The latest data published this morning added to worries, since jobless claims fell to 190,000 instead of 195,000 expected and the unit labor costs in the nonfarm business sector increased 3.2 percent in the fourth quarter of 2022, which is almost three times what was expected in the consensus (1.1%).

This sent the S&P 500 and the Nasdaq down 0.6% and 1.0%, respectively, in pre-market trading. The Dow Jones held at +0.1% thanks to the good performance of Salesforce. The company surprised Wall Street with revenues up 14% in the latest quarter compared to the year-ago period.

For the next quarter, the company expects adjusted earnings in the range of $1.60 to $1.61 per share and revenue of $8.16 billion to $8.18 billion. Analysts were expecting $1.32 in adjusted earnings per share and $8.05 billion in revenue.

This comes after higher-than-expected inflation statistics in Europe, in addition to those already seen in the United States. Investors are increasingly worried about rate hikes, which can be seen in the yield on 10-year U.S. government bonds, which has risen above 4% for the first time since mid-November. The market says it now fears a rate peak at 5.5%, with upside risk. Not so long ago, the market was convinced that this peak would not exceed 5%. All of this is weighing on sentiment with a drop in cyclical and technology stocks in the US yesterday. Europe had also lost ground.

But I’ve had enough talking about rates in this column, let’s talk soccer and the crazy valuations of clubs. The Financial Times that did an interesting valuation exercise on Manchester United on Monday. The British soccer club has been put up for sale by its owner, the Glazer family. Rumors suggest that the transaction amount could be between 6 and 7 billion dollars. This amount calls for two preliminary remarks. On the one hand, when you see rumors of prices coming out in the press, it's because the sellers' boards let them leak out knowingly to test the market or to dissuade the bidders who were willing to offer less. On the other hand, Manchester United has been listed on the New York Stock Exchange for a little over ten years, which explains the dollar amount. This is also what allows us to have a valuation basis, or more precisely a market value. Wall Street currently values "MU" at $4 billion in "enterprise value", i.e. by combining the capitalization ($3.4 billion) and the debt ($670 million).

In reality, the club was worth $4.5 billion until a few days ago, until Lex's team from the Financial Times published their little basic exercise. Namely: if MU were a "normal" listed company, how much would it be valued? And the answer was $1.6 billion. One can of course argue about this amount, which the FT does by reminding that the valuation depends on many criteria, not only purely financial. But the objective was not to make the stock fall (it still lost 10% in the process), but rather to show that by applying reasonable assumptions of growth in activity and results, it is complicated to justify a $6 to $7 billion sale price.

The funny thing is that the market doesn't believe it either, since it hasn't raised the stock to the rumored valuation. The purpose is not to argue about the value of MU but to remind that there are, beyond the pure financial analysis, more or less subjective elements that come into play in the valuation of a company. In this case, the price of the English club is based on its history, the power of its brand, its rarity, the size and loyalty of its fan community, the ecosystem that surrounds it such as sports betting, etc. etc. The stronger these ingredients are, the thicker the overlay of value.

A frenzied craze can also be found among individuals who have a collective passion for assets that have no accounting value, such as AMC Entertainment and all the meme stocks in the United States and elsewhere.

 

Economic highlights of the day:

European inflation for February and US weekly unemployment figures are the two highlights of the day. All the agenda here.

The dollar is strengthening to EUR 0.9447 and GBP 0.8382. The ounce of gold is firm at 1832 dollars. Oil is rallying, with North Sea Brent at USD 84.35 per barrel and US WTI light crude at USD 77.79. The yield on 10-year US debt is back up to 4.02%. Bitcoin is trading around 23,200 dollars.

 

In corporate news :

* Tesla will cut assembly costs in half for future generations of cars, but the automaker did not unveil an affordable electric vehicle at its investor day Wednesday. The stock was down 6% in pre-market trading.

The U.S. giant is also preparing an overhaul of production of its Model Y, its best-selling vehicle, three sources familiar with the project said.

* Silvergate Capital will delay the release of its annual report and said it is assessing its ability to continue operations. The stock is down about 35.3% in premarket trading.

*Best Buy was cautious Thursday about its annual profit, with uncertainty about the outlook for the U.S. economy tempering expectations for a recovery in demand for discretionary goods. The stock is down 1.9% in pre-market trading.

* Citi on Thursday announced targets to reduce emissions from the bank's lending to its coal, auto, steel and real estate clients by the end of the decade.

* Netflix - The group's video streaming services were down Thursday for thousands of users, according to the Downdetector app, which provides real-time availability tracking for hundreds of services, including outages.

* Microsoft has reached an agreement with Liquid Intelligent Technologies, Africa's largest independent fiber network, to expand Internet access on the continent by 2025, said Brad Smith, president of the U.S. giant.

* Salesforce said it expects first-quarter revenue to beat analysts' estimates and doubled its share buyback to $20 billion. The stock is up 15.7 percent in pre-market trading.

* Activist fund Elliott Management has also proposed a slate of directors for the cloud-based software company's board, a source familiar with the matter said Wednesday.

* UBS raised the target on Salesforce Inc. to $210 from $162. Maintains neutral rating.

* Eli Lilly - U.S. President Joe Biden said Wednesday that other pharmaceutical companies will have to lower their insulin prices after Eli Lilly's decision to cut prices starting in the fourth quarter.