1. On April 26 (Friday), the futures of the three major US stock indexes rose sharply before the US stock market. As of press release, Dow futures were up 0.11%, S&P 500 futures were up 0.72%, and NASDAQ futures were up 1.01%.
2. As of press release, the German DAX index rose 0.67%, the UK FTSE 100 index rose 0.42%, the French CAC40 index rose 0.24%, and the European Stoxx 50 index rose 0.85%.
3. As of press release, WTI crude oil rose 0.62% to $84.09 per barrel. Brent crude rose 0.61% to $89.55 per barrel.
Market news
The US PCE data for March hit tonight, and the market is concerned about the risk of rising inflation. The inflation indicator favored by the Federal Reserve will hit the ball tonight. Economists expect the US PCE price index to grow 2.6% year on year and 0.3% month on month in February; the core PCE price index will increase 2.7% year on year and 0.3% month on month in March. However, some analysts warned not to expect how much the inflation situation will improve; there is an upward risk of inflation. Allianz Trade (Allianz Trade) economist Dan North said, “PCE and core PCE for the past three months have gone the wrong way. They're actually rising. So that's why I think the Federal Reserve is adamant that it is still far from what it wants to achieve.” He expects both PCE and core PCE to increase 0.4% month-on-month in March. Higher gasoline prices are expected to drive up overall PCE data, while transportation services and financial services will drive up overall PCE data and core PCE data.
It's worse than a recession! The US economy is likely to be rapidly stagnating. According to data from the US Bureau of Economic Analysis, the US economic growth rate in the first quarter was far lower than expected, at an annual rate of only 1.6%. Not only was this far below expectations of 2.5%, but it also fell short of the 3.4% increase in the fourth quarter. David Donabedian, CIBC Private Wealth US Chief Investment Officer, wrote: “This report is the worst of the two worlds — growth is below expectations and inflation is higher than expected.” Although this cooling usually supports calls to start easing interest rates, the report indicates that the increase in the consumer price index (CPI) was also higher than expected. This seriously limits the ability of the Federal Reserve to act because the Fed has made it clear that before cutting interest rates, it needs to reduce inflation to a lower level. Stocks — already reflected in the price of interest rate cuts — sold off sharply.
Yellen: America can reduce inflation without harming jobs. US Treasury Secretary Janet Yellen said on Thursday that the US can reduce inflation without weakening the strong job market. “I don't see any reason why we need to lower inflation by raising the unemployment rate,” Yellen said. She said there is no evidence that the labor market is so hot that wage pressure is a source of inflation. She said the employment data was “consistent” with the continuing downward trend in inflation. Yellen downplayed Thursday's data showing a slowdown in US economic growth, saying that “special” factors such as foreign trade and inventories have dampened overall growth. She said that the US economy continues to advance at full speed. Yellen said that the biggest component of the rise in the consumer price index is housing costs, and “I have no doubt” that contribution will decline in the next year.
Stubborn inflation made the Fed's dream of cutting interest rates drift farther and farther away, and the US bond market was sold off. On Thursday evening, the US released two major data in a row. GDP grew by 1.6% on an annualized basis in the first quarter, while the closely watched core PCE price index grew at a rate exceeding expectations of 3.7%. Based on these data, traders have reduced their expectations for when the Federal Reserve will cut interest rates and set the time for the first rate cut in December. Now, they believe that the Federal Reserve will only cut interest rates by about 33 basis points for the full year of 2024, which is far below the expectations of cutting interest rates by more than 150 basis points at the beginning of the year. US Treasury yields rose to 2024 highs, and given evidence that pressure on US prices continues, people have doubts about the ability of the Federal Reserve to start cutting interest rates later this year. This Friday, the US will release another key inflation report, which may further weaken expectations of cutting interest rates once this year. Even so, demand for treasury bonds worth more than $180 billion is still quite strong this week.
The governor of the Bank of Japan is “dovish”: the weak yen has not had a significant impact on potential inflation. The Bank of Japan kept the benchmark interest rate unchanged near zero on Friday and emphasized growing confidence that Japan's inflation will continue to hit the 2% target in the next few years, suggesting that it is preparing to raise Japan's borrowing costs later this year rather than immediately. Overall, the Bank of Japan expects the current relaxed financial environment to continue. The yen once fell to around 156.8 against the US dollar, hitting a new low in 34 years. The Bank of Japan also adheres to the guidelines set out in March and continues to buy Japanese government bonds at the current rate to support yields. This has crushed the hopes of some bond traders. They originally thought that the Bank of Japan might soon drastically reduce the scale of purchases, partly to slow the decline in the yen exchange rate.
Individual stock news
ExxonMobil (XOM.US) revenue for the first quarter was US$83.08 billion, down 4% year over year. ExxonMobil's first-quarter results were disappointing. Previously, oil production from the company's large-scale development projects in Guyana soared, but large non-cash expenses fell short of market expectations. According to financial reports, ExxonMobil's first-quarter revenue was US$83.08 billion, down 4% year on year; net profit was US$8.22 billion, compared to US$11.43 billion in the same period last year; earnings per share were US$2.06, 13 cents lower than analysts' average expectations. Despite insufficient earnings, operating cash flow was US$14.7 billion, which was US$1 billion higher than anticipated due to an increase of more than 35% in crude oil production in Guyana.
Chevron's (CVX.US) Q1 revenue declined 4.1% year over year. Chevron's Q1 revenue in 2024 was US$48.716 billion, down 4.1% year on year, and the expected value was US$47.33 billion; earnings per share were US$2.93, compared to the previous value of US$3.55, and the expected value was US$2.68. Chevron had first-quarter free cash flow of $2.7 billion. U.S. gas turnover fell 51.9% to $1.24 per thousand cubic feet (MCF). Driven by a 35% increase in the US, global production increased 12%, mainly due to the acquisition of PDC Energy and the strengthening of American Permian and DJ Basins. As of Thursday, the stock has risen 10.8% so far this year, while the energy select sector SPDR ETF (XLE) is up 15.3%, and the S&P 500 is up 5.8%.
Consumer goods giant Colgate (CL.US) announced financial reports that exceeded expectations and improved performance guidelines. Colgate's Q1 sales increased from US$4.77 billion to US$5,065 billion in the same period last year, which also exceeded market expectations of US$4.960 billion; net profit was US$683 million, or earnings per share of US$0.83 million, up from US$372 million, or $0.45 per share in the same period last year. Adjusted earnings per share of $0.86 were higher than market expectations of $0.81. The company's CEO Noel Wallace said in a prepared speech: “Strong growth in gross margin and operating margin this quarter led to a 16% increase in advertising, and we expect brand investment to remain strong for the rest of 2024.” Looking ahead, the company raised its full-year forecast and now expects sales to grow 2% to 5% compared to the previous forecast of 1% to 4%. The stock has risen 12% so far this year, while the S&P 500 is up 5.8%.
Total (TTE.US)'s Q1 profit exceeded expectations and will buy $2 billion worth of shares in Q2. Total's Q1 revenue was $51,883 million, down 11% from $58.233 billion in the same period last year. Adjusted net profit was US$5.112 billion, down 22% from US$6.541 billion in the same period last year, better than market expectations of US$5 billion; adjusted earnings per share were US$2.14, compared to US$2.61 in the same period last year. The adjusted profit before interest, tax, depreciation and amortization (EBITDA) was $11.493 billion, down 19% year over year. Cash flow from operating activities was $2.2 billion, down 58% year over year. Total announced that the 2024 interim dividend was €0.79 per share, an increase of nearly 7% over the previous year, which is basically in line with expectations. Additionally, the company said it will repurchase a further $2 billion of shares in the second quarter. The company also reiterated that the net investment for 2024 is expected to be between $17 billion and $18 billion.
AI's “revenue promotion” is strong! Microsoft (MSFT.US) Q3 revenue and EPS exceeded expectations, and cloud revenue grew at an accelerated pace. Boosted by demand from enterprise customers for cloud computing and artificial intelligence products, Microsoft's sales and profit increased more than expected in the third fiscal quarter. Q3 revenue increased 17% to US$61.9 billion, with earnings per share of US$2.94; analysts expected average revenue of US$60.9 billion and earnings per share of US$2.83. By sector, revenue from the Productivity and Business Processes division was $19.6 billion, up 12% year over year, slightly higher than expected. Smart cloud business revenue was $26.7 billion, up 21%, and analysts expected $26.25 billion. Revenue from the PC business was $15.6 billion, up 17%, and analysts expected $15.07 billion; this includes first-quarter revenue from the company's partnership with Activision Blizzard. Looking ahead, Microsoft expects fourth-quarter revenue of between US$63.5 billion and US$64.5 billion, slightly lower than analysts' expectations of US$64.5 billion.
Alphabet (GOOGL.US)'s Q1 performance exceeded expectations, paying dividends and buying back 70 billion US dollars of shares for the first time. Google's parent company Alphabet Q1 had revenue of US$80.54 billion, up 15% year over year, better than market expectations; earnings per share of US$1.89 were also better than market expectations. The company also said it would pay a dividend of 20 cents per share for the first time and buy back an additional $70 billion in shares. The stock rose more than 16% after the market. According to information, investors have responded positively to major technology companies' moves to buy back shares and pay dividends. In February of this year, Meta Platforms (META.US) announced its first dividend payment, which boosted the stock price by more than 14%. Notably, Amazon (AMZN.US) has never paid dividends, nor authorized share repurchases close to Google's size. Amazon's largest share buyback took place in 2022, amounting to $10 billion.
Warning: Recovery was slow, and Intel (INTC.US) profit and revenue guidance for the second quarter was poor. Facing weak demand in the data center and personal computer (PC) market, it is not easy for Intel, which is still lagging behind in the field of artificial intelligence (AI), to reclaim its position as the king of chips; the recovery process may be slower than expected by Wall Street. In the first quarter of this year, Intel's sales revenue and profit were higher than analysts' expectations, but the second quarter's guidance fell short of expectations, sounded a wake-up call. It means that Intel CEO Kissinger's efforts to revive the company may take longer, and the investment to do so may be greater. Intel's revenue for the first quarter increased 9% year over year to US$12.72 billion, in line with the average value of the range of 12.2 billion to 13.2 billion US dollars in its own guidance range. Adjusted earnings per share (EPS) for the first quarter on a non-NAAP scale was $0.18. According to my own guidance and analysts' expectations, it was $0.13, and a loss of $0.2 per share for the same period last year.
Western Digital (WDC.US) turned a loss into a profit in Q3, and revenue increased 23% year over year. Western Digital's Q3 revenue increased 23% year over year to US$3.457 billion, better than analysts' general expectations of US$3.36 billion. Under non-GAAP accounting standards, net profit was US$210 million, and net loss for the same period last year was US$435 million; earnings per share were US$0.63, far exceeding analysts' general expectations of US$0.15 per share, and loss of US$1.36 per share for the same period last year. Gross margin was 29.3%, or 10.6% for the same period last year, up 18.7 percentage points; operating profit was US$380 million, and operating loss for the same period last year was US$304 million. Looking ahead, Western Digital estimates revenue for the fourth fiscal quarter of fiscal year 2024 to be $3.60 billion to $3.80 billion, and analysts generally expect $3.68 billion; non-GAAP earnings per share are expected to be $0.90 to $1.20, better than analysts' general expectations of $0.79.
Streaming vendor competition has raised concerns, and Roku (ROKU.US) Q2 revenue guidelines have exceeded expectations. Roku Q1 revenue increased 19% year over year to reach $881.5 million, exceeding expectations of 15%. Operating losses narrowed sharply, from $212.5 million in the same period last year to $72 million due to increased revenue and a 16% reduction in operating expenses. The loss per share was $0.35, and the market expected a loss of $0.62. In terms of operating indicators, the number of streaming households increased 14% year over year, 1.6 million month over month to 81.6 million, streaming time increased 23% to 30.8 billion hours, while average revenue per user (ARPU) remained flat at 40.65 US dollars, the same as year on year. Roku expects total net revenue of US$935 million, gross profit of US$410 million, net loss of US$65 million, and adjusted EBITDA of US$30 million. The company's outlook for Q2 reflects a cautious optimism about its ability to maintain its growth momentum.
Snap (SNAP.US) weathered the “painful period of transformation”: Q1 active users, Q2 revenue guidelines exceeded expectations. Snap Q1 revenue increased 20.4% year over year to $1.19 billion, higher than the forecast of $1.12 billion. Non-GAAP earnings per share of $0.03 were also better than expected. The company provided positive signs that its efforts to reform the digital advertising business are being welcomed by marketers, which has not only boosted revenue but also formed stronger competition with giants such as Google and Meta. Snap expects second-quarter sales to increase by up to 18% year over year to reach $1.26 billion. The average estimate from analysts was $1.21 billion. The company also expects adjusted EBITDA for the second quarter to be between $15 million and $45 million. Snap's results in the first quarter of 2024 benefited from improved ad sales and better user reach, its flagship social media app, Snapchat.
Key economic data and event forecasts
20:30 Beijing time: US monthly personal expenditure rate for March (%), US March PCE price index annual rate (%).
22:00 Beijing time: The final value of the US Consumer Confidence Index for April at the University of Michigan.
The next day at 01:00 a.m. Beijing time: The total number of US drills (ports) for the week ending April 26.
The next day at 03:30 a.m. Beijing time: The CFTC released the weekly position report.