At the moment, it's best to avoid being labelled as an "artificial intelligence stock" and publish earnings just in line with analyst expectations, or you might get punished by investors. Even Microsoft, which exceeded all or almost all expectations with its Q4 results, was down last night. It lost 2.7% at the bell, but all the big tech companies gave back more than 2%.

The Fed decided to keep its rates unchanged, as expected. Commentators described Jerome Powell's speech as modestly hawkish, meaning that the Fed chief was entirely in line with what could reasonably be expected of him: positive, but not overly so, about the economy and rates. A slightly firmer stance than investors were hoping for, knowing full well that they wouldn't get what they were hoping for. Yes, investors are complex. Powell rather elegantly dismissed the market's main fantasy, a rate cut as early as March, saying "I don't think it's likely that the committee will reach a sufficient level of confidence by the March meeting".

His comments led investors to expect a first rate cut in May or June. The CME's FedWatch tool, which provides a probability of rate movements based on futures contracts, tells us this morning that the likelihood of a rate cut in March is down to 35.5% (which is still considerable in view of Powell's statements, but hey...), while it's up to 94% in May.

Wall Street closed in the red on Wednesday, which came as no great surprise. The bond market's reaction was a little more intriguing. The 10-year yield fell by over 10 points despite the Fed's modestly hawkish tone. This is essentially because investors wanted a rate cut in March, but knew it was unlikely. Powell's statements therefore come as no surprise, and the market is still holding on to its rate cut scenario for the foreseeable future. March would have been better, but May or June remain short-term. Some commentators also note that the bond market has risen as a result of a feedback loop with equities, which were already falling before the Fed's statement, a movement that could have been accentuated by the slight resurgence of caution linked to the surprise losses of New York Community Bancorp, whose share price collapsed yesterday. NYCB is the regional bank that took over Signature Bank's assets, so its weakening makes a mess and awakens the demons of early 2023, when several small American banks went under.

As expected, the Bank of England kept its interest rates unchanged today, with six out of nine members of the Monetary Policy Committee voting to keep rates at 5.25%. However, Governor Andrew Bailey welcomed "good news" on the inflation front.

As a result of the BoE decision, Britain's 2-year and 10-year gilt yields rose, while the pound declined. "The fact that two members are still voting for higher rates suggests that there is no material, immediate momentum to lower rates and the inflation projections implicitly show that the committee as a whole believes that the speed of rate cuts implied by yield curve has been too rapid, " Philip Shaw, chief economist at Investec, told Reuters. "We stand by our baseline call that the committee will begin to ease in June”.

Governor Andrew Bailey held a press conference, noting there was good news on inflation over the past few months, and that it has “fallen a long way”, from 10% a year ago to 4%. But he added that the BoE still needs to see more evidence that inflation is set to fall all the way to the 2% target, and stay there, before it can lower interest rates.

The rest of the news is still dominated by the density of corporate earnings reports, with Apple, Amazon and Meta aiming to restore order in US tech after the bell. On the macro agenda, PMI indicators will drive the session, while new US job data was just published.

Job cut announcements rose in January, led by tech companies. Announced layoffs reached 82,307 in January, which is 136% higher than in December, according to firm Challenger, Gray & Christmas. This level was not seen since March 2023.

In another report, the Labor Department said initial claims for state unemployment benefits rose 9,000 to 224,000 for the week ended January 27. Economists expected 212,000 claims.

In the Asia-Pacific region, Japan and Australia ended the session sharply lower. South Korea woke up after a steep decline in January: the KOSPI started the month with a gain of 1.7%. India is stagnating and China is trying to recover. The Hang Seng gained 0.7% during the session. European leading indicators are mostly bearish, with the French CAC 40 down 0.5% and the German Dax just under zero. The FTSE 100 inched up 0.1%. Wall Street futures were in the green in pre-market trading, with futures on the Nasdaq reaching +0.6%.

Today's economic highlights:

Today on the agenda, we have the second estimate of manufacturing PMIs for January in Europe and the US. Eurozone inflation figures for January, the Bank of England rate decision, the Challenger survey layoff figures, new jobless claims, non-farm productivity and unit labor costs, construction spending and ISM Manufacturing are also released today. https://www.marketscreener.com/stock-exchange/calendar/economic/

The dollar is worth EUR 0.9241 and GBP 0.889. The ounce of gold rises to USD 2040. North Sea Brent is at USD 81.32 a barrel and US light crude WTI at USD 76.63. The yield on 10-year US debt fell to 3.94%. Bitcoin trades at USD 42,000.

In corporate news:

  • Qualcomm fell by 1.8% before the opening, as concerns about its sales in China outweighed the slightly better-than-expected earnings reported by the group for its second fiscal quarter.
  • Nvidia has begun taking pre-orders for a new China-specific artificial intelligence (AI) chip, and at the same price as a rival product from Huawei, sources reported.
  • Tesla will immediately hold a shareholder vote to transfer the company's articles of incorporation to Texas, CEO Elon Musk said on Thursday, the day after a judge in Delaware overturned the executive's proposed record $56 billion compensation package.
  • Merck reported better-than-expected fourth-quarter results on Thursday, driven by strong sales of its cancer treatment Keytruda, now the world's best-selling prescription drug. The share price advanced 1% in pre-market trading.
  • Metlife - The insurer loses 4.2% after the close after posting fourth-quarter net earnings of 77 cents per share, compared with $1.96 per share in the previous quarter.
  • Amer Sports, the parent company of France's Salomon, announced on Wednesday that it had set the price of its initial public offering (IPO) at $13 per share, below the initial guidance range of $16 to $18 per share. The group is due to make its stock market debut in New York on Thursday.
  • Royal Caribbean Group announced on Thursday that it expects this year's earnings to exceed Wall Street expectations, thanks to strong demand for cruises despite higher fares. The cruise operator's sales jumped nearly 28% in the fourth quarter of 2023 to $3.33 billion. The share price rose by around 2.8% in pre-market trading.
  • Peloton Interactive announced Thursday that it expects sales for its fiscal third quarter to fall short of market expectations, as the fitness group anticipates lower demand for its equipment amid high inflation, which is weighing on non-essential spending.
  • Wolfspeed- The chipmaker forecasts below-consensus sales for the third quarter, as the slowdown in electric vehicle sales weighed on demand for semiconductors. The stock loses 6% in pre-market trading.
  • Qorvo - The chipmaker forecasts fourth-quarter sales and earnings ahead of Wall Street estimates, anticipating a rebound in the smartphone market.
  • Align Technology jumps 12.2% in pre-market trading, as the dental products specialist anticipates better-than-expected sales for the current quarter.
  • Corteva beat Wall Street estimates for its quarterly profit, thanks to higher prices offsetting lower volumes. The agricultural chemicals group also announced a share buyback plan of almost $1 billion for this year.
  • KKR said on Wednesday it had raised $6.4 billion for its Asia-Pacific infrastructure fund.
  • Norfolk Southern climbs 8.2% in pre-market trading after the Wall Street Journal reports that a consortium of investors has taken a stake of around $1 billion in the rail operator.
  • Ball Corp - The beer can manufacturer missed consensus on its quarterly sales on Thursday, amid falling demand and cautious consumer spending.

Analyst recommendations :

  • Advanced Micro Devices.: Punto Research downgrades to hold from buy with a price target raised from USD 128.50 to USD 174.26.
  • Alphabet Inc.: China Renaissance Research downgrades to hold from buy with a target price of USD 146.
  • Block, Inc.: Zacks downgrades to neutral from outperform with a price target reduced from USD 74 to USD 72.
  • Corning Incorporated: HSBC downgrades to reduce from hold with a target price of USD 29.
  • Phillips 66: Morningstar downgrades to sell from hold with a target price of USD 119.
  • Ppg Industries, Inc.: Redburn Atlantic downgrades to neutral from buy with a target price of USD 160.
  • Qualcomm, Inc.: Citi downgrades to neutral from buy with a target price of USD 160. Fubon Securities upgrades to buy from neutral with a price target raised from USD 130 to USD 175.
  • Rockwell Automation, Inc.: Daiwa Securities downgrades to buy from outperform with a price target reduced from USD 338 to USD 310. Morningstar upgrades to buy from hold with a target price reduced from USD 315 to USD 309.
  • Advanced Micro Devices.: Punto Research downgrades to hold from buy with a price target raised from USD 128.50 to USD 174.26.
  • Cencora.: Cowen maintains its outperform rating and raises the target price from USD 215 to USD 261.
  • Mastercard: Morgan Stanley maintains its overweight rating and raises the target price from USD 439 to USD 536. Macquarie maintains its outperform recommendation and raises the target price from USD 420 to USD 505.
  • Match Group.: Barclays maintains its overweight recommendation and raises the target price from USD 45 to USD 55. Citigroup remains neutral recommendation with a price target raised from USD 32 to USD 39.
  • Microsoft Corporation: HSBC maintains its buy recommendation and raises the target price from USD 413 to USD 516.
  • Palo Alto Networks, Inc.: JMP Securities maintains its market outperform recommendation and raises the target price from USD 300 to USD 380.
  • Qualcomm, Inc.: Fubon Securities upgrades to buy from neutral with a price target raised from USD 130 to USD 175. Wolfe Research maintains its outperform rating and raises the target price from USD 145 to USD 180.
  • Thermo Fisher Scientific: Jefferies maintains its hold recommendation with a price target raised from USD 435 to USD 540.
  • 3I Group : Numis downgrades to hold from buy with a price target raised from GBX 2374 to GBX 2647.
  • Bytes Technology Group: HSBC downgrades to hold from buy with a price target raised from GBP 6.25 to GBP 6.75.
  • Easyjet Plc: JP Morgan upgrades to overweight from neutral with a price target raised from GBP 5.20 to GBP 6.90.
  • Marshalls Plc: Berenberg upgrades to buy from hold with a price target raised from GBX 320 to GBX 420.
  • Next Plc: Barclays downgrades to equalweight from overweight with a price target raised from GBP 82.50 to GBP 85.
  • Pets At Home Group Plc: Berenberg downgrades to hold from buy with a price target reduced from GBX 440 to GBX 390.
  • BP Plc: Oddo BHF maintains its neutral recommendation with a price target reduced from 540 to GBP 5.40.
  • Easyjet: JP Morgan upgrades to overweight from neutral with a price target raised from GBP 5.20 to GBP 6.90.
  • Fdm Group (Holdings) Plc: Stifel maintains its hold recommendation with a price target reduced from GBX 707.25 to GBX 494.90.
  • Marshalls: Berenberg upgrades to buy from hold with a price target raised from GBX 320 to GBX 420.
  • Brookfield Asset Management.: HSBC downgrades to hold from buy with a price target raised from USD 39 to USD 43.50.