Wall Street: end of euphoria

(Boursier.com) — Wall Street falls back into pre-session the day after a sharp increase in the three major indices after the announcements of the Fed, which raised its key rate by half a point as expected and will start to reduce its balance sheet from June.

The decision was taken unanimously by members of the Federal Open Market Committee (FOMC), who deemed it “appropriate” to proceed with further hikes in the coming months. The American Central Bank will also begin to reduce its enormous balance sheet (9,000 billion dollars) gradually, from June 1st.

If these decisions were anticipated by the market, the operators have retained the words more ‘dovish’ than expected from Jerome Powell. During the press conference following the Federal Reserve’s announcement, its chairman indeed indicated that the idea of ​​a 75 bp rate hike in the short term was not an option “actively” considered by the Fed. . And this while some observers feared such action by the Federal Reserve to counter galloping inflation. Jerome Powell said he did not see a wage/price spiral that could cause permanent inflation. He assured that he saw a path to a soft landing for the economy, and felt that the U.S. economy was not close to a reversaleven if activity in the 1st quarter contracted by 1.4% on an annual basis, to everyone’s surprise.

As for the latest macro indicators, it’s time for grimace soup. While awaiting monthly labor figures tomorrow, operators learned of a surprise increase in weekly jobless claims last week, a very sharp drop in productivity, as the latest private employment data was released. yesterday by ADP were rather gloomy.

The US Department of Labor has indeed announced, for the week ended April 30, that jobless claims reached 200,000, up 19,000 from the previous week. The consensus was positioned at 180,000. The four-week average was 188,000, up 8,000. Finally, the number of unemployed people receiving benefits for the week ended April 16 reached 1.384 million, down 19,000 over seven days (1.400 million consensus), the lowest since January 1970.

The (non-agricultural) productivity figures for the first quarter therefore also showed a sharp drop in the latter of 7.5%, against -5.4% consensus. Productivity had not decreased so much since 1947! Unit labor costs soared by 11.6% (unheard of since 1982), against +9.9% expected after a rise of 0.9% in the previous quarter.

On the bond markets, yields are going up a little. The rate of T-Bond at 10 years took 0.2 basis points to 2.937% after reaching 3% on Monday in session, its highest level since December 2018. The rate of the T-Bond at 2 yearsmore sensitive to monetary policy, rose 0.8bp to 2.650%.

Without much change before the Fed, perched near its highest levels for 20 years, the dollar fell sharply after the Bank’s announcements, investors, who had “bought the rumor” lately, began to “sell the news”. But the greenback is already moving forward this Thursday. The dollar index, which measures its evolution against a basket of reference currencies, climbed 0.75% to 103.4 points. On his side, the euro down 0.6% to $1.0554.

gold climbed 1.2% to $1,904 an ounce for the June Comex futures contract. On the crypto side, the bitcoin gains 1.7% over 24 hours, around $39,520 on Coindesk.

Finally, oil prices remain well oriented after the European Commission proposed a total embargo on Russian oil as part of the bloc’s sixth round of sanctions against Russia due to the offensive launched in Ukraine. The barrel of American light crude WTI (June futures) advanced 1.3% to $109.2 on the Nymex, while the Brent North Sea climbs 1.5% to $111.8 for the July contract.

Moreover, and unsurprisingly, OPEC and its allies have just agreed on a small monthly increase in their crude oil production. The cartel validated a ‘standard’ increase of 432,000 barrels per day in June. A limited volume in the current context but which many analysts doubt will be reached while most members are facing capacity constraints. “The steady buildup of OPEC supply since mid-2021 appears to be running out of steam,” said Bill Farren-Price, director of Enverus Intelligence Research. “With supply risk increasing as Russian sanctions mount, the organization’s ability to stabilize oil prices is evaporating.”

VALUES TO FOLLOW

* eBay fall of 7% pre-market on Wall Street, weighed down by disappointing guidance. In the second quarter, the American market place, anticipates a turnover of between 2.35 and 2.40 billion dollars against 2.54 billion dollars anticipated by analysts. Its forecast for the full year also came in below market estimates. Adjusted EPS for the three months to the end of June is also expected between 87 and 91 cents against a consensus of $1.02.

After profiting from the health crisis, online retailers are seeing their growth slow as consumers return to stores as stubbornly high inflation begins to undermine household morale. In the first three months of the year, gross merchandise volume — a figure heavily tracked in the e-commerce industry — fell 20% to $19.4 billion. Active buyers on eBay fell 13% to 142 million in the quarter. Adjusted EPS reached $1.05 ($1.04 expected) for revenues down 6% to $2.48 billion ($2.46 billion consensus).

* Metlife. The insurance company on Wednesday published a better-than-expected profit for the first quarter thanks to higher premiums and commissions.

* Booking reported first-quarter earnings that beat analysts’ expectations and said it expects a buoyant summer season, particularly in Europe.

* Twitter. Elon Musk has secured an additional $7.14 billion in funding from a group of investors including Oracle co-founder Larry Ellison to fund his acquisition of Twitter, a document obtained by Reuters shows. Among the investors participating in this operation, we also find Binance, Brookfield Asset Management, Fidelity Management & Research and Qatar Holding. Separately, Twitter received a chilly reception on Wednesday night when it presented a plan to advertisers at an event in New York, three ad agency executives reported, as the social network’s plans were uncertain. since the announcement of its takeover.

* Chinese technology groups listed on Wall Street retreat after the decision by the Securities and Exchange Commission (SEC), the American stock market policeman, to include more than 80 Chinese companies in a list of entities likely to be removed of the stock market.

* AT&T, Verizon Communications, Comcast. Broadband internet service providers in the United States gave up on Wednesday evening to challenge California’s net neutrality law, which prohibits them from blocking or regulating traffic according to usage.

* Berkshire Hathaway. Warren Buffett increases his bet on the American oil group. The Wall Street guru’s firm bought back an additional 5.9 million shares of Occidental Petroleum for about $336 million, raising its stake in the company to 15.2%, a stock market notice released late Wednesday showed. The shares were purchased on May 2 and 3 at a unit price between $56 and $58.37. Occidental, the best-performing stock on the S&P 500 in the first quarter, saw its shares soar on rising oil prices and buybacks of W. Buffett.

* Chesapeake Energy. The investment company Kimmeridge announced on Wednesday that it had taken a 1.5% stake in the capital of Chesapeake Energy and had started discussions with the group’s management in order to boost its share price.