(Boursier.com) — Up at the start of the session, Wall Street is already falling back into the red despite some good corporate results and a slight lull on the bond market. The S&P 500 is currently down 0.17% to 5,043 pts, while the Dow Jones is down 0.16% to 37,740 pts. The Nasdaq lost 0.45% to 15,794 pts. Operators anticipate less and less a potential rate cut from the Fed this year. Jerome Powell’s rather ‘hawkish’ comments last night clearly point in this direction.
The head of the Federal Reserve highlighted the lack of further progress on inflation after the rapid decline seen late last year, noting that it will likely take more time for officials to gain the necessary confidence in the fact that price growth is heading towards the Fed’s 2% target before lowering borrowing costs. If price pressures persist, Jerome Powell added, the Fed can keep rates stable “as long as necessary.” “Given the strength of the labor market and the progress made on inflation so far, it is appropriate to allow more time for restrictive policy to act and to let the data and evolving outlook inform us. guide,” he stressed. This change in tone from the leader shows that officials do not see the urgency to cut rates and suggests that any reduction in 2024 could come relatively late in the year, if at all.
Meanwhile, tensions in the Middle East continue to simmer. Israel is considering a response to what was the first attack on the Jewish state from Iranian soil. Saudi Arabia and the United Arab Emirates on Wednesday called for maximum “restraint” to spare the region “from the dangers of war and its disastrous consequences”, in an unusually frank joint statement.
Fundamental and technical trends in stock markets still appear favorable, suggesting that the recent decline should prove temporary, say HSBC strategists cited by ‘Bloomberg’. US corporate profits are expected to be on a “healthier track” in 2024 and investors are increasingly confident in companies’ ability to meet expectations, Morgan Stanley strategists add.
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In the bond market, Treasury yields are trading in a narrow range, near the highs of the year. The ten-year Treasury rate fell 4.1 basis points to 4.626%, while the two-year rate returned 3.6 bps to 4.954%. The dollar index is stable against a basket of currencies and the euro rebounds by 0.2% against the greenback to $1.0634 between banks. Bitcoin fell again by 1.2% to $62,250. Finally, gold regained 0.4% to 2,394 dollars per ounce, close to its historic highs.
Values
*United Airlines (+10.8%) fell into the red in the first quarter, victim of Boeing’s persistent problems. The American company, which suffered a net loss of $124 million over the period after the Boeing 737 Max 9 was grounded for three weeks following the accident on an Alaska Airlines flight in January, said its adjusted loss reached $50 million, or 15 cents per share, compared to $207 million or 63 cents per share a year earlier. Revenue rose nearly 10% to $12.5 million. Results better than analysts’ expectations.
United, which relies on Boeing planes for about 80% of its fleet, has 86 Max 9s, more than any other airline in the world, and has been particularly hard hit by the U.S. planemaker’s problems. The Chicago-based carrier now plans to take delivery of just 61 Boeing single-aisle planes this year, 40 fewer than expected in January. The move will reduce the group’s capital expenditure by around $2.5 billion this year, to $6.5 billion. The company previously revealed that it had frozen the hiring of pilots and was asking pilots to take voluntary unpaid leave due to the reduction in the number of flights it operates.
United also no longer expects the 737 Max 10, the newest and longest version of the 737, to be delivered this year. This aircraft has not yet been certified to carry passengers by the FAA. With questions about the quality and safety of Boeing planes, certification was likely pushed back to at least 2025. United therefore decided to convert part of its Max 10 orders to Max 9 for deliveries between 2025 and 2027. Despite these disappointments, United wanted to be reassuring. The group anticipates adjusted earnings per share of between $3.75 and $4.25 in the second quarter, compared to a consensus of $3.73. The firm also maintained its full-year earnings outlook between $9 and $11 per share.
* Omnicom (+1.7%) revealed results that beat Wall Street’s expectations in the first quarter thanks to strong demand for its advertising services. On an adjusted basis, the company generated EPS of $1.67 versus $1.55 expected by consensus.
* Morgan Stanley (+1.6%) plans to significantly cut its Asian teams. According to ‘Bloomberg’ sources, the American financial institution plans to cut around 50 jobs in its investment bank in the Asia-Pacific region, with at least 80% of the cuts in Hong Kong and China. The planned cuts would affect about 13% of the region’s 400 bankers, excluding Japan, one of the sources said. The final scale of the plan and the timing of cost reductions could still change. The job cuts would be the largest in years for Morgan Stanley in China, its largest market in the region. The world’s second-largest economy is struggling to find solid footing due to a prolonged real estate crisis and lingering doubts about growth. The bank is expected to begin communicating on the subject with affected employees as early as this week, according to agency sources.
* Eli Lilly (+1.3%). The group’s weight loss drug helped reduce the frequency of irregular breathing in patients with obstructive sleep apnea by up to 63% on average in two late-stage trials, a the company said. In the United States, an estimated 80 million patients suffer from OSA, which interrupts breathing during sleep due to narrow or obstructed airways.
* ASML (-6.8%), one of the main suppliers to semiconductor manufacturers, reported disappointing new orders in the first quarter. The flow of new orders over the first three months of the year dried up to 3.6 billion euros, compared to $9.19 billion in the previous quarter, and a consensus of €4.63 billion. The Dutch firm saw its net profit fall to 1.22 billion euros over the period, for a turnover of 5.29 billion euros compared to 7.24 billion euros a year ago. “Our outlook for the full year 2024 remains unchanged, with the second half expected to be stronger than the first, in line with the industry’s continued recovery from the recession,” said Peter Wennink, chief executive of the group, adding that 2024 is a “year of transition”. The company forecasts a stable turnover in 2024, after 27.6 billion euros achieved last year, but says it is preparing for strong growth in 2025.
* You’re here (-1.2%) is once again asking its shareholders to vote in favor of Elon Musk’s compensation package after a Delaware court overturned the $56 billion award set for the CEO in 2018. Tesla President Robyn Denholm criticized the court’s decision in January, writing that it amounted to second-guessing shareholders who approved Musk’s compensation. Chief Justice Kathaleen St. J. McCormick described the company’s directors as “lying servants of an overweening master” and said they failed to look out for the best interests of shareholders. In a regulatory filing, the company also said it will ask its shareholders to vote on moving the electric car maker’s headquarters from Delaware to Texas. Shareholders will vote on both issues at the group’s annual meeting on June 13.
* U.S. Bancorp drop of 4% after a lackluster publication. The bank cut its interest income forecast for the full year and reported a 22% fall in first-quarter profit. In recent months, U.S. lenders have offered higher interest rates to hold on to deposits, as customers increasingly seek to earn better returns by putting their money in high-yielding alternative products, such as money market funds. . The bank now expects net interest income (NII), the difference between what banks pay to customers on deposits and what they earn in interest on loans, to be between 16.1 and $16.4 billion in 2024, compared to a previous target of more than $16.6 billion. Net operating income fell 14% to $3.99 billion in the first quarter, while net interest margin contracted to 2.70% from 3.10% in the same period. period of the previous year.
* Abbott Laboratories (-3.5%) raises the lower end of its annual profit forecast range, as strong sales of medical devices led to better-than-expected results in the first quarter. The company posted earnings per share of 98 cents for the period on revenue of $9.96 billion. It now forecasts 2024 EPS of $4.55 to $4.70, compared to $4.50 to $4.70 previously targeted. Abbott’s medical device sales have strengthened in recent quarters due to a recovery in demand for joint replacements and other surgical procedures that had been delayed during the Covid-19 pandemic.
* State Street (-0.2%) would be very interested in Société Générale Securities Services (SGSS), the subsidiary dedicated to the securities business of the Banque de la Défense. According to people familiar with the matter cited by ‘Bloomberg’, the Boston-based firm discussed the terms of a possible takeover of SGSS. The French bank would hope to obtain more than a billion euros for the activity in question. The division, which retains 4.7 trillion euros in assets, has also attracted interest from other suitors, and there is no certainty that State Street will reach an agreement, according to the sources.