The fairy tale scenario of investors took a hit yesterday after the publication of the September JOLTS survey. JOLTS stands for "Job Openings and Labor Turnover Survey,". Basically, it is a somewhat late indicator of labor market dynamics, which falls a few days before the monthly employment report for the month just ended (in this case, October data will be released on Friday). Nevertheless, the JOLTS survey provides a good idea of the major underlying trends, even if investors are now used to refining their analysis by using data from large private job search sites such as Indeed. I'd go further and say that during flat economic times, the JOLTS survey doesn't get people excited. But in the last few months, it's been attracting interest again, which makes sense.

The JOLTS survey results released yesterday showed that the number of job openings in the U.S. economy rebounded in September. That is, companies are still having trouble hiring. Why is this upsetting investors? Because it doesn't fit well with the current scenario that economic activity is slowing down, the labor market is slowing down and therefore the Fed doesn't need to be as aggressive in its monetary sobriety. The market is waiting for the Fed's famous "pivot", i.e. the first signal that the current monetary cycle is about to turn. For this to happen, the central bank must have tangible evidence that the fight against inflation is on the way to being won. Remember, this is the "bad news is good news" syndrome.

As a result, the S&P500 ended down 0.4% and the Nasdaq 100 lost a little over 1%. Earlier, European indexes had continued their autonomous course with strong gains, except in Switzerland where the decline in health care weighed too heavily in the balance. Despite a gloomy economic situation, with industrial sites struggling with soaring energy prices, business indicators on the decline and record inflation, the old continent continued its rebound. The German DAX even added a seventh consecutive pearl to its string of gains. Here too, we are probably in the slightly flawed calculation that the ECB will be forced to ease off if everything goes wrong.

Getting back to the fairy tale scenario, there is a key episode at 2pm ET. If all goes as investors hope, the US central bank is expected to announce a 75-basis point rate hike, the fourth consecutive of this magnitude. But above all, it should – at the 2:30 pm conference – start to subtly soften its message. Fed boss Jerome Powell has several pieces of language to do so.

And then, there's the possibility that the Fed does not change its communication one bit, because it considers that it must maintain pressure to avoid inflationary overheating. Here, of course, it is reasonable to think that investors would be upset at not getting their next central bank shot, after having been deprived of it for several quarters. Indexes would then fall again. So there you have it, the "game-changer" is Jerome.

Everything today will revolve around this monetary policy decision. To wait until 2:00 pm, there will also be some statistics and a new batch of corporate earnings: Sony, Advanced Micro Devices, Novo Nordisk, Costco, Qualcomm or AXA.

 

Economic highlights of the day:

The second reading of European manufacturing PMI indicators for October, APD employment survey, oil stocks and the US central bank's rate decision are all on today's agenda. All the macro agenda is here. 

The dollar is losing ground to EUR 1.0113 but is up 0.07% against the pound to GBP 0.8710. The gold ounce is up a bit around USD 1654. Oil continued its rebound, with North Sea Brent crude at USD 94.47 per barrel and U.S. light crude WTI at USD 88.24. The yield on 10-year U.S. debt reached 4.04%. Bitcoin is trading around USD 20,400.

 

In corporate news:

* Advanced Micro Devices on Tuesday delivered fourth-quarter guidance below market expectations but said it expects revenue growth from its data center business and promised to be cautious on spending. The stock was up 4.2% in pre-market trading.

* Dupont - The chemical company announced Tuesday night that it had abandoned plans to buy ROGERS for $5.2 billion, citing regulatory hurdles in China. In pre-market trading, Rogers plunged nearly 40%.

* Walmart, Walgreen Boots and CVS Health have reached a proposed settlement agreement under which they will pay a total of $13.8 billion to end several thousand lawsuits related to their alleged role in the opioid crisis, two sources close to the negotiations said Tuesday.

* Electronic Arts - The video game publisher lowered its annual order forecast, citing the impact of the rising dollar and the general slowdown in the gaming market after peaks during the pandemic.

* Airbnb said it expects booking growth to slow in the fourth quarter due to the strong dollar and inflation. The stock was down 5.8% in pre-market trading.

* Mondelez - The cookie and confectionery giant raised its annual earnings forecast on Tuesday. The stock was up nearly 4% in after-hours trading.

* Yum Brands - The group that owns KFC, Pizza Hut and Taco Bell reported quarterly like-for-like sales that beat Wall Street expectations.

* Humana - The health insurer reported a 43% increase in adjusted quarterly earnings and confirmed its full-year earnings forecast.

* The New York Times reported quarterly revenue up 7.6% year-over-year but below consensus due to a slowdown in advertiser spending.

* Tesla has closed what was once its main showroom in China, a sign that the electric carmaker is adjusting its strategy to the changing market, two sources close to the matter said.

* Match Group - Tinder's parent company reported better-than-expected quarterly results and the stock was up 16 percent in after-hours trading Tuesday.

 

Analyst recommendations:

  • AbioMed: Morgan Stanley upgrades to equal-weight from underweight. PT up 0.6% to $380.
  • Advanced Energy: Benchmark Company lowers PT to $90 from $110. Maintains buy rating.
  • Bio-Techne: Benchmark Company lowers target to $480 from $540. Maintains buy rating.
  • Blucora: Benchmark Company raises PT to $32 from $26. Maintains buy rating.
  • Boohoo: Liberum downgrades from hold to sell targeting GBp 35.
  • British American Tobacco: Goldman Sachs downgrades to neutral from buy, targeting GBp 3800.
  • Cirrus Logic: Needham & Co raised its target to $85 from $73. Maintains buy rating.
  • Cleveland-Cliffs: Wolfe Research downgrades to underperform from peerperform. PT down 10% to $12.
  • Ecolab: Deutsche Bank downgrades to hold from buy. PT down 5.6% to $135.
  • Essentra: Jefferies remains Buy with a price target cut from GBp 340 to GBp 300.
  • IPG Photonics: Benchmark Company lowers PT to $130 from $165. Maintains buy rating.
  • Microsoft: Macquarie reinstated coverage with a recommendation of neutral. PT up 2.6% to $234.
  • NXP Semi: Jefferies lifts PT to $185 from $165. Maintains buy rating.
  • Ocado: J.P. Morgan downgrades from neutral to underweight, targeting GBp 500.
  • Premier: Baird raised the recommendation to outperform from neutral. PT up 29% to $41.
  • Snowflake: Macquarie initiated coverage with a recommendation of neutral. PT set to $173.
  • The Clorox Co: D.A. Davidson & Co raise PT to $155 from $124. Maintains neutral rating.
  • Unilever: Jefferies remains Buy with a price target reduced from GBp 4600 to 4500.
  • Universal Logistics: Stifel downgrades to hold from buy. PT up 4.2% to $36.