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Romain Fournier

Chief Editor
Having worked in the British, French and Swiss financial press, Romain is able to report on local and international issues, as comfortable in French as in the language of Shakespeare, Romain Fournier leads the editorial team at Marketscreener. Fine connoisseur of the English-speaking markets, Romain delivers an editorial every day on US and UK markets.

A couple of hopes dashed

08/03/2022 | 08:56am EDT
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A trio of Fed policymakers made it clear yesterday that we're nowhere near the end of the tightening campaign to curb inflation. Investors are now 43.5% to believe that the central bank will increase rates by another 75 basis points at its next meeting in September.

The first week of August started with two negative sessions for Wall Street, hampered by the return of tensions between China and the United States over Taiwan. Risk aversion is back, as investors moved away from cyclical stocks. However, US stock futures bounced back this morning. The Dow Jones Industrial Average futures rose 0.5%, S&P 500 futures gained 0.6%, and Nasdaq futures rose 0.6%.

Faced with threats from Xi Jinping, U.S. House Speaker Nancy Pelosi decided to maintain her official visit to Taiwan, and reiterated US support for Taipei. The renewed tensions between China and the US are dashing the hopes of investors, who were counting on a reduction in the tariffs on Chinese products sold in America to reduce inflationary pressure.

Beijing reacted by stepping up its military maneuvers and some retaliatory import and export measures. For financial markets, this situation means an additional negative variable to take into account. These tensions will necessarily have an impact on stocks and the economy. As an example, the world's largest producer of car batteries, Chinese company CATL (Contemporary Amperex Technology), yesterday froze its plans to build a factory in the United States. We also know that some sectors, such as Luxury, prefer a calm Chinese consumer to a warring Chinese consumer.

Meanwhile, earnings season continues. The results of Airbnb and Advanced Micro Devices disappointed investors yesterday, while PayPal shares soared after several positive announcements.

Yesterday's Fed speakers helped send US bond yields sharply higher. In recent days, the general feeling was that the Fed would go into marshmallow mode to avoid damaging US growth too much. But it seems that this won't be the case. However, yields remain lower than a month ago and still inverted between the 10-year and some shorter maturities. This is a sign that the market is seeing U.S. interest rates rise a little less than was feared a short while ago, and that the economic slowdown is being well integrated by investors.

Oil prices declined ahead of a meeting of OPEC+, where producers were expected to keep output more or less unchanged. A Reuters report already indicates that the oil cartel will raise oil output by a small 100,000 barrels per day, which is a humiliation for Joe Biden after his efforts in Saudi Arabia last month to convince them to pump more to boost the economy.

 

Economic highlights of the day:

Today is the day for the services PMI indicators for the major economies. There will also be the ISM services and industrial orders (10:00am). All the macro agenda here.

The dollar is trading at EUR 0.9817. The ounce of gold is stabilizing around USD 1767. Oil is recovering slightly, with North Sea Brent at USD 101.85 per barrel and U.S. WTI light crude at USD 96.11. The yield on 10-year U.S. debt rises back to 2.7%. Bitcoin is trading around USD 22,800.

 

On markets:

* Moderna on Wednesday maintained its annual sales target for its Covid-19 vaccine at $21 billion and announced a $3 billion share buyback program. The pharmaceutical company was up 3% in pre-market trading.

* Advanced Micro Devices expects third-quarter revenue to fall slightly short of Wall Street estimates despite reporting good results in July. The semiconductor designer was down 5.2% in premarket trading.

* CVS Health raised its full-year profit forecast as healthy insurance business and sales of COVID-19 tests helped the U.S. drugstore chain post a 6% increase in second-quarter profit. The stock was up 3% in pre-market trading.

* Regeneron Pharmaceuticals reported a 72.5% drop in quarterly profit on Wednesday, hurt by disappointing sales of its COVID-19 antibody cocktail.

* Gilead Sciences said Tuesday that its adjusted second-quarter profit fell due in part to higher research costs and lower sales of its COVID-19 treatment, Veklury, but total revenue came in above expectations.

* Starbucks gained 1.5% in premarket trading after reporting a better-than-expected quarterly profit, as higher prices and strong demand in the U.S. helped offset a hit to its China business from further confinements.

* Airbnb lost 6.6 percent in premarket trading after it said it expects bookings in the current quarter to be on par with the previous quarter, disappointing investors who were expecting much more amid strong summer demand.

* Paypal Holdings raised its annual profit forecast, announced a $15 billion buyback program and that activist fund Elliott Management had a stake of more than $2 billion in its stock. The U.S. payment company's stock was up 10% before the opening.

* Occidental Petroleum on Tuesday reported better-than-expected quarterly earnings, lower debt and a share buyback program thanks to high oil and gas prices.

* NortonLifeLock gained 5.8% in pre-market trading after the U.K. Competition and Markets Authority provisionally approved the $8.6 billion takeover of cybersecurity company Avast.

* Electronic Arts reported lower-than-expected adjusted quarterly revenue on Tuesday as the easing of COVID-19 restrictions led to a decline in video game purchases.

* Chesapeake Energy and Pioneer Natural Resources on Tuesday reported strong second-quarter earnings and increased cash distributions to shareholders via dividends or stock buybacks.

* Match Group fell 21.8 percent in premarket trading after announcing the resignation of the CEO of its dating app Renate Nyborg and disappointing quarterly guidance.

* Under Armour lowered its full-year profit target, hurt by higher transportation costs, raw materials and increased promotions to attract customers.

* Yum Brands, owner of KFC, reported same-store sales in line with expectations.

* Robinhood Markets - The online brokerage announced Tuesday that it would lay off 23% of its staff as it posted a 44% drop in revenue due to a slump in trading.

* General Motors said it will pay Livent $198 million up front for a guaranteed six-year supply of lithium, a deal that reflects the auto industry's growing concern about a tightening market for the metal used in electric vehicle batteries.

* Uber Technologies on Wednesday sold its 7.8 percent stake in Indian meal delivery company Zomato for $392 million, two sources close to the matter told Reuters.

 

Analyst recommendations:

  • Advanced Micro Devices:  KGI Securities moves to outperform from neutral. PT up 26% to $125.
  • BAE Systems: J.P. Morgan upgrades to overweight from neutral. PT set to 965 pence.
  • Celanese: Deutsche Bank cut the target to $140 from $175. Maintains buy rating.
  • CF Industries Holdings: Citi raised the recommendation to buy from neutral. PT up 19% to $117.
  • DaVita: Deutsche Bank maintains buy rating. PT down to $97 from $150.
  • Global Payments: Raymond James cut the target to $174 from $190. Maintains outperform rating.
  • Kingfisher: Societe Generale cut the recommendation to sell from hold. PT down 13% to 216 pence.
  • Lattice Semiconductor:  Susquehanna Financial raised the target to $72 from $65. Maintains positive rating.
  • Lear: Cowen raised the target to $196 from $163. Maintains outperform rating.
  • LyondellBasell: Deutsche Bank maintains hold rating. PT down to $95 from $120.
  • Mosaic: Citi raised the recommendation to buy from neutral. PT up 17% to $61.
  • Paycom Software: KeyBanc adjusts price target to $390 from $340. Reiterates overweight rating.
  • Plug Power:  Northland Securities initiated coverage with a recommendation of market perform. PT up 18% to $25.
  • Repligen: SVB Securities adjusts price target to $250 from $220. Keeps outperform rating.
  • Rotork: Stifel upgrades to buy from hold. PT up 18% to 310 pence.
  • SBA Communications: KeyBanc reiterates overweight rating. PT up to $389 from $367.
  • Sealed Air: RBC Capital Markets raised the recommendation to outperform from sector perform. PT up 25% to $70.
  • Simon Property Group: Stifel cut the target to $141 from $165. Maintains buy rating.
  • Uber Technologies: Evercore ISI raised the target to $75 from $69. Maintains outperform rating.

© MarketScreener.com 2022
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Stocks mentioned in the article
ChangeLast1st jan.
ADVANCED MICRO DEVICES, INC. 4.37% 66.08 Delayed Quote.-55.97%
AIRBNB, INC. 0.06% 105.04 Delayed Quote.-36.91%
BAE SYSTEMS PLC 1.16% 799 Delayed Quote.43.65%
CELANESE CORPORATION 4.64% 94.46 Delayed Quote.-46.25%
CF INDUSTRIES HOLDINGS, INC. 3.79% 99.895 Delayed Quote.35.98%
CHESAPEAKE ENERGY CORPORATION 4.61% 98.55 Delayed Quote.46.02%
CVS HEALTH CORPORATION 2.17% 97.43 Delayed Quote.-7.55%
DAVITA INC. 4.06% 86.13 Delayed Quote.-27.24%
ELECTRONIC ARTS INC. 3.04% 119.18 Delayed Quote.-12.27%
GENERAL MOTORS COMPANY 2.97% 33.03 Delayed Quote.-45.27%
GILEAD SCIENCES, INC. 0.28% 61.84 Delayed Quote.-15.04%
GLOBAL PAYMENTS INC. 2.35% 110.57 Delayed Quote.-20.07%
KINGFISHER PLC 2.00% 224.8 Delayed Quote.-34.85%
LATTICE SEMICONDUCTOR CORPORATION 3.11% 50.74 Delayed Quote.-36.14%
LEAR CORPORATION 3.24% 123.59 Delayed Quote.-34.58%
LYONDELLBASELL INDUSTRIES N.V. 4.34% 78.53 Delayed Quote.-18.38%
MATCH GROUP, INC. 3.81% 49.55 Delayed Quote.-63.89%
MODERNA, INC. 1.45% 119.845 Delayed Quote.-53.44%
MOSAIC ACQUISITION CORP 0.00%End-of-day quote.-8.64%
NORTONLIFELOCK INC. 1.44% 20.42 Delayed Quote.-22.48%
OCCIDENTAL PETROLEUM CORPORATION 4.41% 64.15 Delayed Quote.111.97%
PAYCOM SOFTWARE, INC. 1.35% 334.17 Delayed Quote.-20.52%
PAYPAL HOLDINGS, INC. 1.03% 86.93 Delayed Quote.-54.36%
PIONEER NATURAL RESOURCES COMPANY 6.29% 230.06 Delayed Quote.19.05%
PLUG POWER INC. 3.57% 21.73 Delayed Quote.-25.58%
REGENERON PHARMACEUTICALS, INC. 5.45% 726.44 Delayed Quote.9.08%
REPLIGEN CORPORATION 4.68% 195.8605 Delayed Quote.-29.35%
ROBINHOOD MARKETS, INC. -0.89% 10.0001 Delayed Quote.-43.13%
ROTORK PLC 1.45% 237.6 Delayed Quote.-34.43%
SBA COMMUNICATIONS CORPORATION 1.64% 289.32 Delayed Quote.-26.83%
SEALED AIR CORPORATION 1.84% 45.32 Delayed Quote.-34.03%
SIMON PROPERTY GROUP, INC. 1.49% 91.01 Delayed Quote.-43.83%
STARBUCKS CORPORATION 1.70% 85.67 Delayed Quote.-27.96%
UBER TECHNOLOGIES, INC. 0.66% 26.67 Delayed Quote.-36.80%
UNDER ARMOUR, INC. 6.32% 7.06 Delayed Quote.-68.62%
YUM BRANDS 2.80% 109.32 Delayed Quote.-23.42%
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