Wall Street Relapses, Corporate Profit Lacked by Inflation

The rebound was short-lived at Wallstlet, where the index recurred significantly on Wednesday night after the release of the target account (-27.5%), which confirms what Wal-Mart (-6.6%) said the day before. Inflation in costs, especially wages, has significantly reduced the profit outlook for trading companies. The market is also digesting the latest words from Jerome Powell, who firmly indicated on Tuesday that the Fed will raise rates until inflation clearly drops.

Two hours before the closing, the Dow Jones fell 3.27% to 31,587 points, the broad S & P 500 index fell 3.7% to 3,937 points, and the Nasdaq Composite Index, rich in technology and biotechnology stocks, fell 4.4%. I got 11,456 points.

Earlier that day, the European market did not fall so sharply, the Eurostocks 50 index fell 1.36%, the DAX 30 fell 1.26% in Frankfurt and the CAC 40 fell 1.2% in Paris. In Asia, the Nikkei Stock Average rose 0.9% in Tokyo and the Shanghai Composite Index fell 0.25% in China.

All 11 S & P 500 Sector Indexes on Wednesday started at consumer discretion (-6.8%), consumer staples (-6%) and technology (-4.4%) and have fallen. %)!

Bonds regain secure shelter status and Bitcoin relapses

In the bond market, interest rates fell sharply again on Wednesday as investors evacuated to low-risk assets, including bonds, pushing yields down. The 10-year T-Bond rate fell 9 basis points again in the evening to 2.89%, and the 2-year T-Bond rate fell 6 bp to 2.65%.

The dollar also takes advantage of risk aversion to rebounds. The dollar index rose 0.37% against the basket of benchmark currencies to 103.75 points and the euro fell 0.65% to $ 1.0478.

Bitcoin plunged to $ 26,000 last Thursday at $ 28,963 at the end of the night, down 3.7% in 24 hours, a threshold of $ 30,000, well away from the November 2021 record of nearly $ 69,000. Could not be found. Gold fell 0.2% to $ 1,815.90 on the Comex futures contract in June.

The latest “macro” indicator released Wednesday in the United States showed that the real estate market is starting to slow down against the backdrop of rising mortgage rates. Housing starts were 1,724 million units in April, FactSet’s consensus was 1.76 million units, and March 1,728 million units. On the other hand, building permits were settled at a rate of 1,819 million in line with consensus, but decreased from March (1.87 million).

Oil modifies and fears demand

Crude oil prices have fallen for fear of slowing global demand, despite the announcement of a sharp decline in US oil reserves last week. Crude oil inventories (excluding strategic stockpiles) fell 3.4 million barrels to 420.8 mb, but consensus expected an increase of 1.4 mb.

On Wednesday night, a barrel of US light crude oil WTI (June futures contract) brought 2.8% to $ 109.19 in Nymex and Brent in the North Sea with a maturity of July returned 2.9% to $ 108.66. Prices have already been revised on Tuesday after Washington announced relaxation of sanctions imposed on Venezuela, paving the way for resumption of oil purchases from this South American country.

Investors have also responded to Jerome Powell’s words on Tuesday that the U.S. central bank will continue to tighten monetary conditions until inflation shows clear signs of a slowdown, but the landing of the U.S. economy is “almost calm.” “I believe it is still possible to” “do not cause a recession.

Powell decided to raise interest rates as much as needed to curb inflation

Thus, at a meeting hosted by The Wall Street Journal, the Fed’s head asserted that the Fed’s plan was to gradually raise the key rate by 0.5 points at the next meeting. However, he did not rule out a significant increase of 0.75 points as needed.

The Federal Reserve will need to “see clear and compelling evidence” that inflation is easing before slowing the pace of rate hikes. “If you don’t see it, you should consider acting more aggressively,” Jerome Powell said. “If that means raising rates higher than what is generally considered neutral, we wouldn’t hesitate to do so,” he said. The “neutral” level of the “federal funds” interest rate of the economy is being discussed, but is generally considered to be around 2.5%.

Asked about the risks of causing a recession, Powell compared this route to “a somewhat turbulent plane descent,” saying that “there are several possible routes to landing … almost soft.” However, he admitted that it could be “a little pain” for Americans, but argued that inflation needed to return to the Fed’s medium-term target of 2%.

Value to follow

Target, an American discount store, fell 27.5% in response to the opening of accounts in the first quarter. Overwhelmed by supply chain constraints, the group missed a profit consensus. Adjusted earnings per share was $ 2.19, while FactSet’s consensus was $ 3.07. Therefore, after the unrelieved results announced by the giant Wal-Mart earlier this week, it is a new disappointment in this sector. Target is considering additional inflation-related costs of $ 1 billion this year, especially in shipping. Group CEO Brian Cornell said: In fiscal year 2022, the Group expects sales to grow by 1-5%, but is lowering its profit forecast due to a sharp increase in expenses. Ended quarter sales were $ 25.17 billion higher than expected, compared to the $ 24.5 billion forecast.

Loews (-7.2%), an American challenger to the Home Depot (-5.9%) in the distribution of household products, saw comparable sales decline by 4% in the first quarter of 2022, 3.8 in the US market. Announced that it will decrease by%. .. Quarterly earnings per share were $ 3.51. Net income for the quarter ended at the end of April reached $ 2.3 billion. Total revenue was $ 23.7 billion, compared to $ 24.4 billion in the first quarter of 2021. The consensus was adjusted EPS of $ 3.22 and revenue of $ 23.76 billion. The group shows that it is reaffirming its 2022 annual financial forecast. Therefore, we expect revenues in the range of $ 97 billion to $ 99 billion, compared to revenues in the range of $ 13.1 to $ 13.6.

TJX (+ 7.8%), an American distribution group, announced an adjusted pre-tax margin of 9.4% in the first quarter of 2023. This year’s adjusted margin guidance has been revised upward to 9.6-9.8%. In the last quarter, Marmaxx recorded similar growth of 3%, driven by customer traffic. Quarterly adjusted earnings per share were 68 cents. By the end of April, quarterly sales were $ 11.4 billion, up 13% year-on-year. Sales are slightly below the Group’s guidance, but margins are maintained and management is still welcoming today.

Massachusetts semiconductor designer Analog Devices (-1.6%) posted net income of $ 783.3 million for the second quarter, ending at the end of April 2022, compared to $ 422.9 million in the year-ago quarter. $ 1.49 per title). Year. Excluding the item, adjusted earnings per share was $ 2.4, while FactSet’s consensus was $ 2.11. Revenue increased 79% to $ 2.97 billion. Adjusted operating profit more than doubled to $ 1.49 billion. In this way, ADI has made record revenues for the fifth consecutive quarter, demonstrating unprecedented demand for its technology. For the first quarter, the group expects adjusted EPS to be $ 2.42 and revenue of $ 3.05 billion.

Alphabet (-3.2%). According to Reuters, Google’s Russian subsidiary is considering filing for bankruptcy, but authorities have seized bank accounts, making it impossible to continue. Google has been under pressure in Russia for months not to remove content deemed illegal by Moscow and to restrict access to some Russian media on YouTube.