(Boursier.com) — Wall Street remains fairly well oriented before the market this Friday, with the S&P 500 and the Nasdaq even gaining 0.2%, to their all-time high, compared to a decline of 0.1% on the Dow Jones. The latest US employment figures which have just been announced are quite difficult to read, with job creations for February higher than expected, but a sharply downward revision for the month of January and an increasing unemployment rate. The good performance of the American markets is also explained, once again, by the excellent performance of the Nvidia share, expected at yet another peak in pre-session, up almost 3% over $950 for a close capitalization of 2.400 billion dollars. On Wednesday and Thursday, Jerome Powell, head of the Fed, reassured the markets by mentioning the future rate cut.
Powell first told lawmakers in the House of Representatives that peak rates had probably been reached and that rate cuts were likely “at some point” in 2024. The US central bank should proceed cautiously, however, when It will assess whether inflation is slowing appropriately. “If the economy generally performs as expected, it will likely be appropriate to begin to ease monetary policy tightening at some point this year,” Powell said during remarks before the House Financial Services Committee. The FOMC does not expect it to be appropriate to narrow the target range until it gains greater confidence that inflation is moving sustainably toward the 2% target. , added Powell.
Powell said inflation had improved significantly, but remained above the long-term target of 2%. Demand on the labor market always exceeds supply, and the market therefore remains quite tight. Powell also noted the more general resilience of the economy and consumption. He judges that progress has been considerable over the past year regarding the Fed’s dual mandate relating to employment and inflation (price stability). Nevertheless, Powell highlighted economic uncertainties and does not take for granted the return of inflation to the target… The Fed leader sees risks in a premature reduction… but also in a reduction too late rate.
The Fed will carefully evaluate the new data. The central bank indeed needs a greater degree of confidence in the sustainable return of inflation towards the objective before proceeding with easing. Thus, the American monetary authority should not rush before adjusting rates downward. Potential rate cuts will depend on the trajectory of the economy and inflation. The FOMC, the Fed’s monetary committee, would indeed like to observe additional data confirming disinflation. In the meantime, the strength of the economy and the resilience of the labor market allow the central bank to proceed cautiously.
Quoting…
Yesterday, Powell spoke again before the Senate Committee on Banking, Real Estate and Urban Affairs. He judges that if the economy develops as expected, rate cuts could start well this year. He adds that the Fed is independent and intends to stay out of political issues. Thus, the Fed’s helmsman generally confirms his speech from the day before, specifying that the central bank stands ready to cautiously lift its restrictive policy.
The Fed boss’ testimony comes two weeks before the next monetary meeting, at the end of which officials are expected to keep rates stable for the fifth consecutive meeting, between 5.25 and 5.50%, at the highest of more than 20 years.
The government report on the employment situation in the United States for the month of February 2024 showed 275,000 non-agricultural job creations, against a market consensus of 200,000 and a revised reading – down sharply – to 229,000 for the previous month (353,000 previously estimated). The unemployment rate stood at 3.9%, compared to a consensus of 3.7% and a level of 3.7% also a month earlier. Job creations in the private sector totaled 223,000, compared to 175,000 consensus and 177,000 a month earlier (317,000 for the previous estimate for January). The average hourly wage increased by 0.1% compared to the previous month against 0.2% consensus. It increases by 4.3% over one year. The labor force participation rate has changed little, at 62.5%, in line with market expectations.
According to the CME Group’s FedWatch tool, the probability of an additional monetary status quo leaving the range on the fed funds rate between 5.25 and 5.50% on March 20, at the end of the next monetary meeting, is at 95%. The probability that rates will still remain unchanged on May 1 after the next meeting reaches 71%. The first monetary easing could take place on June 12.
In Wall Street business news, Broadcom, Costco Wholesale, Marvell Technology, MongoDB, DocuSign, Guidewire And Gap, published their quarterly financial results after market yesterday evening. There will be no other notable posts this Friday.
Values
Broadcom, the American chip designer, beat the profit consensus last night on Wall Street for its first fiscal quarter 2024, but the title consolidated after the market despite the prospects of artificial intelligence – and a sales projection of 10 billion dollars worth of AI chips this year. Over the past quarter, adjusted earnings per share were $10.99, above consensus ($10.4 approximately), while revenues were $11.96 billion, compared to $11.8 billion. consensus and 8.92 billion a year before. Business growth was therefore 34%, while net profit reached $1.32 billion on a GAAP basis and $5.25 billion on an adjusted basis. For fiscal 2024, Broadcom still expects revenue of around $50 billion, including VMware. Annual adjusted EBITDA is expected to be around 60% of revenues.
Costco beat the profit consensus last night, but its revenues came in below expectations for the second quarter of the 2024 financial year. The American distribution giant, based on the warehouse club model accessible by membership to individuals and professionals, has posted quarterly adjusted earnings per share of $3.92, well above consensus (approximately $3.6). Revenues amounted to $58.4 billion, up 5.7% year-on-year, but slightly below expectations since analysts on average expected a level of more than $59 billion. Same-store sales, excluding gasoline and foreign exchange, increased 5.8%. In the United States, like-for-like growth was 4.8%.
Gap. In the fourth fiscal quarter, the group posted revenues of $4.3 billion, an increase of 1%, while annual turnover declined by 5% to $14.9 billion. Operating margin improved to 5% in the final quarter of the fiscal year, while annual adjusted operating margin was 4.1%. Quarterly net profit was $185 million, while full-year net profit reached $502 million. For the closed quarter, revenue consensus was at $4.2 billion. Quarterly adjusted earnings per share were 49 cents, compared to a consensus of just 20 cents.
Thus, the brand’s recovery efforts seem to be paying off, with a return to modest growth and a strong improvement in profitability. For the current financial year, Gap expects its sales to be roughly stable, with the retailer citing the still uncertain consumer and macroeconomic environment. For the current quarter, Gap expects net sales of $3.3 billion.
DocuSign, the Californian electronic signature giant, published a better-than-expected fourth quarter. Adjusted earnings per share were 76 cents, compared to 64 cents consensus and 65 cents a year earlier. Revenues totaled $712 million, growing 8% year-over-year, compared to a market consensus of $698 million. Subscription revenue was $696 million, an increase of 8%. Professional services and other revenue was $17 million, a growth of 5%. Cash, cash equivalents, restricted cash and investments were $1.2 billion at the end of the quarter. For the year, revenues were $2.8 billion, for adjusted EPS of $2.98. For the current financial year, revenues are expected between $2.915 and $2.927 billion, for an adjusted operating margin ranging from 26.5 to 28%.
Marvell Technology, the American designer of ‘chips’, corrects Wall Street following its quarterly publication. For the fiscal fourth quarter, closed, revenue was $1.43 billion, in line with expectations. Adjusted earnings per share were 46 cents, also in line with market consensus. For the current quarter, i.e. the first fiscal quarter of 2024, adjusted earnings per share are anticipated at 23 cents, plus or minus 5 cents, compared to 40 cents consensus. The group expects quarterly revenues of 1.15 billion dollars, plus or minus 5%, far from the consensus which stood at 1.37 billion. Marvell also announced a $3 billion share repurchase authorization. Management says it has “incredible confidence” in the business and prospects, but the market disagrees, with AI’s prospects not masking weakness in wireless infrastructure businesses and consumer markets and businesses.
Taiwan Semiconductor Manufacturing Company, a Taiwanese semiconductor foundry giant, gained another 3% before market trading on Wall Street, the highest ever for an expected capitalization of more than $640 billion. For the first two months of 2024, the group posted growth in its activity of 9.4% with the development of artificial intelligence, which now offsets the weakness of smartphone activities with the slowdown of the iPhone. TSMC therefore announced revenues for the months of January and February totaling 397.4 billion Taiwan dollars, or approximately $12.6 billion. This is a good performance, given the current weakness of Apple – a customer which accounted for a quarter of TSMC’s activity last year. TSMC is also Nvidia’s main production subcontractor.
Nvidia therefore remains in the spotlight this Friday on Wall Street, driven in particular by these good figures from TSMC. The title of the American graphics and AI chip giant reaches a new high for a market capitalization of more than 2,400 billion dollars. While the value is rapidly approaching $1,000, also driven by favorable opinions from brokers, Bloomberg notes that the group would be well placed to carry out a “split” of its action. The last one, four to one, was operated in May 2021 when the stock was worth around $600. A new split would make the stock more affordable for small shareholders, notes the director of a management house cited by Bloomberg.
Eli Lilly. The FDA, the American drug authority, has postponed its verdict on donanemab, an experimental Alzheimer’s treatment for early-stage patients, by several months. No date has been set for the meeting of the advisory committee responsible for reviewing the treatment. Lilly, however, maintains its annual financial forecasts.