Yesterday, indexes alternated between red and green but without moving too far from the equilibrium point, the Nasdaq, the German DAX, and the French CAC40 and were in the moderate decline category, while the S&P 500, the British FTSE and the Italian MIB picked up a few points.

The surprise change in monetary policy in Japan should bring down the last stronghold of accommodative policy in the world. This has reinforced the message that inflation is likely to persist, even if it will likely fall from the spectacular levels seen in 2022.

It also raises some questions about the health of the bond market, since the BoJ's stated reason for its unexpected move is to ensure the smooth functioning of that market. Some industry insiders are wondering if there is something going on in the background that the average investor might not be aware of. The troubles experienced by British Gilts at the end of the summer are still on everyone's mind... It must be said that this year is atypical: Lombard Odier pointed out this morning that over the course of a century, a simultaneous decline in equities and bonds has occurred only three times: in 1931, in 1969 and in 2022.

In the US, investors are also concerned about bad macroeconomic news. For example, monthly building permits were down sharply, as reported by the Census Bureau. There was a time, not so long ago, when "bad news? good news" was the norm, because investors thought that a pile of bad macro data would force the Fed to reverse course on rate hikes.

Of course, the longer the Fed maintains its hawkish policy, the greater the damage to the economy. But this is nothing compared to the effects of permanently high inflation, according to the institution's analysis. Which makes sense, otherwise the Fed would not bother. Note that some economists dispute this point and think that the cure is worse than the disease. That's how economics is: everyone has a lot of theories and everyone makes a few mistakes, then theories are made to explain why the previous ones didn't quite work. And so on.

In the end, US investors have gone into "bad news is bad news" mode. Is it good news? No idea, but we will now have to deal with an even more exotic universe of perception. For example, the Conference Board has just released the December US consumer confidence index. The American consumer is holding the economy together at the moment, as he keeps spending despite price increases. Two weeks ago, we would probably have said "if the numbers are bad, stocks will go up because the Fed will have to be less hawkish". Now it's more confusing, so less directional. Well, the consumer confidence index for December came in at 108.3, while 101.0 was expected. This is way above the mark and might worry some investors that see a sign of overheating. Investors like when numbers are good, but not too good…

We also received US housing data. This is not normally the most closely watched statistic, but it is taking on added importance at the moment, for the reasons mentioned above. Existing home sales dropped 7.7% to an annual rate of 4.09 million units last month, the lowest level since May 2020, and below expectations of 4.20 million units in a Reuters consensus. Sales have now been falling for 10 consecutive months.

 

Economic highlights of the day:

In the United States, the Conference Board's Consumer Confidence index and Existing-Home Sales are the main focus. All the macro agenda here. 

The dollar is up 0.2% to EUR 0.9432 and 0.7% to GBP 0.8264. The gold ounce rebounds to 1818 dollars. Oil is little changed, with North Sea Brent at USD 81.65 per barrel and US WTI light crude at USD 77.86. The yield on 10-year US debt climbs to around 3.70%. Bitcoin is flirting with USD 17,000.

 

In corporate news:

* Nike climbed 12.5% in premarket trading after posting its second-best quarterly revenue growth in more than a decade and a profit above expectations, as deeper and deeper discounts aimed at reducing excess inventory helped the sports equipment maker boost sales.

* Fedex reported a larger-than-expected quarterly profit and announced an additional $1 billion in spending cuts. The stock was up 5% in trading before the Wall Street opening.

* Tesla - Following a poll unfavorable to him, Elon Musk said he will step down as CEO of Twitter as soon as he finds a successor but will continue to lead some key divisions of the social network. The share of the automotive group, of which Elon Musk is also the boss, gained 1% in pre-trade.

* American Equity Investment Life announced that it had rejected an unsolicited offer to buy Prosperity Life and its main shareholder, investor Elliott Investment Management, for $3.9 billion.

* Rite Aid climbed 8.4% in pre-market trading after reporting better-than-expected third-quarter sales and a smaller-than-expected loss.

* Core Scientific, one of the largest listed cryptocurrency mining companies, announced Wednesday that it had filed for Chapter 11 bankruptcy protection.

 

Analyst recommendations:

  • Bird Global: DA Davidson downgrades to Neutral from Buy, lowers price target to $0.40 from $3.50.
  • Citizens Financial: D.A. Davidson & Co initiated coverage with a recommendation of buy. PT up 24% to $47.
  • Fedex: Credit Suisse considers the stock attractive and recommends it with a Buy rating. Previously set at USD 213, the target price has been slightly modified to USD 211.
  • Ionis Pharma: Morgan Stanley downgrades to equal-weight from overweight. PT up 2.8% to $40.
  • Keycorp: D.A. Davidson & Co reinstated coverage with a recommendation of buy. PT up 20% to $20.
  • McDonald's: Jefferies  has maintained its recommendation on the stock with a Buy rating. The target price is being increased from USD 305 to USD 315.
  • M&T Bank: D.A. Davidson & Co initiated coverage with a recommendation of neutral. PT up 14% to $160.
  • NBT Bancorp: Raymond James initiated coverage with a recommendation of strong buy. PT up 17% to $49.
  • Nike: Goldman Sachs considers the stock attractive and recommends it with a Buy rating. The target price has been lifted and is now set at USD 133 compared to USD 120 before.
  • Starbucks: Jefferies cut its recommendation to hold from buy. PT up 2% to $100.
  • Synthomer: Berenberg remains Buy with target raised from GBp 160 to GBp 170.
  • United Bankshares: Raymond James initiated coverage with a recommendation of outperform. PT up 13% to $44.
  • US Bancorp: D.A. Davidson & Co reinstated coverage  with a recommendation of neutral. PT up 12% to $47.