(Boursier.com) – Wall Street is expected to be fairly stable on Friday, after the fall of the previous day (-1.47% on the DJIA and -2.1%) following worrying US inflation figures. S&P 500, Dow Jones and Nasdaq are nearly unchanged pre-trade. The barrel of WTI crude rose 1.2% to $91. An ounce of gold lost 0.6% to $1,827. The dollar index gained 0.3% against a basket of benchmark currencies. Bitcoin is trading below $44,000. On the bond markets, the yield of the 10-year T-Bond consolidated at 2.01%, while that of the 30-year was just under 2.3%.
Inflation concerns dominate after the US CPI report yesterday Thursday and comments from St. Louis Fed President James Bullard. The market is accelerating bets on a Fed rate hike with 50 basis points now expected in March. Goldman Sachs said it now expects seven Fed rate hikes in 2022, down from five forecast in January. This potential cycle of aggressive Fed tightening and balance sheet relief is obviously weighing on stretched valuations. Flattening yield curves are also fueling the debate about possible weaker growth prospects.
Markets are pricing in a more aggressive Fed tightening cycle following the US CPI report. Futures point to a 50 basis point rate hike probability in March at 70-80%. Goldman Sachs also upgraded its view on rate hikes, forecasting seven consecutive 25bp increases versus five predicted at the end of January. However, this revision to rate expectations may have gone too far, with Bloomberg saying the Fed would actually be in no rush to tighten too quickly.
An emergency rate hike signaled outside of regular meetings would further signal panic and be very badly perceived by the markets.
While St. Louis Fed President James Bullard (voting member) has said he favors a 50 basis point hike in March, Fed ‘centrists’ remain skeptical of such a move. decision, with San Francisco Fed President Mary Daly saying it wouldn’t be her preference and Thomas Barkin of the Richmond Fed not yet being convinced of the need for the eventual move…
The US consumer price index for January rose 0.6% from the prior month, beating the consensus of 0.4% and in line with December’s 0.6%. The annualized reading came out 0.5 points up from the previous month at 7.5%, above the consensus of 7.3% and the highest since February 1982. The underlying CPI (excluding food and energy) increased by 0.6% compared to the previous month, against a consensus of 0.5% and unchanged compared to December. The annualized reading is up 0.5 points to 6% (consensus 5.9%), the highest since August 1982. Food is up 1% from the previous month, new cars are showing prices unchanged, but used car prices are up 1.3%. In the air, prices climbed 2.3%. Rents are also rising. Markets saw big implications for the Fed in the report, increasing the likelihood of a 50 basis point rate hike in March.
In Europe this time, note that Christine Lagarde, President of the ECB, warned of the risk of acting too quickly on rates.
On the economic front on Wall Street this Friday, the preliminary index of consumer sentiment for the month of February 2022 will be released at 4 p.m. (consensus 67.5 against 67.2 in January).
In business news on Wall Street, quarterly financial publications are less numerous, most of the wave having now passed. We can still follow today the latest figures of Dominion, Apollo Global Management, Cleveland Cliffs, Newell Brands, Under Armor, Goodyear Tire & Rubber Where American Axle & Manufacturing.
Values
Goodyear Tire & Rubber is up sharply before the stock market on Wall Street this Friday, while the American tire manufacturer has just published quarterly accounts that are higher than forecast. For its fourth fiscal quarter, the group posted adjusted earnings per share of 57 cents, compared to a level of 44 cents a year earlier and a consensus of 32 cents. Revenues soared to $5.05 billion (+38%), compared to $3.66 billion in the corresponding period last year. Revenue consensus was 4.96 billion.
Unit volumes of tires increased by 29% year-on-year. Replacement tire shipments soared 39%. Quarterly revenue growth excluding the Cooper Tire transaction remains solid at 12%. Quarterly net profit was $553 million and adjusted profit was $162 million.
Apollo Global. The Wall Street Journal reports a close deal from the Apollo Fund to acquire Worldline’s payment terminal business for $2.3 billion – more than €2 billion. The WSJ explains that the pandemic has accelerated the adoption of digital payments, and that Apollo Global Management Inc. is therefore on the verge of sealing an agreement to acquire Worldline’s payment terminals. The newspaper quotes people familiar with the matter, adding that the deal could be announced in the coming days.
The New York firm Apollo Global has also just published its financial results for the fourth fiscal quarter today. Distributable profit increased by 52%, with management and advisory fees from credit operations. This distributable profit represented 483 million dollars for the quarter ended at the end of December, against 317 million dollars a year before. Distributable EPS amounted to $1.05, slightly below market consensus. Disposal proceeds for the quarter were 4.2 billion. The group has also deployed 34.6 billion dollars, dedicated to new investments, mainly in the credit division. Under GAAP, quarterly net profit fell 45% to $234 million. Assets under management rose 3.4% to $497.6 billion.
Newell Brands, an American consumer products company, has just published quarterly profits and revenues above expectations, but its gross margin has declined. The group with the brands Rubbermaid, Sharpie, Elmer’s and Mr. Coffee, has also unveiled a mixed guidance for the quarter started and the year. Net income was $96 million and 22 cents per share for the quarter ended, compared with $127 million a year earlier. Adjusted earnings per share reached 42 cents. Consolidated sales rose 4.3% to $2.8 billion. Management expects 2022 to be another year of progress, despite the difficult environment. Organic growth is expected between 0 and 2%, while adjusted EPS is expected between $1.85 and $1.93.
Zillow jumped before the opening of Wall Street on Friday. The American firm of online real estate ads based in Seattle revealed convincing results last night for the fourth fiscal quarter. The loss of adjusted Ebitda over the period emerged symbolic at 0.4 million dollars, while analysts feared a much larger deficit. The net loss was $261 million, also lower than expected. Revenue totaled $3.88 billion in the quarter ended, versus a FactSet consensus of about $3 billion.
The guidance for the first fiscal quarter is robust, with adjusted EBITDA expected between $124 and $174 million, while the FactSet consensus saw a loss. Revenue is expected between $3.123 billion and $3.443 billion. The group has also introduced a 2025 guidance including revenues of 5 billion dollars and an adjusted EBITDA margin of 45%.
Under Armor, the Baltimore clothing group, beat the Wall Street consensus in the fourth quarter, but warns of trouble ahead. Revenues for the quarter ended increased 15% in the domestic market. Net income was $110 million and 23 cents per share, compared with $185 million a year earlier. Total revenue rose 9% to $1.5 billion (+8% at constant currency). Gross margin climbed 130 basis points to 50.7%. Net profit was $110 million and adjusted profit was $67 million. Adjusted EPS was 14 cents. However, the group expects supply chain concerns to weigh on profits in the coming months.
Stanley Black & Decker is investigating the sale of the Access Technologies unit, Bloomberg reported, citing people familiar with the matter. According to the agency, the US home and garden products giant is working with an adviser to explore options for the division, which could be valued at $500 million and is likely to attract interest from its peers, as well as from private equity firms.
Alphabet remains under surveillance this Friday on Wall Street, while the Competition and Markets Authority (CMA), the British competition authority, which launched an investigation at the beginning of last year into Google’s Privacy Sandbox project consisting in deleting third-party cookies from the Chrome browser, said today that it had obtained new legally binding commitments from the internet giant to address its concerns. The final commitments accepted by the CMA today are the result of extensive investigation and extensive work with Google and market participants, including two formal public consultations.
It should also be noted that European publishers, including Axel Springer, News UK and Conde Nast, have filed a complaint with the European Commission against Google, judging that the American would exercise control over them through advertising technologies.