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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.

Bad news is piling up

07/14/2022 | 09:01am EDT
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The mood soured on stock markets after data released yesterday shows U.S. inflation rose by 9.1% year-over-year in June, which was way above economist expectations.

The latest US inflation figures show that prices are not going to cool down anytime soon. On the contrary, inflation accelerated in June. The Consumer Price Index (CPI) rose by 1.3% last month after a 1.0% increase in May. The Core CPI, which excludes energy and food prices, was up by 0.7% in June, after 0.6% in May.

The Fed also released its latest Beige Book last night, which confirmed what everyone in the US can see. Increases in food, commodity, and energy costs (especially fuel) have remained high and prices are rising because companies are passing on their higher costs to consumers.

When and if there is a decline in prices, it is likely to be desperately slow. This is an issue, since the Fed may have to act harder and longer to regain control, with the risk of a hard landing scenario for the US economy. The market is now opened to the possibility of a 100-basis point rate hike on July 27. From 10% a few days ago, the CME’s Fedwatch tool now gives it an 82% chance!

Just a few months ago, the norm was to raise rates by quarter points, and even then, the best thing was to simply avoid raising rates at all. Things are moving very fast on stock markets!

South Korea and New Zealand raised their rates by 0.5 basis points yesterday, while Canada followed decided to go with a 100 bps increase.

Other bad news just came from JPMorgan Chase & Co and Morgan Stanley, which kicked off earnings season with disappointing results. JPMorgan’s profit fell in Q2, hit by higher provisions to cover potential losses, amid quantitative tightening. Morgan Stanley also posted a drop in quarterly profits.

These results, along with the determination of central banks to curb high inflation with aggressive rate hike, raise fears of recession - all three Wall Street indexes opening in the red this morning.

However, on some level, the market seems to have come to terms with the fact that the Fed will have to take action to curb inflation by reducing the amount of cash in circulation. Inflation data did not lead to any sharp movements yesterday, a sign that investors have now fully integrated the arrival of a much more restrictive monetary policy. The S&P500 limited its losses to -0.45%. Risk assets have shown surprising resilience, like the Nasdaq 100, which has long been in positive territory yesterday, or bitcoin, which has risen 4.50% to USD 20,100.

 

Today's economic highlights:

US weekly jobless claims and producer price index were released at 8:30am, before weekly oil inventories at 10:30am. All the macro agenda here.

The euro is still flirting with parity with the US dollar. The ounce of gold is down to USD 1713. Oil is losing some strength again, with North Sea Brent at USD 98.44 per barrel and US WTI light crude at USD 95.16. U.S. debt has a 10-year yield at 2.95%. Bitcoin is trading at USD 19,700.

 

On markets:

* Intel said Thursday that it has begun notifying customers that it plans to raise prices on most of its products because of rising costs.

* Twitter - The social network said it was not planning any company-wide layoffs but would likely continue to restructure its operations.

* Conocophillips announced that it will take a 30% stake in Sempra Energy's liquefied natural gas (LNG) plant in Port Arthur, Texas, as the U.S. oil and gas producer expands its LNG business to meet strong demand.

* Occidental Petroleum - Berkshire Hathaway, led by Warren Buffett, said it bought an additional 4.3 million shares of the oil company this week, raising its stake to 19.2%.

* Amazon - The online shopping giant offered to refrain from using seller data for its own retail operations and made other concessions in a bid to close an antitrust investigation, EU regulators said.

* Regeneron Pharmaceuticals - The pharmaceutical company announced that the Phase III trial of Dupixent (Dupilumab) showed positive results in children aged 1 to 11 with eosinophilic esophagitis.

* Alphabet- The Italian competition authority (AGCM) said Thursday it had opened an investigation targeting Google for alleged abuse of a dominant position in data portability, a charge the group denied.

 

Analyst recommendations:

  • AMD: BMO Capital Markets upgrades to outperform from market perform. PT jumps 48% to $115.
  • American Express: Wells Fargo adjusts price target to $190 from $215, keeps overweight rating.
  • CDW: J.P. Morgan upgrades to overweight from neutral. PT up 26% to $200.
  • Centene: Jefferies raised the recommendation on Centene Corp. to buy from hold. PT up 35% to $115.
  • CF Industries: Credit Suisse reinstated coverage with a recommendation of underperform. PT down 15% to $73.
  • Cigna: Jefferies downgrades to hold from buy. PT down 1% to $271.
  • Cisco: J.P. Morgan downgrades to neutral from overweight. PT up 19% to $51.
  • Dollar General: Citi cut the recommendation to neutral from buy. PT up 4.6% to $258.
  • Fidelity National: Wells Fargo Securities downgrades to equal-weight from overweight. PT up 7.9% to $101.
  • Fiserv: Wells Fargo Securities downgrades to equal-weight from overweight. PT up 5.6% to $97.
  • Glencore: Goldman Sachs is still Buy but with a price target reduced from GBP 7.45 to GBP 6.
  • Idex: Oppenheimer & Co upgrade to outperform from market perform. PT up 19% to $215.
  • Juniper: J.P. Morgan upgrades to overweight from neutral. PT up 29% to $36.
  • Linde PLC: BofA remains Buy but adjusts its target to USD 369 from USD 370.
  • Mohawk Industries: Barclays cut the recommendation to underweight from equal-weight. PT up 2.4% to $129.
  • PPG Industries: BofA Securities adjusts price target to $161 from $172, keeps buy rating.
  • The Mosaic Company: UBS remains long but with a price target reduced from USD 78 to USD 60. Credit Suisse reinstates at Outperform.
  • Visa: Wells Fargo Securities is still long but with a price target reduced from USD 280 to USD 255.
  • Watsco: Baird upgrades to outperform from neutral. PT up 25% to $313.
  • Zoom Video: Piper Sandler adjusts price target to $115 from $96, keeps neutral rating.

© MarketScreener.com 2022
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Stocks mentioned in the article
ChangeLast1st jan.
ALPHABET INC. 3.04% 101.64 Delayed Quote.-29.83%
AMAZON.COM, INC. 4.50% 121.09 Delayed Quote.-27.37%
AMDOCS LIMITED 2.47% 83.01 Delayed Quote.8.24%
AMERICAN EXPRESS COMPANY 3.89% 145.46 Delayed Quote.-14.41%
CDW CORPORATION 4.02% 166.34 Delayed Quote.-18.77%
CENTENE CORPORATION 1.09% 80.87 Delayed Quote.-1.86%
CF INDUSTRIES HOLDINGS, INC. 4.75% 105.06 Delayed Quote.41.71%
CIGNA CORPORATION 2.02% 293.02 Delayed Quote.27.61%
CISCO SYSTEMS, INC. 2.22% 41.82 Delayed Quote.-34.84%
CONOCOPHILLIPS 5.14% 115.62 Delayed Quote.60.18%
DOLLAR GENERAL CORPORATION -0.56% 245.11 Delayed Quote.4.52%
FIDELITY NATIONAL INFORMATION SERVICES, INC. 4.19% 79.54 Delayed Quote.-27.13%
FISERV, INC. 3.47% 98.73 Delayed Quote.-4.88%
GLENCORE PLC 2.93% 500.8 Delayed Quote.33.56%
IDEXX LABORATORIES, INC. 3.54% 348.59 Delayed Quote.-47.06%
INTEL CORPORATION 2.71% 27.7 Delayed Quote.-47.63%
JPMORGAN CHASE & CO. 4.68% 112.77 Delayed Quote.-31.97%
JUNIPER NETWORKS, INC. 3.99% 27.63 Delayed Quote.-25.60%
LINDE PLC 3.86% 286.46 Delayed Quote.-20.38%
MOHAWK INDUSTRIES, INC. 7.34% 100.55 Delayed Quote.-44.81%
MORGAN STANLEY 4.47% 83.97 Delayed Quote.-14.46%
OCCIDENTAL PETROLEUM CORPORATION 3.29% 66.17 Delayed Quote.120.97%
PPG INDUSTRIES, INC. 4.34% 119.15 Delayed Quote.-33.78%
REGENERON PHARMACEUTICALS, INC. 0.60% 739.54 Delayed Quote.17.10%
THE MOSAIC COMPANY 5.36% 52.09 Delayed Quote.32.58%
TWITTER, INC. 22.24% 52 Delayed Quote.-1.57%
VISA, INC. 2.20% 185.65 Delayed Quote.-14.33%
WATSCO, INC. 3.44% 274.54 Delayed Quote.-12.25%
ZOOM VIDEO COMMUNICATIONS, INC. 4.87% 77.54 Delayed Quote.-59.80%
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