The main engine of growth remains artificial intelligence, with any company getting the AI label being raided by investors.

Last week’s revised US CPI data confirmed that inflation rose by 3.3% in the last quarter of 2023. This week on Tuesday, investors will be able to read US inflation data for January, with economists expecting inflation to drop to 2.9%.

Investors will be assessing comments today from Fed Governor Michelle Bowman, Richmond Fed President Thomas Barkin and Minneapolis Fed President Neel Kashkari, for any cues on the timing for interest rate cuts.

The U.S. economy is too dynamic to cut rates so quickly, the central bank said. The market now expects only four cuts by 2024, but this pace is still open to question. The publication of US consumer prices (Tuesday) and producer prices (Friday) for January will refine the prognosis.

Corporate results continue to drive the markets. Things are going rather well: Q4 earnings growth was twice as fast as expected in the US, and 81% of companies beat expectations. The average over the previous four years was 76%. That's right, companies always do better than expected, because they fine-tune expectations and pass on skillfully conservative targets to analysts. Two-thirds of S&P500 companies have already published, including many of the heavyweights. But there are still a few big names, including Nvidia, Walmart, Berkshire Hathaway, Broadcom and Salesforce. In 2024, the "Magnificent Seven" accounted for 60% of the S&P500's rise. Well, I should say the Magnificent Six, since Tesla is in the red (-22%).

Among premarket movers, Diamondback Energy fell 1.1% after it announced that it will merge the largest privately held oil and gas producer in the Permian basin, Endeavor Energy Partners, in a deal worth $26 billion.

Most major Asian stock markets are closed for the Lunar New Year: China, Hong Kong, South Korea, Singapore, Taiwan, Malaysia and Vietnam are all affected. For good measure, the day is also a public holiday in Japan, which is celebrating its founding. India and Australia are the only countries left to show any signs of life. Bombay and Sydney lost around 0.4% to start the week.

European indices are mostly bullish, while futures on Wall Street's main three indices are hovering around zero.

Today's economic highlights:

No statistics in sight today, but speeches by Fed bankers Michelle Bowman, Thomas Barkin and Neel Kashkari.

The dollar is up 0.3% to EUR 0.9289 and gained 0.2% against the pound to GBP 0.7932. The ounce of gold falls to USD 2019. Oil is losing ground, with North Sea Brent at USD 80.59 a barrel and US light crude WTI at USD 75.58. The yield on 10-year US debt rises to 4.18%. Bitcoin trades at USD 48,180.

In corporate news:

  • Diamondback announced on Monday the acquisition of Endeavor Energy Resources, the largest unlisted oil and gas producer in the Permian Basin, in a cash and stock transaction worth around $26 billion, including debt. Diamondback loses 0.7% in pre-market trading.
  • Alphabet- The group's main subsidiary, Google, pledged 25 million euros on Monday to help Europeans develop their artificial intelligence (AI) skills.
  • Nvidia - The group's CEO, Jensen Huang, said on Monday that all countries should have their own artificial intelligence (AI) infrastructure in order to take advantage of the technology's economic potential while protecting their own culture. He also believes that fears about AI are exaggerated.
  • VF Corp - Activist investor Engaged Capital has enlisted the support of the group's founding family, owners of The North Face, Vans and Timberland brands, to secure board seats and implement faster change, one of the family's heirs told Reuters.
  • New York Community Bancorp gained 1.8% in premarket trading, after jumping 17% on Friday following the publication of a notice showing that group executives had bought back over $850,000 worth of shares. Prior to this rebound, the regional bank's shares had lost around 50% of their value since January 31, when the group posted a surprise quarterly net loss and cut its dividend.
  • Amazon - The Internet giant's Prime Video streaming service will exclusively broadcast its first NFL (National Football League) playoff game next season, the Wall Street Journal reported Friday, citing sources close to the matter.
  • Applied Digital lost 3.1% in pre-market trading after reporting a power outage at its Ellendale, North Dakota data center.

Analyst recommendations:

  • Applied Materials: Morgan Stanley maintains its market weight recommendation and raises the target price from USD 142 to USD 190.
  • Blue Owl Capital: Keefe Bruyette & Woods maintains its market perform recommendation with a target price raised from USD 15.50 to USD 19.
  • Burberry Group: Berenberg drops coverage on the stock.
  • Caterpillar: Citigroup remains neutral recommendation with a target price raised from USD 255 to USD 340.
  • Charter Communications: Baptista Research maintains its hold recommendation with a target price reduced from USD 445.50 to USD 298.
  • Cloudflare: Morgan Stanley maintains its market weight recommendation and raises the target price from USD 66 to USD 92. Goldman Sachs maintains its sell recommendation and doubles the target price from USD 45 to USD 89. Macquarie maintains a neutral recommendation with a target price raised from USD 82 to USD 105.
  • Close Brothers Group: Keefe Bruyette & Woods maintains its outperform rating and reduces the target price from 1050 to GBX 700.
  • Hershey: Morgan Stanley downgrades to underweight from equal weight with a target price reduced from USD 191 to USD 183.
  • HSBC Holdings: Keefe Bruyette & Woods downgrades to underperform from market perform with a target price reduced from GBX 750 to GBX 700.
  • JD Sports Fashion: Berenberg drops coverage on the stock.
  • Jupiter Fund Management: BNP Paribas Exane upgrades to neutral from underperform with a target price raised from GBX 72 to GBX 81.
  • Lloyds Banking Group: Keefe Bruyette & Woods upgrades to market perform from underperform with a target price of GBX 50.
  • Lowe's Companies: JP Morgan upgrades to overweight from neutral with a target price raised from USD 210 to USD 265.
  • Meta Platforms: Loop Capital Markets maintains its buy recommendation and raises the target price from USD 440 to USD 555.
  • Palo Alto Networks: Wolfe Research maintains its outperform rating and raises the target price from USD 255 to USD 415.
  • Pepsico: Citi upgrades to buy from neutral with a target price raised from USD 180 to USD 195.
  • Rivian Automotive: Barclays downgrades to equalweight from overweight with a target price reduced from USD 25 to USD 16.
  • Standard Chartered: Keefe Bruyette & Woods upgrades to market perform from underperform with a target price of GBX 790.
  • W.W. Grainger: Baptista Research maintains its underperform recommendation and raises the target price from USD 696 to USD 915.80.
  • Willis Towers Watson: Citi upgrades to buy from neutral with a target price raised from USD 236 to USD 315.