(Boursier.com) – Wall Street now corrects this Tuesday, after the intervention of Jerome Powell. The S&P 500 dropped 0.78% to 4,017 pts, the Dow Jones lost 0.75% to 33,179 pts and the Nasdaq lost 0.72% to 11,591 pts. On the Nymex, a barrel of WTI crude fell 2.1% to $78.8. An ounce of gold returned 1.7% to $1,823. The dollar index rose 0.6% against a basket of currencies.
Jerome Powell, the head of the Fed, speaks today before the Banking Committee of the United States Senate. He believes that the strength of the economy suggests that the rate peak will be higher than previously expected. Indeed, inflationary pressures are stronger than expected. The magnitude of the price revisions suggests that inflation is higher than expected… The new data therefore suggests that the ultimate level of rates will be “probably higher than previously expected”. If the data warrants it, the US central bank also stands ready to possibly increase the pace of rate hikes. According to Powell, restoring price stability will require a restrictive monetary policy posture for some time.
Jerome Powell says historical data shows the risks of easing monetary policy prematurely. “We will stay the course until the job is done,” assured the leader of the Fed, specifying that the decisions would be taken “meeting by meeting”, and while the full effect of the monetary tightening is not yet feeling. Powell believes that there is still a long way to go to bring inflation under control and that it will probably be strewn with pitfalls. He notes that at the same time, the US job market remains extremely tight.
In another register, Powell also indicates that the Fed is “monitoring the cryptocurrency space”, where there has been “a lot of disruption”.
Jerome Powell comes with his comments to skyrocket expectations of rate hikes. The leader, who had noted in February the beginning of a process of disinflation, has just cooled the markets by reporting a potential peak in higher rates. According to the CME Group’s real-time FedWatch tool, there are now nearly equal odds (52% vs. 48%) of a rate hike of 25 or 50 basis points on March 22! Again this morning, the hypothesis of a move of 25 bp was considered much more likely. Regarding the next meeting, of May 2 and 3, the most important probability is now that of a range of 5.25 to 5.5% (49% of ‘proba’), whereas before Powell’s intervention , the assumption of a range of 5-5.25% prevailed. For June 14, the most probable hypothesis at the moment is a range of 5.5 to 5.75% (44% probability). Rates could peak at this level, between 5.5 and 5.75%, although the 6% is not excluded.
Two big events are expected this week, with Fed Chairman Jerome Powell’s monetary policy testimony before the Senate Banking Committee on Tuesday and the House Committee tomorrow Wednesday, and the February US jobs report on Friday. . The latter is likely to be an influential directional mover for the market given the data reliance rightly pointed out by Powell’s Fed. UBS expects Powell to tell Congress that the Fed remains rightly dependent on data and still has work to do. Non-farm payrolls are expected to rise by 215,000 in February in the US, after January’s outsized gain of 517,000. The potential slowdown in February, however, should not undermine the tight labor market narrative. The US unemployment rate for February is expected to be stable at 3.4%. Job creations in the private sector are expected at 213,000 against 443,000 a month earlier.
Elsewhere in the world, German industrial orders for the month of January surprised up 1% compared to the previous month against -1% of FactSet consensus, which brings their decline to 10.9% year-on-year against -13% of consensus. Spanish industrial production in January also beat expectations, growing by 1.2% compared to the previous year.
It should also be noted that the Australian central bank raised its main key rate on Tuesday to its highest level in more than ten years, but left open the possibility that there was only one increase in the tightening cycle, while consumption is slowing down and the inflationary risk seems less substantial. The Reserve Bank of Australia (RBA) therefore raised its key rate by 25 basis points to 3.6%, the tenth increase since May. However, the bank is no longer referring to rate increases, but to “a” potential further tightening.
Finally, on the geopolitical front, Beijing blamed the United States on Tuesday for the growing tensions between the two superpowers, warning of a risk of “conflict and confrontation” if Washington did not change the trajectory. Speaking to reporters in Beijing on the sidelines of the annual plenary session of parliament, Reuters reports, the Chinese foreign minister also said an invisible hand seemed to be fueling the conflict in Ukraine.
Values
Meta (+1%), ex-Facebook, will still cut thousands of jobs even though its CEO had pledged not to reduce the workforce. The Bloomberg agency, citing people familiar with the subject, confirms recent information from the Washington Post and adds that the additional layoffs will take place this week. In November, the group of Mark Zuckerberg had announced, let us remember, a vast social plan, eliminating 13% of its workforce, which represented more than 11,000 jobs.
Salesforce.com (stable) has just announced a partnership with OpenAI (ChatGPT) and other firms in generative AI. The San Francisco firm will add ChatGPT to its Slack collaborative software as part of the OpenAI partnership. More generally, Salesforce will add generative artificial intelligence to its enterprise software. The San Francisco group says its “EinsteinGPT” technology will combine its proprietary AI with that of other partners, including OpenAI, to help enterprise customers generate email drafts, customer account information and computer code.
General Motors (-1%). Cruise, GM’s autonomous vehicle unit, will cut spending this year, according to a senior executive quoted by Reuters. Growing losses from self-driving vehicle companies have raised concerns among investors, the agency said, which says GM “spent” nearly $2 billion on Cruise last year. “We will continue to look at hardware, software – both in terms of component costs and quantity of components on the vehicle – and will continue to reduce costs as we move forward,” Cruise’s COO said. , Gil West, at a technology conference, without quantifying the level of expenditure this year.
Rivian Automotive (-12%), the American manufacturer of electric vehicles supported by Amazon, plans to sell green bonds for $1.3 billion, as weakening demand and high costs weigh on the liquidity of Tesla’s smaller rivals. Initial investors will have an option to purchase an additional $200 million of bonds for settlement 13 days after the bond issuance, Rivian said. This capital will help facilitate the launch of Rivian’s R2 family of vehicles. The convertible debt was “an optimal cost of capital relative to selling securities at current levels,” a spokesman for the Irvine, California-based automaker, which makes electric pickup trucks and SUVs, told Reuters.
Dick’s Sporting Goods, an American sporting goods distribution group, climbed 9% on Wall Street following its publication. For the fourth fiscal quarter, like-for-like growth was 5.3%, while total sales rose 7.3% to $3.6 billion. Consolidated net profit declined 32% to $236 million, while adjusted earnings per share fell 20% to $2.93. The consensus over the period was $2.88 adjusted EPS for $3.45 billion in revenue. Annual revenues reached a record $12.4 billion, up 0.6% compared to the previous year and 41% compared to 2019. The group raised its annualized dividend to $4 per share, more twice the previous dividend.
BlackBerry lost 13% on Wall Street, after an annual activity guidance below expectations. Preliminary FY2023 revenue is estimated at approximately $656 million, with IoT revenue of $206 million and cybersecurity revenue of $418 million. The consensus was $675 million in total annual revenue.