(Boursier.com) — Wall Street is currently on an upward trend this Friday, trying to recover following two sessions of a fairly brutal purge in reaction to the Fed’s very firm speech concerning the sustainable level of high rates. The S&P 500 rose by 0.45% to 4,349 points, the Dow Jones by 0.13% to 34,115 points and the Nasdaq by 0.82% to 13,333 points. On the Nymex, a barrel of WTI crude rose 1.1% to $90.6. An ounce of gold gains 0.4% to $1,947. The dollar index agrees 0.1% against a basket of reference currencies.
On the bond markets, the yield on two-year Treasury bonds consolidates slightly at 5.09%, compared to 4.44% for the 10-year and 4.53% for the 30-year.
The preliminary US Composite Markit PMI for September 2023 stood at 50.1, very close to the market consensus of 50, after a reading of 50.2 a month before. This index signals activity close to equilibrium. The manufacturing PMI came in at 48.9 versus the FactSet consensus of 47.9, while the services indicator came in at 50.2, in line with market estimates.
Lisa Cook, Governor of the Fed, also intervenes, while Mary Daly, boss of the San Francisco Fed, will be followed later in the day. Cook’s intervention in Canada is linked to an NBER (National Bureau of Economic Research) conference concerning artificial intelligence. In her prepared remarks, she did not discuss economic or monetary policy. Daly, for her part, generally tends to give a speech very similar to that of Powell.
The Fed had previously weighed down the American rating since Wednesday evening. The US central bank left its rates unchanged, as expected, between 5.25 and 5.5% on federal funds, at a 22-year high, and signaled an additional hike possible by the end of the year , in order to ensure that inflation is brought back towards the 2% objective. Interest rate projections for the end of the year range from 5.5% to 5.75%, signaling a potential further tightening of a quarter point. Twelve members of the FOMC, the Fed’s monetary committee, consider an additional increase necessary, while seven would opt instead for a status quo until the end of the year. Expectations have also risen regarding rates for next year, which shook the markets and in particular the Nasdaq.
Fed officials expect rates to fall only 0.5% next year from the potential peak of 5.5-5.75%, meaning rates will therefore remain “higher higher, longer”. In June, Fed members instead forecast a one percentage point drop in rates in 2024 compared to the peak. In other words, expectations regarding rates for next year have risen by 50 basis points, which is a lot to digest for markets which were holding out hope of a more pronounced pivot in the medium term.
Jerome Powell also failed to provide any reassurance to markets, emphasizing the strength of economic activity and expressing concern about rising crude prices – which obviously complicates the fight against inflation. Overall, this stronger-than-expected or more resilient economy means “we need to do more with rates,” according to Powell. Fed members also consider inflation still high and remain attentive to the related risks. In any case, they are now counting on inflation of 3.7% at the end of the year compared to 3.9% previously. Next year, this American inflation should decline to 2.6%, according to US central bankers. Powell, for his part, has noted good inflation readings for three months, but would like to see even more.
Powell also stressed that the Fed would remain data dependent. He thus believes that the rate forecasts do not constitute an action plan but anticipations of the members of the Fed. Thus, the central bank will take its monetary decisions “meeting by meeting”, leaving open the possibility of further raising rates if necessary. The Fed leader, however, does not believe that the aggressive rate hike will cause a slowdown. He says the hypothesis of a soft landing is plausible, although other factors could weigh on the outlook.
According to the CME Group’s FedWatch tool, the probability is now 27.4% of a rate increase of 25 basis points on November 1, following the next monetary meeting, compared to 72.6% probability of a status quo. The tool gives more than 36% probability of a quarter-point rate increase by the end of the year and even 5.6% for an increase of 50 basis points compared to current levels .
Salesforce (stable), the Californian software publisher, announced an agreement to acquire Airkit.ai, the financial terms of which were not disclosed. Airkit.ai is a creator of artificial intelligence-powered customer service applications and experiences. Once the acquisition is finalized, Airkit.ai will become part of Service Cloud and will continue to be led by Adam Evans, the company’s co-founder and CTO. The transaction is expected to close in the second half of Salesforce’s fiscal 2024. This transaction does not result in any change from the company’s current financial guidance previously provided on August 30, 2023, Salesforce said.
Walt Disney (stable). Rumors of Disney’s discussions about a sale of ABC are greatly exaggerated, according to the New York Post. Sources close to the matter told the NY Post that no banker had been hired and that no sales documents would be circulated, while Nexstar, which reportedly began preliminary negotiations last week regarding the acquisition of ABC, would not be in a good position to pay what Disney would likely consider for ABC, given that a realistic price for the business would be between $7 billion and $8 billion, which would “terrify” Nexstar shareholders. A source with direct knowledge of the situation adds that a major private equity firm has expressed interest in a deal with Disney in recent days. The entertainment giant responded that it was evaluating its options on ABC and had not initiated a sales process…
Microsoft (stable) could well obtain the agreement of the British CMA for the takeover of the video game publisher Activision Blizzard (+2%) for 69 billion dollars. Thus, the restructured deal paves the way for approval, according to the British antitrust regulator, which blocked the operation in April due to the supposed excessive control it would have given to the Redmond software giant in the cloud gaming market. In August, however, Activision agreed to sell to Ubisoft cloud streaming rights to ‘Call of Duty’ and any other current or future Activision-Blizzard title for 15 years following its acquisition by Microsoft. The British Competition & Markets Authority (CMA) considered that this divestment “substantially addresses” its previous concerns. The CMA has only identified “residual concerns” about the new deal, and Microsoft has put forward solutions which the British authority believes should resolve the remaining problems.
Amazon (+2%) has as expected indicated that Amazon Prime Video will include limited advertisements from the beginning of 2024. The group plans to broadcast significantly fewer advertisements than traditional television and other streaming TV service providers. Ads in Prime Video content will be introduced in the US, UK, Germany and Canada in early 2024, followed by France, Italy, Spain, Mexico and Australia later in the year. ‘year. No action is required for Prime members… The group will not make any changes in 2024 to the current price of Prime membership, but will offer a new ad-free option for an additional $2.99 per month for members US Prime, with other countries to follow at a later date.
McDonald’s (+1%) will increase the price of the royalty for new American franchise operators for the first time in almost three decades, according to an internal letter seen by Reuters. Thus, the American fast food giant will increase the commission imposed on its franchisees for its brand from 4% to 5% from January 1, for any open restaurant. According to the letter seen by Reuters, this price increase will help the group maintain its competitive advantage, so that it can continue to “provide opportunities for small, independent business owners and their families for generations to come.”
Apple (+1%) would experience some success with the launch of its new iPhone range in China, according to the first local reports. As of 10 a.m. Beijing time on Friday, sales of the iPhone 15 on the JD platform had jumped 253% compared to those of the iPhone 14 last year, indicates the CNBC site, or 25,000 phones already sold . The media are also getting excited about the queues in Beijing or Shanghai for the release of new smartphones… In India this time, Apple is expected to gain a larger share of the local market with its iPhone 15 Pro and Pro Max devices at the high end. The group could reach 7% of smartphone sales in India over the period from July to December, compared to 5% in the first half of 2023. This is at least what the Reuters agency indicates, citing data shared exclusively by the Counterpoint firm. Wait times in India for the 15 Pro and Pro Max models extend until the end of October, mirroring trends seen in China and the United States.
Counterpoint estimates that the models will account for 25% of overall iPhone 15 shipments in India in the fourth quarter, a 4% growth over what previous-generation high-end models accounted for a year earlier.
Ford (+3%). According to a source familiar with the Reuters negotiations, the United Auto Workers, an American industrial union, is expected to announce significant progress towards an agreement with the manufacturer on new employment contracts, before the extension of his strike. The UAW indicated earlier this week that it would not add additional Ford plants to its strike action if it saw significant progress.