DAL Delta Air Lines Inc

The equity markets have recovered a portion of their losses in 2023, rising over 14% year-to-date. While volatility has declined significantly in recent months, macro pressures continue to persist, ranging from inflation and interest rates to the threat of an economic recession. 

An increasing number of businesses are sounding the alarm about rising fuel costs and wage increases impacting their quarterly profits.

Airline profits remain under pressure

Aerospace companies, as well as delivery giant UPS, are grappling with significant new labor agreements. Concurrently, unions across various sectors, from the automotive world to the entertainment industry, are advocating for improved pay. The airline industry, where significant outlays are concentrated on jet fuel and staff wages, is feeling the squeeze intensely.

Last Thursday, Delta Air Lines (NYSE: DAL) revised its projected adjusted earnings for Q3, setting the range between $1.85 and $2.05 per share, a decrease from the previously estimated $2.20 to $2.50. While the airline cited unanticipated fuel expenses as a primary reason, it also mentioned that maintenance costs exceeded expectations.

As per the industry body- Airlines for America, the average jet fuel price at prominent US airports stood at $3.42 per gallon as of Tuesday, marking a 38% increase over the past two months.

Earlier this month, American Airlines (NYSE: AAL) joined the list of carriers adjusting their earnings outlook, following earlier revisions by Alaska Airlines (NYSE: ALK) and Southwest Airlines (NYSE: LUV) . 

American Airlines now expects its adjusted earnings per share for Q3 to range between $0.20 and $0.30 per share, a substantial drop from its earlier projection of up to $0.95 a share. The revision comes in the wake of escalating fuel prices and a fresh labor agreement with pilots.

Interest rate hikes in focus

On Tuesday, the Federal Open Market Committee (FOMC) of the Federal Reserve will convene for its two-day meeting, culminating in an anticipated interest rate announcement and a press briefing by Chair Jerome Powell on Wednesday. 

As indicated by CME GroupU+02019s fed funds futures, current market sentiments hint at the Fed maintaining the current interest rates. However, there might be one more rate increment by yearU+02019s end, contingent on inflation trends. The benchmark federal funds rate is anticipated to remain above 5% until at least the subsequent summer to steer inflation closer to its 2% goal.

The Bank of England (BoE) will hold its interest rate deliberations on Thursday. A 25 basis point increase to 5.5% is projected by economists polled by Reuters—this would be the peak since 2008. If this materializes, it will signify the 15th successive rate increment since its initiation in December 2021, addressing the swiftest inflation surge in the U.K. in recent times.

Upcoming News on the Housing Market Next week will bring fresh insights on the housing scene, encompassing data on building permits, housing initiations, and the sales statistics for pre-owned homes in August, coupled with the NAHB’s Housing Market Index for September.  

Predictions suggest a slight drop in housing initiations to 1.44 million units in August from 1.45 million in July. On the other hand, sales of pre-existing homes are estimated to be marginally higher at 4.1 million, up from JulyU+02019s 4.07 million. 

After witnessing a 6-point drop in August, the NAHB’s Housing Market Index, a gauge for homebuildersU+02019 future sales projections, is expected to recover to 53 this month. 

This is a downturn from the zenith of 84 during the pandemic in 2021 before the FedU+02019s rate augmentations led to a surge in mortgage rates and diminished demand. Still, itU+02019s notably above the trough of 31 seen last December.

Delta Air Lines (NYSE:DAL)
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Delta Air Lines (NYSE:DAL)
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De Mai 2023 até Mai 2024