(Boursier.com) — The geopolitical crisis is affecting the pre-market stock indices on Wall Street, after the Hamas attack on Israel, but the American stock seems to be holding up for the time being. The S&P 500 lost 0.5%, the Dow Jones 0.4% and the Nasdaq 0.7%. Crude prices are however rising sharply, with a barrel of WTI crude up 3.5% to $85.7 and Brent from the North Sea up 3.4% to $87.4. An ounce of gold rose 1% to $1,864. The dollar index advances 0.5% against a basket of reference currencies. On the bond markets, closed for Indigenous Peoples Day, the yield on the 2-year T-Bond remains at 5.08% at last reading, compared to 4.8% on the 10-year and 4.96% on the 30-year – which had even crossed 5% on Friday following the announcement of a very solid report on American employment for the month of September.
It’s ‘Indigenous Peoples Day’, formerly ‘Columbus Day’, in the United States this Monday, but the stock markets remain open. On the economic front, the day will be calm, with interventions from the President of the Dallas Fed, Lorie Logan, and Michael Barr.
Lorie Logan said the Fed may have to do more to curb inflation if the economy continues to surprise on the upside. In a speech in Dallas at the annual meeting of the National Association for Business Economics, Logan noted the recent surge in long-term bond yields, without adopting an overly flexible stance. “However, to the extent that the strong economy is driving the rise in long-term interest rates, the FOMC may need to do more,” said Logan, who anticipates that the Fed will have need to maintain restrictive financial conditions to bring inflation back towards the 2% objective.
Logan said that while welcome progress on inflation had been made, monthly inflation data remained somewhat patchy. It would therefore still be too early to say with certainty that inflation is heading towards 2% in a sustainable and timely manner. She also notes that even if the job market is no longer as dynamic as a year ago, it remains very solid overall.
Fed Vice Chairman of Supervision Michael Barr, meanwhile, pushed back against recent claims that a new U.S. proposal requiring banks to shore up their reserves would reduce lending and hurt the economy, telling bankers that their industry prospered after regulators imposed changes in the wake of the 2008 financial crisis. At least that’s what Barr said in a speech Monday to the American Bankers Association in Nashville.
Sectorally speaking, the big stocks in the defense sector and the oil majors should make strong progress today on Wall Street. The air compartment could, however, suffer.
In Wall Street business news, PepsiCo publishes its quarterly results tomorrow Tuesday, while Fastenal, Delta Air Lines, Infosys, Walgreens Boots Alliance And Domino’s Pizza announced Thursday. Friday, UnitedHealth, J.P. Morgan, BlackRock, Citigroup, Wells Fargo, PNC Financial And Progressive Corporationwill publish their results, marking the start of the quarterly season with, as usual, major financial stocks.
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Microsoft will unveil a new AI chip at its developers conference next month, according to ‘The Information’, which reports that the chip in question would be “similar” to GPUs from Nvidia and designed to run in data centers serving LLMs (large language models). The Information adds that Microsoft is still considering whether to offer the chip to Azure customers. The article notes that Microsoft has been working on the chip codenamed Athena since 2019, and that its existence was reported earlier this year. Microsoft’s developer conference begins on November 14.
Remember that OpenAI, the creator of ChatGPT, would also consider, according to Reuters, designing its own artificial intelligence chips and would have gone so far as to evaluate a potential acquisition target for this. Reuters cited people familiar with the plans last week. OpenAI, however, has not yet decided to move forward, according to recent internal discussions seen by Reuters. For at least the last year, the group has reportedly been discussing various options to resolve the shortage of expensive AI chips that OpenAI relies on. Options considered include building a dedicated AI chip factory, working more closely with other chipmakers including Nvidia, and diversifying suppliers beyond Nvidia.
You’re here remains under surveillance this Monday on Wall Street, while its sales of electric vehicles produced in China fell by 10.9% year-on-year in September. Citing data released on Sunday by the China Passenger Car Association (CPCA), Reuters reports that Tesla saw a 10.9% decline in sales of Chinese-produced electric vehicles, with 74,073 units sold in September, compared to the same period. from last year. Sales figures for Tesla’s China-made Model 3 and Model Y vehicles fell 12% from the previous month. At the same time, Chinese automaker BYD recorded an increase in vehicle deliveries of 42.8%, from 200,973 units in September last year to 286,903 units last month, with its EV and hybrid models. Reuters notes that Tesla is delivering more exported vehicles from China at the start of the quarter, before focusing on local deliveries at the end of the quarter.
Walt Disney is moving in the red for the hour before market on Wall Street. However, according to the Wall Street Journal, activist Nelson Peltz’s Trian Fund Management fund has increased its stake in the entertainment giant and is expected to request several seats on the board of directors. One of the seats would concern Peltz himself, which would thus signify his involvement. The WSJ reports that Trian is now one of Disney’s largest shareholders with a stake worth more than $2.5 billion. The activist thus holds more than 30 million Disney titles, compared to around 6.4 million at the end of the second quarter. According to people familiar with the matter cited by the Wall Street Journal, Trian considers Disney stock significantly undervalued and believes that the group needs a “more focused” board of directors.
Ford Motor announced late last week its intention to eliminate 495 additional jobs in Michigan and Ohio, due to the impact of the auto strike led by the United Auto Workers union. The American automaker said 470 positions would be cut at two sites dedicated to engines in Ohio. According to Reuters, this brings the Ford layoffs justified by this UAW strike to around 1,800 jobs. The union chose Friday not to extend the strike to additional sites, while nearly 8,000 employees of the manufacturer are already on strike.
Bristol-Myers Squibb will acquire Mirati Therapeutics in a transaction valuing the oncology treatment developer up to $5.8 billion. The New York biopharmaceutical company announced yesterday Sunday that it had entered into a definitive merger agreement with Mirati under which it would pay $58 per share in cash. San Diego-based Mirati Group is rolling out its first product to patients, a drug called Krazati, used as a second-line treatment for a type of lung cancer in which the KRAS gene has mutated. The lab received accelerated approval from the Food & Drug Administration for the treatment in December. A divestiture will give Mirati additional resources to help it commercialize the treatment and fund further studies. Since August, Mirati’s CEO and CFO have resigned. Bloomberg News had already reported last year that the group was attracting the interest of large pharmaceutical companies with a view to a potential takeover…
Sanofi was also considered among the potential buyers of the Californian laboratory, but it is Bristol-Myers which seals the deal. The total equity value of the operation reaches $4.8 billion, but Mirati shareholders will also receive a CVR (contingent value right) for each security held, with a potential value of $12 per security in cash, i.e. an additional transaction amount of one billion dollars. The transaction was unanimously approved by the boards of directors of Bristol-Myers and Mirati. The transaction is expected to be treated as a business combination and to be dilutive to BMS’ adjusted earnings per share of approximately 35 cents within 12 months of closing.
Arm Holdings rises again a little before market on Wall Street to $54, while several brokers have just initiated their hedging. Goldman Sachs initiated its recommendation on the file at buy, setting a price target of $62. JP Morgan appears to be ‘overweight’ with a target of $70. Citi is targeting $65 and also recommends buying. Bank of America displays comparable advice and objective, just like Barclays… The British chip designer controlled by the Japanese SoftBank was listed last month on Wall Street, on the Nasdaq, allowing SoftBank to raise 4.87 billion of dollars based on the 95.5 million titles offered.
Citigroup sells its consumer wealth portfolio in China, including assets under management and deposits, to HSBC Holdings. The transaction covers total deposits and investment assets of approximately $3.6 billion and is expected to be completed in the first half of 2024. Financial details of the transaction were not disclosed. “Today’s announcement advances the cessation of Citi’s consumer banking business in China,” the bank said.