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.

Elon still rules over markets

06/03/2022 | 09:43am EDT
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Tesla CEO’s influence on stock markets is still very strong, since his latest comments on the state of the economy led Wall Street’s main indexes to open lower. In an email sent to executives seen by Reuters, Elon Musk said has a "super bad feeling" about the economy and wants to cut about 10% of jobs.

Investors are also assessing the May jobs report, released earlier today, looking clues on what the Fed’s next steps will be in terms of rate hikes and quantitative tightening.

The labor market is still strong, with the US economy adding more jobs than expected last month, with May non-farm payroll rising by 390,000. The FactSet economic consensus expected the U.S. to add 325,000 jobs last month, down from 428,000 in both March and April. The unemployment rate stands at 3.6%, vs 3.5% expected.

Investors are wondering what the Fed has in store for the next few months, but the panic seems to have subsided. U.S. bond funds attracted net inflows in the week to June 1, after five months of outflows, according to Refinitiv data, thanks to new signs that inflation may have peaked.

Today’s lower open comes after a rebound yesterday. It seems like stocks are bouncing around in a vacuum. But since the market is always right, there are a few factors that support Thursday's rally. Whether those factors are valid is another story. Here, if I told you that Microsoft was about to lower its second-quarter earnings guidance before Wall Street opens, you probably would have predicted a market drop. But yesterday, the tech giant issued a warning on its results due to currency effects, yet, the Nasdaq closed up 2.75% yesterday and Microsoft stock even gained 0.8%! Even comments by Fed bankers Loretta Mester and Lael Brainard suggesting that the U.S. central bank could continue to raise rates in September did not change the course of indexes. The market doesn't really want to believe it. Instead, it is dreaming that the Fed will abandon its full rate hike program because of deteriorating macroeconomic conditions. So as soon as a US statistic is a little weak, stocks go up. This is a recurring paradox. It seems that only Elon is able to get through to investors.

In other news, OPEC+ decided yesterday to increase its production a bit more than expected in July and August (648 million barrels per day more, instead of 432 million more than in the previous months). Again, counter-intuitively, this announcement pushed up the price of black gold. It must be said that observers thought that the cartel could take advantage of Russia's export difficulties to allow its other members to increase their own production. But this did not happen and industry insiders expect that in reality, the production increase will be smaller because only some Gulf countries have the capacity to pump significantly more and will be content to go up to their quotas. Once again, Saudi Arabia is dictating its conditions: after all, the country runs a legal cartel, so why deprive itself. Joe Biden is planning to visit Riyadh by the end of the month, the New York Times revealed: this is a sign that Washington is seeking to increase its pressure on the Kingdom, both in terms of production and its relations with Russia. In the new global geopolitical configuration, there is no guarantee that Biden will succeed.

 

Economic highlights of the day:

The final PMI indices for services will be published throughout the day for the major economies. The May employment figures and the ISM services are also on the agenda.

The dollar gained 0.3% to EUR 0.9331. The ounce of gold is worth EUR 1858. Oil recovered with North Sea Brent crude at USD 117.50 per barrel and US WTI light crude at USD 118.12. The yield on 10-year US debt is firm at 2.92%. Bitcoin is just under USD 30,000.

 

On markets:

* Tesla - Group CEO Elon Musk wants to cut 10% of the workforce, he wrote in a letter to executives that Reuters was able to see, citing his "very bad feeling" about the economic situation. The stock is losing about 4% in pre-market trading.

* Kohl’s Corporation is up more than 7% in pre-market trading. According to the Wall Street Journal, the department store group has received takeover offers from Sycamore Partners and Franchise Group.

* Bristol Myers Squibb announced Friday that it is buying Turning Point Therapeutics for $4.1 billion.

* American Airlines Group announced on Friday that it now expects its sales to increase by 11% to 13% in the second quarter, compared with the 6% to 8% previously forecast.

* Walmart announced Thursday that it plans to open four new fulfillment centers in the U.S. within two years, creating 4,000 jobs.

* Lululemon Athletica - The sports and leisurewear specialist raised its annual revenue and profit forecasts to reflect demand growth, saying the impact of the confinements in China was limited and more than offset by other markets. The stock gained 1.4% in pre-market trading.

* Coinbase Global - The cryptoasset exchange platform will extend its hiring freeze and reconsider a number of previously agreed-upon hires to address changing economic conditions, management said in a blog post Thursday night.

 

Analyst recommendations:

  • BankUnited: Keefe, Bruyette & Woods downgrades to market perform from outperform. PT up 22% to $51.
  • Canadian National Railway: CIBC Capital Markets upgrades to outperform from neutral. PT up 12% to C$167.
  • Ciena: B Riley Securities upgrades to buy from neutral. PT rises 32% to $67.
  • Ecolab: Credit Suisse raised the recommendation on Ecolab to outperform from neutral. PT up 13% to $195.
  • Exact Sciences: Piper Sandler initiated coverage with a recommendation of neutral. PT down 2.4% to $50.
  • FlagStar Bancorp: Keefe, Bruyette & Woods downgrades to market perform from outperform. PT up 12% to $44.
  • Marsh & McLennan: Morgan Stanley downgrades to underweight from equal-weight. PT down 9.4% to $145.
  • Martin Marietta: J.P. Morgan upgrades to overweight from neutral. PT rises 18% to $410.
  • Micron: Piper Sandler downgrades to underweight from neutral. PT down 7.1% to $70.
  • Microsoft: Stifel lowers price target to $320 from $350, maintains buy rating.
  • Snowflake: Raymond James initiated coverage with a recommendation of outperform. PT up 33% to $184.
  • Solaredge: Oppenheimer upgrades to outperform from perform, sets $334 price target.
  • SouthState Corp: Keefe, Bruyette & Woods upgrades to outperform from market perform. PT up 24% to $100.
  • The Travelers Co: Goldman Sachs downgrades to sell from neutral. PT down 4.5% to $170.
  • Veeva Systems: Truist Securities adjusts price target to $225 from $275, keeps buy rating.
  • Voya Financial: Goldman Sachs raised to buy from neutral. PT rises 18% to $80.

© MarketScreener.com 2022
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Stocks mentioned in the article
ChangeLast1st jan.
AMERICAN AIRLINES GROUP INC. 1.73% 15.25 Delayed Quote.-15.09%
BANKUNITED, INC. 1.59% 40.82 Delayed Quote.-3.52%
CANADIAN NATIONAL RAILWAY COMPANY 0.93% 163.73 Delayed Quote.5.37%
CIENA CORPORATION 3.42% 54.7 Delayed Quote.-28.93%
COINBASE GLOBAL, INC. 7.73% 90.49 Delayed Quote.-64.14%
ECOLAB INC. 1.73% 174.09 Delayed Quote.-25.79%
EXACT SCIENCES CORPORATION 0.83% 42.71 Delayed Quote.-45.12%
FLAGSTAR BANCORP, INC. 1.49% 42.34 Delayed Quote.-11.68%
LULULEMON ATHLETICA INC. 1.49% 321.69 Delayed Quote.-17.82%
MARSH & MCLENNAN COMPANIES 1.46% 172.72 Delayed Quote.-0.63%
MARTIN MARIETTA MATERIALS, INC. 1.43% 370.1 Delayed Quote.-15.99%
MICRON TECHNOLOGY, INC. 4.36% 65.04 Delayed Quote.-30.18%
MICROSOFT CORPORATION 1.70% 291.91 Delayed Quote.-13.20%
SNOWFLAKE INC. 0.48% 168.68 Delayed Quote.-50.21%
SOLAREDGE TECHNOLOGIES, INC. 3.60% 330.52 Delayed Quote.17.80%
SOUTHSTATE CORPORATION 2.06% 85.33 Delayed Quote.6.52%
TESLA, INC. 4.68% 900.09 Delayed Quote.-14.83%
THE TRAVELERS COMPANIES 1.63% 171.56 Delayed Quote.9.67%
VEEVA SYSTEMS INC. 0.32% 225.37 Delayed Quote.-11.79%
VOYA FINANCIAL, INC. 2.09% 64.94 Delayed Quote.-2.07%
WALMART INC. 1.85% 132.22 Delayed Quote.-8.62%
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