Supported by Nike, FedEx and China

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(Boursier.com) — A little break before Christmas? Wall Street, which ended four consecutive sessions in the red yesterday, should progress quite clearly at the opening. The context remains the same but investors again seem to be tempted by some risk-taking amid the recent movement of consolidation in the context of expected monetary policy and fears of a global recession. Better-than-expected results from Nike and FedEx are cheering traders as the holiday season approaches Just like the latest data from China.

Official media reported citing the government that local authorities have decided to take a series of measures to support the economy in order to lay the foundations for strong growth in 2023. China wants to accelerate major investment projects and reforms of existing infrastructure, state media reported after the cabinet meeting.

On today’s macro agenda, the current account balance showed a deficit of $217.1 billion against the consensus of $222 billion. The Conference Board’s December Consumer Confidence Index (4:00 pm), November Existing Home Resales (4:00 pm) and weekly oil inventories should follow a little later.

In currency markets, the greenback is stabilizing with a dollar index hovering around 104 points (+0.1%) while the euro is also stable, slightly above $1.06 between banks. Bitcoin is still trading below $17,000. Finally, in the oil market, a barrel of Brent extended its gains, up more than 2% to $81.6.

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* Nike The reassuring US sporting goods giant showed strong quarterly results on Wall Street yesterday while raising its full-year guidance as strong demand for its sneakers and sportswear in North America and Europe helped offset sluggish sales in China, its most profitable market. In its second fiscal quarter, the Oregon-based firm posted net profit of $1.3 billion, flat for more than a year, or EPS of 85 cents, versus the 65 cents expected by analysts.

Global sales rose 17% to $13.3 billion (+27% at constant exchange rates) versus the consensus of $12.6 billion. Earnings beat expectations in all regions except China. Although down 300 basis points to 42.9%, gross margin, a key indicator of profitability, also beat expectations, and executives said year-end performance was strong. The company’s margins were hurt by a stronger dollar, higher freight and logistics costs, and higher markdowns to eliminate excess inventory. The latter made further progress in the quarter. “We believe the inventory peak is behind us because the actions we’re taking in the market are working,” Nike Chief Executive John Donahoe said on the earnings conference call, however.

Nike increased its marketing spend in an effort to attract more customers. Demand generation spending rose 8% to $1.1 billion in the quarter, mainly due to increased advertising. “Despite operating in a heavily promotional market, our momentum for the holiday season continued into the first week of December,” said Chief Financial Officer Matt Friend. For the full fiscal year, which ends in mid-2023, Nike now expects 10-15% growth, excluding currency effects. The company reiterated its estimate that gross margins would decline by 200 to 250 basis points.

* fedex Successfully passed his entrance exam in New York yesterday. Despite further declines in operating parcel volumes, the American delivery giant exceeded analysts’ expectations, supported by price increases and cost reductions. In its second fiscal quarter, the Memphis-based group recorded a net profit of $815 million, or $3.18 per share, compared with a profit of $1.3 billion, or $4.83 per share, a year earlier. Adjusted EPS was $3.18, versus the $2.80 consensus. Revenue came in at $22.8 billion, versus the $23.74 billion consensus.

FedEx is “making rapid progress in its ongoing transformation while navigating a weak demand environment,” Chief Executive Raj Subramaniam said. “Our earnings exceeded our expectations in the second quarter thanks to the execution and acceleration of our aggressive cost reduction plans.” The company announced an additional $1 billion in savings in fiscal 2023, bringing the total to $3.7 billion. The firm will close offices, stop rural Sunday deliveries and lay off staff in its freight division.

For the full year, FedEx unveiled a new adjusted EPS target of $13 to $14, excluding pension fund swings and costs on cost-cutting measures. Analysts had expected adjusted earnings of $14.14 per share. Investors lowered their expectations in September after FedEx withdrew its annual guidance, posted profit below estimates and pledged to cut costs in the face of declining volumes. FedEx said capital spending for the current fiscal year, which ends at the end of May, is expected to be $5.9 billion, $400 million less than an earlier forecast. “As we look to the second half of our fiscal year, we are accelerating our progress in cost reductions, helping to offset continued weakness in global volumes,” said Chief Financial Officer Michael Lenz.

* you are here Wall Street fell more than 8% yesterday, bringing its year-to-date losses to more than 60%. That’s enough to bring the Texan group’s valuation below $500 billion for the first time since November 2020. Management chaos has continued to weigh heavily on Tesla headlines since the Texan group’s acquisition of Twitter for $44 billion, while the one-time SpaceX boss financed the deal by selling billions of shares in the electric car maker. Investors fear that managing the social network has become a distraction for the Tesla boss, a group in which he is personally involved in manufacturing and engineering.

An opinion far from shared by the entrepreneur of South African origin. Yesterday, Elon Musk openly mocked Ross Gerber, CEO of Gerber Kawasaki Wealth Management, after the longtime Tesla investor tweeted about the electric vehicle maker’s lack of leadership and said it was time for a “reshuffle.”

* Broadcom Are among the sights of Brussels. The European Commission has opened an in-depth investigation to assess VMware’s proposed acquisition under the EU Merger Regulation. After a preliminary investigation, the regulator fears that the operation will allow Broadcom to limit competition in the market for the supply of network cards, FC HBAs and storage adapters.

* Rite Aid Climbed in the pre-session despite deep quarterly losses. The group actually posted revenue above analysts’ expectations, helped by accelerated growth in its retail operations. However, the US drugstore chain lowered its forecast for the year due to various headwinds, including significant seasonal markdowns. In the third quarter, the firm posted a loss of $67.14 million, or $1.23 per share, compared with a loss of $36.06 million, or 67 cents per share, a year earlier. Adjusted EPS came in at -$0.14 vs -$0.15 consensus. Revenue reached $6.08 billion, versus the $6.06 billion consensus. In 2023, the group now expects Ebitda of $410 to $440 million, compared to the previous range of $450 to $490 million.

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