Wall Street is consolidating strongly for now, before trading on Thursday, the DJIA lost 1.4% and the S&P 500 1.6%, compared to a 1.8% drop on the Nasdaq. Last night, markets reacted strongly to the Fed’s unusual announcements, with a 1% rise on the Dow Jones and a 2.5% jump on the Nasdaq. The trend therefore seems much less favorable, after this brief technical leap and while S&P remains at the threshold of a ‘bear market’ level.
On Nymex, a barrel of WTI crude oil rose 0.5% to $ 114.7. An ounce of gold rose 0.6% to $ 1,831. The dollar index lost 0.3% against a basket of currencies. Bitcoin is recovering slightly to $ 21,000, after a recent purge.
According to today’s report in the United States, the start of housing in May 2022 came out at a rate of 1.549 million units, compared to 1.72 million market consensus and 1.81 million a month earlier. There were 1.695 million building permits, compared to 1.8 million by consensus and 1.82 million in April.
The Philadelphia Fed’s manufacturing index for June was negative at -3.3, compared to the FactSet consensus of +5.
The weekly unemployment claims for the week ending June 11 were 229,000, compared to a consensus of 218,000 and 232,000 for the revised reading of the previous week.
The US Federal Reserve raised its main key rate yesterday on Wednesday by three quarters of a point (75 basis points) to come between 1.50% and 1.75%, which is the first gesture of this magnitude in 28 years, in 1994! The US Federal Reserve has signaled its intention to continue raising this rate of “fed funds” to 3.4% at the end of 2022, then to 3.8% at the end of 2023, in order to curb inflation, which it has long underestimated.
In a press release, the Fed’s Monetary Policy Committee (FOMC) said it was “firmly determined to return inflation to the 2% target” and remained “very vigilant about inflation risks”. Fed President Jerome Powell said during his press conference that he did not rule out a further increase of 75 basis points at the next meeting on July 26 and 27. “From the perspective of where we are today, it seems that we will increase by 50 or 75 bp at our next meeting,” he said, noting that the size of the increase will depend on economic indicators. However, he clarified that increases of 75 bp will not become “normal business”.
In their new economic projections released on Wednesday, FOMC members sharply raised the average forecast for the “fed funds” rate to 3.4% by the end of the year, compared to 1.9% in the latest projections made in March. . The FOMC then sees rates continue to rise to reach 3.8% at the end of 2023 (compared to 2.8% expected in March) before returning to 3.4% in 2024 (2.8% expected in March).
The Fed expects so-called “PCE” inflation to reach 5.2% this year (up from 4.3% in March), while the core PCE index (excluding energy and food), a preferred measure by the central bank, should rise by 4%. , 3%. % compared to 4.1% forecast last March. Note that the basic PCE index was 4.9% in May, which means that Fed officials expect a slowdown by the end of the year, due to the monetary tightening undertaken by the central bank since last March (+ 0.25 points in March, +0.5 pt in May and +0.75 pt on Wednesday).
Continued monetary tightening, combined with a reduction in the Fed’s balance sheet, should then allow inflation to slow, returning to 2.6% at the end of 2023 (2.7% for the core PCE), projections that are slightly changed from March . In 2024, price inflation should return to 2.2% (2.3% for the core PCE), approaching the Fed’s long-term goal of 2%.
The Fed now forecasts U.S. GDP growth of just 1.7% this year from 2.8% compared to 2.8% expected in March, and after a strong recovery after the 5.7% pandemic in 2021. Growth would continue should be 1.7% in 2023 (compared to 2.2% expected in March) then 1.9% in 2024 (2% expected in March). However, Jerome Powell said Wednesday he did not notice a general slowdown in the U.S. economy and assured that the Fed was “not trying to push the economy into recession.” “We are trying to lower inflation to 2% (and keep) a strong labor market,” he explained. “That’s what we’re trying to do,” he insisted.
In a statement, the Fed said “general economic activity appears to have recovered after a slowdown in the first quarter. Job gains have been solid in recent months and the unemployment rate has remained low. Inflation remains high, reflecting supply and demand. an imbalance pandemic, as well as higher energy prices and wider price pressures, ”the central bank commented.
According to new Fed projections, the US labor market should remain solid, despite a slight increase in the unemployment rate expected to 3.7% in 2022, 3.9% in 2023 and 4.1% in 2024 , compared to 3.5%, 3.5% and 3.6% respectively. expected in March.
No surprises from the Bank of England on Thursday. The BoE raised its key rate by a quarter of a point at noon, the fifth increase since December, although some observers expected a decrease of 50 bp. The nine-member Monetary Policy Committee voted 6-3 to raise the reference interest rate by 25 basis points to 1.25%, the highest level since January 2009.
The first of the world’s largest central banks to embark on an interest rate hike last December, the BoE has vowed to act “violently” if necessary to address inflation-related risks, which it expects to exceed 11% in a few months: ” the size, pace and timing of any further increase in the key rate will reflect the Committee’s assessment of the economic outlook and inflationary pressures “.
Consumer price inflation in the UK reached 9% in April, the highest level in 40 years, and the BoE raised its forecasts on Thursday, saying it now expects to reach just over 11% in October, when energy prices rise again .
Although the risk of recession is uncomfortably high, we believe the central bank will step up, raising rates by 50 basis points in August. Then we expect policymakers to return to 25 basis points in September and November, which will lead to a key rate of 2.25% by the end of the year, ”said Dan Hanson of Bloomberg Economics.
The market, for its part, expects a significant monetary tightening by the end of the year, setting a key rate of 3% by December. That would probably require three rate increases of half and a quarter on the four remaining meetings in 2022, at a pace unprecedented.
Jabil, an American subcontractor for the production of electronics, announced for its third fiscal quarter ended at the end of May 2022, results that exceeded expectations, while raising its financial forecasts. For the quarter ended, net income was $ 218 million and $ 1.52 per share, compared to $ 169 million a year earlier. Adjusted earnings per share reached $ 1.72, compared to a consensus of $ 1.62. Revenue rose 15% to $ 8.33 billion, compared to the FactSet consensus of $ 8.22 billion. “As we look to the future, we see strong demand in key areas of our business,” said Group CEO Mark Mondello. “Given this continued momentum, we now expect revenue in fiscal 2022 to approach $ 32.8 billion and adjusted earnings per share to be $ 7.45,” Mondello added.
Kroger, a U.S. retail group, released results that exceeded market expectations and raised its estimates, which did not prevent a sharp drop in prices before the Wall Street stock market. In the first fiscal quarter, the group made a net profit of $ 664 million and 90 cents on title, up from $ 140 million a year earlier. Adjusted earnings per share were $ 1.45, compared to the FactSet consensus of $ 1.29. Revenue reached $ 44.6 billion, compared to $ 41.3 billion a year earlier and $ 44.2 billion by consensus. Sales of the similar product increased by 4.1% excluding petrol, in line with market expectations. The group, raising its forecasts, is counting on the growth of ‘identical’ sales excluding fuel from 2.5 to 3.5%, for customized EPS from around $ 3.85 to $ 3.95. The FactSet consensus was for similar growth of 3.2% and adjusted EPS of $ 3.84.
Revlon shows in the red before the stock market on Wall Street, after being the subject of frantic speculation during the last sessions. The group, it was feared, filed for bankruptcy yesterday, according to Chapter 11 of the American law. The cosmetics and fragrance group controlled by MacAndrews & Forbes, the firm of billionaire Ronald Perelman, has listed assets and liabilities between $ 1 billion and $ 10 billion, according to a filing with the U.S. Bankruptcy Court for New York’s Southern District. The bankruptcy petition comes days after The Wall Street Journal reported that Revlon began negotiations with lenders before the debt matured to avoid bankruptcy.
Twitter. Elon Musk is addressing all Twitter employees this Thursday for the first time since unveiling his original $ 44 billion buyout plan. Business Insider, citing an email from Twitter CEO Parag Agrawal, reported earlier on the meeting. Agrawal, in his message, says employees can send their questions to the businessman in advance. The social media marketing director, Leslie Berland, will play the role of moderator during the event …
Musk should therefore confirm his intention to take control of Twitter during this general meeting. A person familiar with the issue told the Wall Street Journal that the billionaire is also expected to clarify recent comments on telecommuting at the meeting and to address aspects of his Twitter strategy.
Tesla, meanwhile, is raising prices to cope with rising costs, several sources say. The electric vehicle designer has raised prices on all models in the United States, facing supply problems.
Meta. The Competition Authority announced on Thursday that Meta, a former Facebook member, has pledged to end practices that could cause concern in the French advertising market. Therefore, the Competition Agency accepts these obligations of the Mark Zuckerberg Group in order to modify its practice. Bloomberg notes that this allows Matt to avoid heavy fines after he offered to respond to French antitrust concerns about his online advertising market.
Meta, Google (Alphabet), Twitter and Microsoft agreed on Thursday to tighten their policy against “fake news”, under pressure from the European Union, which threatens sanctions in the event of non-compliance with a revised version of its code of best practice. on misinformation introduced in 2018. About 30 signatories have pledged to abide by the regulation, the European Commission said.
McDonald’s, the American fast food giant, would approve, his lawyers claim, the proposal of the prosecutor’s office in France to impose a fine of 1.245 billion euros. A fine would allow the group to avoid criminal proceedings for tax evasion between 2009 and 2020 in France.