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 little respite for Wall Street

05/10/2022 | 09:33am EDT
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Wall Street looked set for a rebound as it opened this morning, after experiencing steep losses in the past few sessions. The S&P 500 was up by 1.5%, the Nasdaq by 2.3% and the Dow Jones by 1.1%.

Despite this improvement, investors' concerns about inflation, rising interest rates, the conflict in Ukraine, lockdowns in China and slowing global growth are still very present.

Volatility remains high: The VIX volatility index has risen above 35 points, flirting with its peak last March. This means that the slightest news coming from the Fed, Ukraine or China can have consequences for indexes.

At the macro level, the fear of inflation has been replaced by the fear of monetary austerity, which is turning into a fear of recession. This caused the star shock absorber of 2022, the oil sector, to drop yesterday, adding to the fall of the technology sector. U.S. investors went to safer grounds with health care and big family stock, such as PepsiCo, Kellogg or Johnson & Johnson.

The yield on 10-year US debt has deflated a little to 3.03%, while risky assets are still suffering: bitcoin even made a brief foray below USD 30,000 per unit yesterday.

After all, after 12 years of increases for the Nasdaq in the past 13 years (2018 being the only exception, and still with a contraction of -0.12%), you must also expect some reversals of fortune.

The reality is that the bull run on equity markets was no longer sustainable given the current headwinds. Too much inflation, too many geopolitical tensions, too many production imbalances, too much money spent on speculation and not enough elsewhere. Until recently, anyone could get away with doing just about anything. Now that we're in the thick of it, it's best to stick with the good old investment principles: focus on quality companies whose fundamentals are appropriate to current macroeconomic conditions, be diversified, adjust your risk level, etc. etc. It never hurts to regain humility.

There will continue to be volatility in the days to come, in both directions. Investors will watch out for the April US inflation numbers, which will be announced on Wednesday. They have a strong influence on morale, because they will be a strong indicator of the Fed's monetary policy.

 

Economic highlights of the day:

The dollar is up slightly to EUR 0.9478. The ounce of gold is up to USD 1862. Oil is also gaining ground, with North Sea Brent crude at USD 105.82 a barrel and U.S. light crude WTI at USD 101.95. The yield on 10-year U.S. debt falls a bit to 3.03%. Bitcoin is rising to 32,195.

 

On markets:

*An internal Tesla memo, seen by Reuters, shows that the automaker has suspended most of its production at its Shanghai plant as the Chinese economic capital entered its sixth week of containment due to COVID-19. According to data released Tuesday by the China Passenger Car Association (CPCA), the Chinese industry federation, Tesla's production in China plunged 98% in April compared to the previous month.

* Pfizer announced on Tuesday that it is buying migraine drug maker Biohaven Pharmaceutical for about $11.6 billion in cash. Pfizer shares fell 1.3% in pre-market trading, while Biohaven shares jumped 71.2%.

* Novavax shares plunged 20% in premarket trading after the company announced that it had shipped only 31 million doses of its COVID-19 vaccine in the first quarter out of the two billion it expects to sell this year.

* AMC Entertainment - The movie theater operator reported better-than-expected quarterly revenue and a narrowed net loss on Monday thanks to the success of big-budget movies like "The Batman." The stock is up 4.2% in pre-market trading.

* Microsoft announced on Monday that it will cover travel expenses that its employees may incur in connection with an elective termination of a pregnancy as the U.S. Supreme Court may end the constitutional right to abortion.

* Meta, Facebook's parent company, is considering reducing the amount of commissions it pays to media groups as part of a re-evaluation of its partnerships in recent years, The Information reported Monday, citing sources close to the matter.

* Match Group, the owner of Tinder, is suing Google, a subsidiary of Alphabet, in California for anti-competitive practices in the Play Store, the application store of the Internet giant.

* About 20 U.S. Internet service providers have pledged to lower rates or increase speeds for millions of low-income households, U.S. President Joe Biden said Monday.

* Lucid Group - The U.S. electric vehicle maker announced Tuesday that it plans to market premium sedans in Europe later this year to expand its presence beyond the United States. The stock is up 2.9% in pre-market trading.

* The share price of the online used car distributor VROOM soared 31% after the announcement of the promotion of Tom Shortt to group CEO and the publication of a smaller-than-expected quarterly net loss.

* Peloton Interactive - The sports equipment maker plunged 17% in premarket trading after reporting a 23.6% decline in quarterly sales due to weak demand.

* Blackrock announced on Tuesday that it intends to oppose certain shareholder resolutions at this year's annual general meetings, saying that certain proposals, particularly on climate change, are too restrictive and "incompatible with the long-term financial interests of its customers.

* Halliburton - Shareholder advisory firm Institutional Shareholder Services (ISS) on Monday recommended voting against the oilfield services group's proposed executive compensation package.

* The Carlyle Group announced Monday that it has reached an agreement with White Mountains to acquire insurance broker NSM Insurance Group for $1.78 billion in cash.

 

Analyst recommendations:

  • Agree Realty: JMP Securities initiated coverage with a recommendation of market outperform. PT up 21% to $81.
  • Axon: Credit Suisse initiated coverage with a recommendation of outperform. PT jumps 92% from last price to $169.
  • Edison International: Mizuho Securities downgrades to neutral from buy. PT up 2.8% to $72.
  • Essex Property: Barclays downgrades to underweight from equal-weight. PT up 4.7% to $310.
  • Ford: Berenberg initiated coverage with a recommendation of hold. PT rises 27% to $17.
  • General Motors: Berenberg initiated coverage with a recommendation of buy. PT up 44% to $55.
  • GlaxoSmithKline: Berenberg remains Buy with a price target raised from GBp 1700 to GBp 1850.
  • Metro Bank: Investec upgrades to buy from hold. PT up 21% to 95 pence.
  • Prestige Consumer Health: Jefferies upgrades to buy from hold. PT up 22% to $70.
  • Progressive: Jefferies analyst upgrades to hold from underperform. PT down 2.5% to $106.
  • Schroders: Citigroup upgrades from neutral to buy targeting GBp 2900.
  • Tyler Tech: Credit Suisse initiated coverage with a recommendation of neutral. PT set to $408.
  • Upstart: Piper Sandler downgrades to neutral from overweight. PT down 43% to $44.
  • W. P. Carey: JMP Securities initiated coverage with a recommendation of market outperform. PT set to $87.

 

 


© MarketScreener.com 2022
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Stocks mentioned in the article
ChangeLast1st jan.
AGREE REALTY CORPORATION -1.13% 72.7 Delayed Quote.3.04%
AMC ENTERTAINMENT HOLDINGS, INC. -5.54% 12.78 Delayed Quote.-50.26%
AXON ENTERPRISE, INC. 2.60% 95.65 Delayed Quote.-40.62%
BLACKROCK, INC. 0.65% 620.72 Delayed Quote.-32.64%
EDISON INTERNATIONAL -3.23% 61.69 Delayed Quote.-6.59%
ESSEX PROPERTY TRUST, INC. -0.84% 264.5 Delayed Quote.-24.27%
FORD MOTOR COMPANY -1.06% 11.2 Delayed Quote.-45.50%
GENERAL MOTORS COMPANY 0.56% 32.37 Delayed Quote.-45.10%
GSK PLC -0.89% 1786.6 Delayed Quote.12.20%
HALLIBURTON COMPANY -8.08% 28.89 Delayed Quote.37.43%
JOHNSON & JOHNSON -0.77% 178.14 Delayed Quote.4.94%
KELLOGG COMPANY 0.68% 72.27 Delayed Quote.11.43%
LUCID GROUP, INC. 1.35% 17.23 Delayed Quote.-55.32%
MATCH GROUP, INC. 3.73% 74.16 Delayed Quote.-45.94%
META PLATFORMS, INC. 5.10% 168.19 Delayed Quote.-52.42%
METRO BANK PLC -3.69% 75.7 Delayed Quote.-18.21%
MICROSOFT CORPORATION 1.26% 262.85 Delayed Quote.-22.82%
NOVAVAX, INC. 12.49% 64.29 Delayed Quote.-60.05%
PELOTON INTERACTIVE, INC. 14.02% 10.41 Delayed Quote.-74.47%
PEPSICO, INC. -0.22% 169.01 Delayed Quote.-2.49%
PFIZER, INC. -1.28% 51.64 Delayed Quote.-11.41%
PRESTIGE CONSUMER HEALTHCARE INC. 0.34% 59.78 Delayed Quote.-1.76%
PROGRESSIVE CORPORATION -1.13% 117.14 Delayed Quote.15.42%
SCHRODERS PLC -2.57% 2580 Delayed Quote.-25.62%
TESLA, INC. 2.55% 699.2 Delayed Quote.-35.48%
THE CARLYLE GROUP INC. 1.28% 32.5 Delayed Quote.-41.55%
TYLER TECHNOLOGIES, INC. 1.87% 340.13 Delayed Quote.-37.93%
UPSTART HOLDINGS, INC. 8.04% 35.46 Delayed Quote.-78.31%
W. P. CAREY INC. -1.57% 82.06 Delayed Quote.1.61%
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