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 new era of sobriety

05/12/2022 | 10:12am EDT
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U.S. stock fell on Thursday, hampered by growth stocks, as investors worry about the impact of the Fed's aggressive monetary on growth. Tech stocks are among the worst performers, with the Nasdaq 100 down 1.8% this morning, after losing 3% on Wednesday.

Investors are also spooked by PPI figures, released earlier today, which show that prices at the wholesale level rose further in April, the Bureau of Labor Statistics reported. However, they were in line with Dow Jones estimates. The producer price index gained 0.5% last month and 11% year-on-year. Excluding food, energy and trade services, core PPI climbed 0.6% in April and 6.9% year-on-year.

Equity markets went through all the spectrum of emotions, with one real constant: there is a lot of confusion in the minds of investors. This was due to the release of a slight decline in inflation in April, although less than expected. If there is a decline in prices, it is likely to be desperately slow. Therefore, the Fed may have to act longer to regain control of operations. So that increases the risk of a central bank blunder; and the soft-landing scenario is further undermined. In a few weeks, we have gone from "anyway, inflation is transitory, growth is strong" to "anyway, the fight against inflation will lead at best to sluggish growth, at worst to a recession".

One constant is the systematic bulldozing of technology stocks whose valuations were extravagant. Let's look at the ARKK Innovation investment fund, and compare it to the Berkshire Hathaway fund, which is kind of a temple of conservatism. The former is losing more than 60% in 2022, while the latter is in positive territory. A quarrel between old and new revisited.

Individual U.S. investors are now becoming bearish. Over the last two days, retail traders sold $1.9 billion worth of shares. This is the largest two-day outflow in 14 months, JPMorgan said.

We are definitely entering a more sober economic era, by necessity. We're going to have to adapt and start counting more seriously again, because the free money era is coming to an end. Everyone knew that. But it's easier to realize that the door is closing when it's right in your face.

 

Economic highlights of the day:

In the United States, the weekly unemployment figures and the producer price index are the main indicators.

The dollar is up 1% to EUR 0.9610. Gold is trading at USD 1846 per ounce. Oil rebounded yesterday, with North Sea Brent crude at USD 106.19 per barrel and US light crude WTI at USD 104.26. The yield on 10-year US debt falls further to 2.89%. Bitcoin is falling back to USD 28,000.

 

On markets:

* Apple is down 1.4% in pre-market trading, as its subcontractor Foxconn reported a slowdown in demand for electronic products and tensions in supply chains due to health restrictions in China.

* Walt Disney reported on Wednesday that the number of new users of Disney+, its video-on-demand platform, was higher than expected in the January-March period, but most of this growth is based on India, a market where the average subscription rate is about $0.76 per month. The group's second quarter results also came in below expectations. The stock lost 5.3% in pre-market trading.

* Twitter - The Securities and Exchange Commission is investigating Elon Musk's late disclosure of a stake in Twitter last month, the Wall Street Journal reported Wednesday, citing sources close to the matter.

* Alphabet subsidiary Google on Wednesday showed off a new prototype of connected glasses that can transcribe and translate a conversation in real time at its annual developer conference.

* Meta Platforms confirmed Wednesday that it is considering changes in Reality Labs, a division at the heart of the company's strategy to refocus on hardware and the metaverse, a virtual universe touted as the future of the Internet. The changes could be announced within a week as the group said last month it wanted to cut costs this year.

* Ford Motor announced Thursday that it has given up producing electric vehicles in India for export and is considering options for its two sites in the country. The stock is down 3.5% in pre-market trading.

* Beyond Meat plunged 24% in premarket trading in response to the release of a widening first-quarter net loss linked to higher costs and deep discounts in the period.

* Bumble - The dating app jumped 8.9% in the aftermath of Wednesday's release of better-than-expected first-quarter revenue and earnings.

* Rivian Automotive is up 2.7 percent in premarket trading after confirming on Wednesday its target of producing 25,000 vehicles this year despite supply chain tensions.

 

Analyst recommendations:

  • Albemarle: Wells Fargo Securities upgrades to overweight from equal-weight. PT up 34% to $285.
  • American Express: Wolfe Research downgrades to peerperform from outperform. PT down 8.4% to $146.
  • Beyond Meat: Barclays downgrades to equal-weight from overweight. PT down 4.5% to $25.
  • Capital One: Wolfe Research downgrades to underperform from peerperform. PT down 28% to $86.
  • Discover Financial: Wolfe Research downgrades to peerperform from outperform. PT down 7.3% to $97.
  • Electronic Arts: Raymond James lowers price target to $150 from $158, maintains outperform rating.
  • Federal Realty: Raymond James upgrades to strong buy from market perform. PT up 29% to $140.
  • Homeserve: RBC Capital Markets downgrades to sector perform from outperform. PT up 8.6% to 1,200 pence.
  • Lincoln National: UBS adjusts price target to $61 from $77, maintains neutral rating
  • National Bank of Canada: National Bank's target cut to $88, underweight rating reaffirmed by Barclays
  • On Semiconductor: Wells Fargo upgrades to overweight from equal-weight. PT up 26% to $65.
  • Papa John's International: UBS adjusts price target to $93 from $144, maintains neutral rating.
  • Peloton Interactive: Telsey Advisory adjusts price target to $15 from $28, keeps market perform rating.
  • SSE: Berenberg upgrades from hold to buy targeting GBp 2200.
  • Victrex: Jefferies remains "Hold" with a price target reduced from GBp 2100 to GBp 1860.
  • The Toronto-Dominion Bank: TD Bank Group target cut to $102, overweight rating maintained by Barclays.
  • Trex Company: UBS adjusts price target to $65 from $100, maintains neutral rating.

© MarketScreener.com 2022
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Stocks mentioned in the article
ChangeLast1st jan.
ALBEMARLE CORPORATION -1.06% 198.3 Delayed Quote.-15.17%
ALPHABET INC. 1.16% 2291.44 Delayed Quote.-20.90%
AMERICAN EXPRESS COMPANY -1.07% 138.15 Delayed Quote.-14.64%
APPLE INC. 0.96% 142.92 Delayed Quote.-20.28%
BERKSHIRE HATHAWAY INC. 0.07% 414148.01 Delayed Quote.-8.17%
BEYOND MEAT, INC. 6.03% 29.03 Delayed Quote.-55.45%
BUMBLE INC. 3.62% 33.52 Delayed Quote.-1.00%
CAPITAL ONE FINANCIAL CORPORATION -0.58% 106.04 Delayed Quote.-26.49%
DISCOVER FINANCIAL SERVICES -0.30% 97.68 Delayed Quote.-15.22%
ELECTRONIC ARTS INC. -0.32% 124.35 Delayed Quote.-5.72%
FEDERAL REALTY INVESTMENT TRUST 0.25% 97.1 Delayed Quote.-28.77%
FORD MOTOR COMPANY -1.25% 11.06 Delayed Quote.-46.08%
HOMESERVE PLC 0.34% 1170 Delayed Quote.33.33%
LINCOLN NATIONAL CORPORATION -0.40% 46.78 Delayed Quote.-31.19%
META PLATFORMS, INC. 0.94% 169.77 Delayed Quote.-49.53%
NATIONAL BANK OF CANADA -0.18% 84.77 Delayed Quote.-11.95%
ON SEMICONDUCTOR CORPORATION 0.66% 47.61 Delayed Quote.-29.90%
PAPA JOHN'S INTERNATIONAL, INC. -0.36% 85.16 Delayed Quote.-36.20%
PELOTON INTERACTIVE, INC. -2.50% 10.15 Delayed Quote.-71.62%
RIVIAN AUTOMOTIVE, INC. 10.42% 29.66 Delayed Quote.-71.40%
SSE PLC -0.03% 1696.5 Delayed Quote.2.91%
THE TORONTO-DOMINION BANK -0.80% 83.15 Delayed Quote.-14.26%
TREX COMPANY, INC. 0.57% 56.44 Delayed Quote.-58.44%
TWITTER, INC. -0.44% 38.21 Delayed Quote.-11.59%
VICTREX PLC 2.65% 1816 Delayed Quote.-27.54%
WALT DISNEY COMPANY (THE) -1.13% 96.08 Delayed Quote.-37.26%
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