The U.S. job market is flexing its muscles again. Initial jobless claims, seasonally adjusted, fell by 19,000 to 241,000 for the week ending October 12, defying the Bloomberg consensus of 259,000. Meanwhile, the 4-week moving average crept up by 4,750 to 236,250.

Last week's claims were revised from 258,000 to 260,000. The insured unemployment rate remained at 1.2% for the week ending October 5. In retail, the Census Bureau's preliminary report is all sunshine. Retail and food services sales in September rose by 0.4% to $714.4 billion, surpassing analysts' expectations.

Year-over-year, sales increased by 1.7% from September 2023. These figures are a double-edged sword for the market. They confirm the US economy's robustness but also diminish the likelihood of rate cuts. The market reacted well, with Futures Nasdaq 100 rising 1.1%, Futures S&P 500 up 0.5% and Futures Dow Jones gaining 0.2%.

Financial institutions are delivering strong earnings reports, boosting indices. Morgan Stanley hit a record high with a 6.5% gain.

The S&P500 rose 0.47%, while the Nasdaq 100 managed a modest 0.07% recovery. Nvidia bounced back from a previous dip, but the semiconductor sector is still reeling from ASML's recent woes. ASML's head, Christophe Fouquet, remarked, "today, without AI, the market would be very sad, if you ask me." Investors are warming up to small caps again. The Russell 2000 index reached levels unseen since November 2021, nearly three years ago.

After showing weakness in August and September, it's rebounding with gains nearing 5% in four sessions, driven by healthcare and financial services. A trip to China is unavoidable. A major press conference is set for today to bolster government support for the real estate sector. Observers note the central government is pressuring local entities to revitalize the economy. President Xi Jinping's call for officials to achieve the 5% annual growth target is significant.

Meanwhile, the chip war between Beijing and Washington is heating up. U.S. congressmen are pushing the White House to block Huawei suppliers from accessing American equipment. Despite restrictions, Huawei is producing high-performance chips, worrying Washington.

Geopolitically, rumors suggest Israel is ready to respond to an Iranian attack. In Europe, the third-quarter earnings season began with a thud. ASML dropped 20% in two days. LVMH has seen five consecutive sessions in the red, down 14% in October.

Yesterday, Tecan and Eramet fell 14%, and Ipsos dropped 13%, all due to disappointing results or downgraded 2024 forecasts. Today, earnings reports from Nestlé, Publicis, and Essilor-Luxottica are on the docket. Investors are eyeing Ljubljana, Slovenia, where the ECB has relocated its October monetary policy meeting. Christine Lagarde and her team announced a 25bps rate cut, as expected. In Asia-Pacific, Japan and Australia are in a bullish mood, while South Korea and India are slightly down. In China, Hong Kong is down 1.0%, as we await yet another round of stimulus measures. European indices are bullish, with the EURO STOXX 50 up 1%.

Economic highlights today:

On the agenda today, the ECB decision, new jobless claims in the US, the Philly Fed's business outlook and retail sales, followed by capacity utilization and industrial production, then business inventories and the NAHB housing market index, and finally, DOE crude inventories. See the full agenda here. 

The dollar is worth EUR 0.9223 and GBP 0.7687. The ounce of gold remains firm at USD 2,680. Oil fell, with North Sea Brent at USD 74.20 a barrel and US light crude WTI at USD 69.96. The yield on 10-year US debt stands at 4.07%. Bitcoin is hovering around USD 67,000.

In corporate news: 

  • Lucid loses 12% after its quarterly results.
  • Equifax loses 4.6% after its quarterly results.
  • CSX Corporation loses 3.5% after its quarterly results.
  • Uber is reportedly exploring a takeover ofExpedia, according to the FT.
  • RTX Corporation to pay $950 million for fraud and corruption in Qatar.
  • Meta lays off WhatsApp and Instagram employees, according to The Verge.
  • China's cybersecurity agency calls for Intel investigation.
  • Boeing plans to raise around $15 billion through a share sale and convertible bond, Reuters reported.
  • Robinhood launches a desktop platform and adds index futures and options trading to the application.
  • Alcoa and Ignis about to sign a joint financing agreement for an aluminum plant in Spain.
  • Blackstone exceeded Wall Street's expectations for the third quarter, with assets under management reaching a record $1.1 trillion.
  • Elevance Health is down 12.6% in pre-market trading as the health insurer cut its profit forecast for the year due to rising costs associated with government-sponsored Medicaid insurance.
  • Sage Therapeutics announced the redundancy of more than 165 employees, about 33% of its workforce, as part of a reorganization plan.
  • KeyCorp reported a 9% rise in third-quarter adjusted earnings, driven by higher interest on loans and increased underwriting fees.
  • M&T Bank reported a jump in third-quarter earnings, helped by higher fees from institutional services and wealth management activities, and by setting aside less money for credit losses.
  • Boeing moves closer to a plan to raise around $15 billion through common stock and a mandatory convertible bond, but the timeline remains uncertain.

    Today's main publications: Netflix, Intuitive Surgical, Blackstone, Elevance Health, Marsh & McLennan, The Travelers Companies, KeyCorp...

Analyst recommendations:

  • Fortinet, Inc.: Mizuho Securities downgrades to underperform from neutral with a target price of USD 68.
  • Illumina, Inc.: HSBC upgrades to buy from hold with a price target raised from 126.USD 338 to USD 180.
  • Littelfuse, Inc.: Oppenheimer upgrades to outperform from market perform with a target price of USD 310.
  • Markel Group Inc.: Zacks upgrades to outperform from neutral with a price target raised from USD 1647 to USD 1660.
  • Sealed Air Corporation: Raymond James upgrades to strong buy from market perform with a target price of USD 42.
  • Uber Technologies, Inc.: Daiwa Securities downgrades to neutral from outperform with a price target raised from USD 73 to USD 84.
  • W.w. Grainger, Inc.: Oppenheimer downgrades to market perform from outperform.
  • Coherent Corp.: Morgan Stanley maintains its market weight recommendation and raises the target price from 72 to USD 100.
  • Johnson Controls International Plc: Mizuho Securities maintains a neutral recommendation with a price target raised from 62 to USD 75.
  • Kinder Morgan, Inc.: Wells Fargo maintains its overweight recommendation and raises the target price from USD 22 to USD 27.
  • Okta, Inc.: BTIG maintains its buy recommendation and reduces the target price from USD 128 to USD 98.
  • Palantir Technologies Inc.: Mizuho Securities maintains its underperform recommendation and raises the target price from 24 to USD 30.
  • Pure Storage, Inc.: Guggenheim maintains its buy recommendation and raises the target price from USD 72 to USD 93.
  • Synchrony Financial: Barclays maintains its equalweight recommendation and raises the target price from 49 to USD 59.
  • Transocean Ltd.: Pareto Securities maintains its hold recommendation with a price target reduced from 6.50 to USD 4.50.
  • United Airlines Holdings, Inc.: Bernstein maintains its outperform rating and raises the target price from USD 68 to USD 85.
  • RS Group Plc: Deutsche Bank downgrades to hold from buy with a price target reduced from GBX 950 to GBX 830.