(Boursier.com) — The US rating is widening its losses on Friday, after learning of worrying inflation figures for the month of January, which could prompt the Fed to adopt an even tougher policy. The comments of Jefferson and Mester of the American central bank are not reassuring either… The S&P 500 drops by 1.67% to 3,945 pts, the Dow Jones by 1.47% to 32,667 pts and the Nasdaq by 2.17 % at 11,338 pts. On the Nymex, a barrel of WTI crude lost 0.6% to $75. An ounce of gold returned 0.5% to $1,817. The dollar index gained 0.6% against a basket of benchmark currencies.
Personal income of US households for the month of January rose 0.6% compared to the previous month, against a consensus of 0.9%, while personal consumption expenditure appreciated by 1.8% against 1 .3% FactSet Consensus. But the markets were mainly watching today the ‘core PCE’ price index linked to household spending. This indicator, excluding food and energy, shows an increase of 0.6% compared to the previous month against 0.4% of consensus, an increase of 4.7% year-on-year against 4.3% expected. This is therefore another disappointing reading on US inflation.
A month before, in December, the core PCE price index had climbed 0.4% from November, a 4.6% year-on-year gain (upward-revised readings). Despite the upward adjustment in the December figures, the January figures point to an acceleration in consumer price inflation.
The final index of U.S. consumer sentiment from the University of Michigan was revised to 67 for the month of February 2023, down from 66.4 from the FactSet consensus and 66.4 also from the preliminary reading.
New home sales in the United States for the month of January 2023 came out at a pace of 670,000 units, against 618,000 FactSet consensus and 625,000 a month earlier (upward-revised reading).
The Fed’s Philip Jefferson, Loretta Mester and Susan Collins speak during the day. Jefferson says the Fed is responding to inflation quickly and aggressively to preserve credibility and anchor the decline in inflation. The member of the board of governors adds that wage growth is still too high for the return to the 2% inflation target. The outlook for inflation in non-real estate services will depend on the rebalancing of labor demand and supply, he said. For now, this imbalance suggests that high inflation can only come down slowly. Jefferson points out that the current situation is different from previous fights against inflation, and that the argument that central bankers must accept the cost of disinflation makes sense. He believes that the current credibility of the Fed is higher now than in the 1960s or 1970s…
Loretta Mester, boss of the Cleveland Fed, indicates for her part that the Fed must do a little more to fight against inflation. She hopes that inflation can be brought under control without triggering a recession, but adds that inflation risks remain on the upside. In an interview with Bloomberg, Mester notes that inflation readings are still not at the desired level. She believes that today’s report on core PCE inflation shows that the Fed needs to do a little more to ensure that this inflation returns to target. Mester did not comment on the Fed’s next move, though she had previously not ruled out a 50 basis point move. Rather than say more about her expectations for the next meeting, she prefers to point out that the terminal rate, or the level of the ‘peak rates’, matters more. In an earlier interview with CNBC, Mester mentioned his support for a final rate “somewhere above 5%” later this year, which should hold for some time.
Jamie Dimon, the emblematic boss of JP Morgan Chase, does not rule out the hypothesis of a 6% rate in the United States, while inflation remains pressing. Asked by CNBC, the leader of JP Morgan thinks the Fed should probably take a break on rates at just over 5%, while the current range for the rate of ‘fed funds’ is 4.5 to 4.75 %. Nevertheless, the leader says he suspects that rates could go even higher to reach 6%. This level would therefore go quite clearly beyond the current terminal rate assumption of the American central bank, which would rather be in a range of 5.25 to 5.5%.
Values
block (+1%), ex-Square, the mobile and electronic payment specialist, led by Jack Dorsey, is resisting Wall Street. For the fourth fiscal quarter, the group published adjusted earnings per share of 22 cents, yet below the consensus which was 30 cents. Total revenue meanwhile reached $4.65 billion, versus the consensus $4.61 billion. The growth of Cash App, the mobile payment service developed by the group, supported the results. Block posted gross margin of $1.66 billion in the quarter, up 40%, beating expectations. The unadjusted net loss was $114 million or 19 cents per share. Cash App improved its gross margin by 64% to $848 million in the quarter.
Booking Holdings (+1%) posted better-than-expected results and record revenues in 2022, with the resumption of travel. Gross bookings, which include all travel services booked by customers net of cancellations, soared to $27.3 billion in the fourth quarter. Analysts were anticipating a level of $26.2 billion. Booked nights, which reflect Booking’s largest category of travel services, were 211 million in the quarter, in line with expectations. Quarterly net profit was $1.23 billion or $31.92 per share, compared to $618 million a year earlier. Adjusted EPS was $24.74, versus consensus around $22. Quarterly revenue hit $4 billion, up from $3 billion a year earlier.
Warner Bros. Discovery (+1%) unveiled for the fourth quarter an adjusted Ebitda of 2.6 billion dollars, in line with the FactSet consensus. Revenues, on the other hand, disappointed, standing at 11 billion dollars against 11.2 billion of consensus. The adjusted loss per share is heavier than expected. The total number of DTC subscribers increased by 1.1 million, but the consensus was at 1.6 million. The media giant is targeting $3.5 billion in synergies and cost savings over the next two years, including $750 million in 2022 and $2 billion in 2023. In the quarter to the end of December, the group posted a net loss of $2.1 billion, after a deficit of $2.3 billion in the third quarter.
Adobe (-8%) fall on Wall Street, the Bloomberg agency believing that the US Department of Justice is preparing to block its proposed acquisition of Figma for 20 billion dollars. The agency specifies that the DoJ would prepare an antitrust action to block this takeover of the graphics and design prototypes editor. The agency cites sources familiar with the matter as saying the antitrust lawsuit could be upheld as early as next month. Adobe said its business segments are different from those of Figma, which focuses on interactive designs. The group also says it is engaged in constructive discussions with regulators around the world. Adobe still intends to complete the operation this year…
Autodesk (-11%), the American software publisher known for its AutoCAD product, stalled on Wall Street, while its revenues and profits for the fourth fiscal quarter nevertheless exceeded market expectations. Over the period, adjusted earnings per share were $1.86, compared to consensus $1.81 and $1.5 a year earlier. Revenues totaled $1.32 billion, compared to $1.21 billion a year earlier. The company posted fourth-quarter net income of $293 million, $1.35 a share, from $89 million a year earlier. Nevertheless, the outlook is considered disappointing, while the group notably delivers guidance for the first quarter below expectations. Autodesk expects earnings of $1.50 to $1.56 per share on revenue of $1.26 billion to $1.28 billion for the first quarter.
Beyond Meat (+25%), fallen star of Wall Street and leader of plant-based meat substitutes, ignites on the stock market. The group achieved in the fourth quarter revenues close to 80 million dollars, compared to a market consensus of 76 million dollars. US domestic sales also exceeded market expectations. Ethan Brown, CEO of the business, believes that Beyond Meat is making solid progress in its transition to a sustainable growth model. Regardless, quarterly revenue still fell 21%, which isn’t really the definition of growth. The group now plans, for the year started, revenues ranging from 375 to 415 million dollars, surrounding the consensus of analysts. Over the quarter, the adjusted EBITDA loss was $56 million and the group continued to burn cash at a steady pace. Cash reserves at the end of the period were $310 million.
Boeing stumbles 4% on Wall Street, penalized by the announcement of the cessation of deliveries of Dreamliner due to a documentation problem linked to a component of the fuselage. Boeing said on Thursday it “discovered an analysis error from our supplier related to the 787’s forward pressure bulkhead,” resulting in a pause in deliveries. And this only a few months after their resumption in August. The aircraft manufacturer discovered the problem in certification documents provided to the Federal Aviation Administration and notified the regulator. The component acts as a barrier between the pressurized interior cabin and the radome. It was provided by Spirit AeroSystems, which said it was too early to say it had made the “analysis error”.