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.

Brace for a rate hike

12/10/2021 | 09:12am EDT
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U.S. consumer prices continued to rise in November due to supply disruptions. This is the largest annual gain since 1982, and a clear sign that the Fed may be forced to reduce its asset purchases quicker than expected.

The consumer price index rose 0.8% last month after climbing 0.9% in October, the Labor Department said today. This is higher than the 0.7% expected in a Reuters consensus. Over the past twelve months, it rose 6.8%, the highest growth since June 1982.

Investors were anxiously awaiting the CPI data to get some clues as to when the Fed will start accelerating tapering. Fed Chair Jerome Powell previously said the U.S. central bank should consider speeding up the reduction of its bond purchases at its policy meeting next Tuesday and Wednesday. Many are also expecting a rate hike. 

However, markets are reacting rather positively to the announcement. This is a slightly slower pace than in October. Perhaps a steeper rise would have definitely forced the Fed to accelerate its monetary tightening program, whereas these figures leave more space for the central bank.

Meanwhile, fears about the consequences of the return of the pandemic continue to rattle markets. Yesterday, U.S. equities lost ground, especially technology and cyclicals, while the economic old guard kept the Dow afloat. However, Futures on all three Wall Street indexes were all up this morning.

Predictably, the flurry of partial information about the return of the pandemic and its Delta and Omicron variants is fueling stock market volatility. Investors are rightfully and appropriately wondering what impact this new wave will have on the growth outlook for 2022. At this point, projections are still very optimistic for next year, but economists may start to shave off those projections if Omicron gets out of hand.

Yesterday, new data on Omicron's ability to bypass the protective barrier of a double dose of vaccine sparked a new bout of caution and caused some indices to go down. Health care, consumer non-cyclical and utilities closed in the green, while technology, energy or consumer cyclicals nosedived. Investors are looking for more defensive stocks and fewer growth stocks and/or stocks correlated to the economic cycle. Europe and the US were in sync on this point, which is not so frequent this year. There was no miracle on gold, which a mysterious force has been holding around USD 1780 for a while.

 

On markets:

* Tesla - Elon Musk, the automaker's boss, who is continuing to sell shares, said Thursday night on Twitter that he is considering stepping down from his position at the company to become "an influencer." In addition, a Tesla employee, the second in less than a month, has filed a lawsuit against the carmaker for sexual harassment, claiming a "hostile work environment" against women in one of the group's U.S. plants.

* Oracle - The business software company said Thursday night it expects current-quarter profit and revenue to beat market expectations after better-than-expected results in the previous quarter. The stock jumped 11% in pre-market trading.

* Broadcom - The semiconductor maker said Thursday night it expects first-quarter sales to beat Wall Street expectations and announced plans to launch a $10 billion share buyback. The stock is up 7.1 percent in pre-market trading on Wall Street.

* Microsoft is about to get the green light without conditions from the European Commission to its proposed acquisition of Nuance Communications for $ 16 billion, Reuters learned from sources close to the case. Nuance and Microsoft advanced respectively by 1% and 0.3% in pre-trade.

* Lockheed Martin - The F-35 stealth aircraft of the American group won the tender launched by Finland to replace its aging fleet of 64 F-18 fighters, a source close to the file said on Friday. The Finnish government has budgeted 10 billion euros for the contract, including 9.4 billion for the purchase of the aircraft.

* Lululemon Athletica lost about 2 percent in premarket trading after saying it expects the spread of new coronavirus variants to weigh on demand for its products, even as it raised its 2021 revenue and earnings-per-share guidance.

* Blackstone - The U.S. private equity group announced Friday that it has bought Singaporean fund GIC's 49% stake in Dexus Australia Logistics Trust (DALT) for A$2.1 billion.

* Getty Images agreed on Friday to return to the stock market by merging with SPAC (financial vehicle) CC Neuberger Principal Holdings II in a deal that values the image bank at about $4.8 billion including debt. CC Neuberger Principal Holdings II shares rose 2.1% in premarket trading.

* Pfizer, BioNTech, Moderna - Australia will begin vaccinating children aged 5 to 11 with COVID-19 from Jan. 10, Prime Minister Scott Morrison announced Friday.

 

Analyst recommendations:

  • Apple: Cross Research adjusts Apple's PT to $195 from $176, maintains Buy rating
  • Ashmore: Goldman Sachs downgrades from Buy to Neutral with a target of GBp 340.
  • AstraZeneca: Berenberg remains Buy with target reduced from GBp 10,500 to GBp 10,000.
  • AvalonBay: BMO Capital Markets raised its recommendation to outperform from market perform. PT up 18% to $285
  • Centerspace: BMO Capital Markets downgrades to market perform from outperform. PT up 3% to $112
  • Commercial Metals: J.P. Morgan raised the recommendation to overweight from neutral. PT up 27% to $42
  • Countryside: Goldman Sachs downgrades from neutral to underweight with a target of GBp 450.
  • Jabil: Goldman Sachs raised the recommendation  to buy from neutral. PT up 22% to $75
  • Kaiser Aluminum: J.P. Morgan cut the recommendation to underweight from neutral. PT up 1.1% to $98
  • Microsoft: President Capital Management adjusts PT to $380 from $270, maintains Neutral rating
  • Oracle: Deutsche Bank raised the recommendation to buy from hold. PT up 35% to $120
  • Petrofac: J.P. Morgan upgrades to Overweight from Neutral with a target of GBP 160.
  • Radius Health: Morgan Stanley downgrades to underweight from equal-weight. PT down 7.9% to $7.
  • Royal Caribbean: Berenberg upgrades to hold from sell. PT up 7.1% to $80
  • SM Energy: Cowen raised the recommendation to outperform from market perform. PT up 33% to $42
  • Southwest Airlines: Goldman Sachs cut the recommendation to sell from neutral. PT down 17% to $36
  • Tullow Oil: J.P. Morgan upgrades to Overweight from Neutral, targeting GBP 79. 
  • US Bancorp: UBS starts US Bancorp at Buy with $70 price target
  • Walt Disney: Punto Casa de Bolsa raised the recommendation to buy from hold. PT up 24% to $189.70

© MarketScreener.com 2021
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Stocks mentioned in the article
ChangeLast1st jan.
APPLE INC. -2.78% 139.21 Delayed Quote.-19.41%
ASHMORE GROUP PLC -0.87% 228.4 Delayed Quote.-20.82%
ASTRAZENECA PLC -0.02% 10598 Delayed Quote.22.15%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) 0.01% 0.70876 Delayed Quote.-2.75%
AVALONBAY COMMUNITIES, INC. -0.55% 203.06 Delayed Quote.-19.16%
BIONTECH SE -4.82% 155.35 Delayed Quote.-36.69%
BLACKSTONE INC. -1.85% 106.48 Delayed Quote.-16.18%
BRITISH POUND / US DOLLAR (GBP/USD) -0.38% 1.2518 Delayed Quote.-7.59%
BROADCOM INC. -0.76% 522.375 Delayed Quote.-20.90%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) -0.30% 0.77956 Delayed Quote.-1.40%
CC NEUBERGER PRINCIPAL HOLDINGS II -0.08% 9.9419 Delayed Quote.0.51%
CENTERSPACE 0.91% 84.46 Delayed Quote.-24.53%
CHAINLINK (LINK/USD) -4.29% 7.009 End-of-day quote.-66.22%
COMMERCIAL METALS COMPANY -1.97% 37.4 Delayed Quote.5.13%
COUNTRYSIDE PARTNERSHIPS PLC -2.08% 235 Delayed Quote.-46.67%
DEUTSCHE BANK AG 0.66% 10.084 Delayed Quote.-9.08%
DEXUS -0.19% 10.61 Delayed Quote.-4.41%
EURO / US DOLLAR (EUR/USD) 0.39% 1.0725 Delayed Quote.-7.05%
INDIAN RUPEE / US DOLLAR (INR/USD) 0.04% 0.012904 Delayed Quote.-4.36%
JABIL INC. -3.35% 56.08 Delayed Quote.-17.51%
KAISER ALUMINUM CORPORATION -3.24% 95.69 Delayed Quote.5.27%
LOCKHEED MARTIN CORPORATION 2.03% 441.76 Delayed Quote.21.84%
LONDON BRENT OIL 0.83% 113.73 Delayed Quote.44.68%
LULULEMON ATHLETICA INC. -5.98% 256.54 Delayed Quote.-30.30%
MICROSOFT CORPORATION -1.07% 257.89 Delayed Quote.-22.50%
MODERNA, INC. -4.55% 131.36 Delayed Quote.-45.81%
MORGAN STANLEY -1.13% 81.36 Delayed Quote.-16.15%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) 0.01% 0.64468 Delayed Quote.-6.09%
ORACLE CORPORATION -1.95% 68.67 Delayed Quote.-19.69%
PETROFAC LIMITED 0.19% 157.7 Delayed Quote.36.51%
PFIZER, INC. 0.87% 53.35 Delayed Quote.-10.45%
RADIUS HEALTH, INC. -1.32% 5.96 Delayed Quote.-12.72%
ROYAL CARIBBEAN CRUISES LTD -10.00% 49.82 Delayed Quote.-27.98%
S&P 500 -1.53% 3914.24 Real-time Quote.-16.63%
S&P GSCI ALUMINUM INDEX -1.98% 183.701 Real-time Quote.5.09%
SM ENERGY COMPANY -0.83% 40.025 Delayed Quote.36.91%
SOUTHWEST AIRLINES CO. -3.82% 41.72 Delayed Quote.1.26%
TESLA, INC. -7.32% 625.7525 Delayed Quote.-36.14%
TULLOW OIL PLC 0.18% 54.45 Delayed Quote.17.01%
UBS GROUP AG 0.03% 17.78 Delayed Quote.8.25%
US BANCORP 0.10% 50.81 Delayed Quote.-12.39%
WALT DISNEY COMPANY (THE) -4.60% 100.98 Delayed Quote.-33.88%
WTI 0.36% 110.135 Delayed Quote.46.38%
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