relayed by Yahoo! Finance. “The defendants’ proposal is an invitation to further wrongdoing and delay.” The social network’s lawyers therefore consider that the recalcitrant buyer would still not be reliable. “The operation should have been finalized a long time ago”, is still offended Twitter.
Musk pledged in April to acquire Twitter for $54.2 per share before backtracking, denouncing the social network’s opacity about measuring the number of fake accounts. The social media network finally announced earlier this week that it had received a letter from Elon Musk’s teams. The richest man in the world would therefore intend to redeem the group, this new twist occurring just before the Delaware trial, which promised to be delicate. Twitter’s intention is confirmed, namely to finalize the transaction under the initial conditions, at $54.2 per share.
Musk had previously tried to abandon the operation. He indeed estimated the proportion of fake and bot accounts on the social network to be far too high, much higher than the “less than 5%” claimed by the group. But the businessman has therefore surprised again with one of his quick turnarounds of which he has the secret. “To buy Twitter is an accelerator to create X, the universal application”, launched the billionaire, earlier this week, in a tweet. “Twitter probably accelerates X by a ratio of 3 to 5, but I could be wrong”, insisted Musk, also evoking “the original X.com vision”, what some believe could be a great application “à la WeChat” including social network, e-commerce and payment.
Yesterday, The Wall Street Journal understood that Twitter and Musk were negotiating details of their final deal ahead of a potential announcement on Monday. The last virulent exchanges by interposed lawyers still leave room for doubt, which explains the differential between recent quoted prices and the price of the long-awaited offer.
Tilray (-11%) relapse on Wall Street, after its powerful rally the day before. The latest quarterly have not convinced. The group limited its losses, but misses the consensus. For the first fiscal quarter, the net loss was $65.8 million or 13 cents per share. Quarterly revenue fell 9% to $153.2 million. The consensus was 7 cents loss per share and $156 million in revenue.
Levi Strauss (-9%) corrects on Wall Street. The group exceeded profit expectations for the quarter ended, but it simultaneously warns about its annual guidance, reduced due to macroeconomic conditions. Thus, the effects of exchange, the slowdown in consumer demand and disruptions in the supply chain will weigh on the annual results, warns the inventor of blue jeans.
Levi Strauss now anticipates, for fiscal year 2022, adjusted earnings per share ranging from $1.44 to $1.49, compared to previous guidance ranging from $1.5 to $1.56. Annual revenue growth is now expected between 6.7 and 7%, or between 11.5 and 12% at constant currencies. Growth at constant currencies was previously expected between 11 and 13%. For the quarter ended, the third fiscal quarter, the Californian group from San Francisco posted adjusted earnings per share of 40 cents, compared to a consensus of 37 cents. A year earlier, adjusted EPS was 48 cents. Quarterly revenue came in at $1.52 billion, missing consensus by 6%.