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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.

Fed officials gave us a reality check

08/19/2022 | 09:49am EDT
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The last session of the week is off to a bad start. Federal Reserve officials dampened the mood with comments that dashed investors' hopes the Fed was going to adopt a less aggressive monetary policy, after data showing inflation softened.

St. Louis Fed President James Bullard said yesterday he was more in favor of another 75-basis-point rate hike in September, while San Francisco Fed head Mary Daly said raising rates by 50 or 75 basis points next month would be "reasonable".

Kansas City Fed President Esther George added another blow when she said that she and her colleagues will not stop tightening policy until they are "completely convinced" that inflation is coming down. Until now, most investors hoped that 75-basis points rate hikes would be history.

So, what will it be? The next major event for monetary policy is the Jackson Hole Symposium, the big summer gathering of central bankers, organized each year by the Kansas City Fed in Wyoming. It will be held next week from August 25 to 27 and is expected to be the focus of markets for several days.

Yesterday, oil stocks and semiconductor companies lifted indexes, after OPEC Secretary General said that demand for oil has been strong and that fears of a slowdown in China are exaggerated. As a result, the Dow Jones, the S&P500 and the Nasdaq rose slightly.

As for the overall mood, specialists are still having trouble interpreting the latest macroeconomic statistics. Until the end of 2021, the various indicators published showed the strength of the economy. During the first half of the year, the situation deteriorated, and we saw a resurgence of data below economists' expectations. Both situations are easy enough to understand. But for the past few weeks, the data has been less clear-cut. There are good surprises, such as on the job market or even on production. And others not so good, in particular on the real estate market. We saw it again yesterday.

Today is the third Friday of the month. It is the monthly clearing, dubbed "Triple Witching " by investors. Several classes of derivatives are expiring, which causes an increase in volatility visible mainly to those in the know. However, experts point out that this August 2022 deadline carries a bit more stakes than usual, because options played an important role in the summer market rebound and traders will have to decide whether to "roll" them or take new positions. Goldman Sachs estimates that $2.1 trillion worth of U.S.-listed options are expiring today. Traders have been using options extensively to get on board the rebound train. This clearing day will be a good opportunity to see if they continue with their bets.

To finish, our daily Wall Street column will take a little break, and be back on September 5. May I take this opportunity to thank you for being a loyal reader.

 

Economic highlights of the day:

UK retail sales and German producer prices are today's main indicators All the macro agenda is here.

The dollar is down to EUR 0.9940. The ounce of gold is also down to USD 1755. North Sea Brent crude is trading at USD 95.25 per barrel and US WTI light crude at USD 89.58. The yield on 10-year US debt is back up to 2.90%. Bitcoin fell back below USD 22,000.

 

On markets:

* Deere - The world's largest agricultural machinery maker reported lower-than-expected quarterly earnings per share and lowered its annual profit forecast due to rising costs and supply chain issues. In pre-market trading, it was down 7%.

* Foot Locker climbed 22% in premarket trading after reporting better-than-expected second-quarter profit, a smaller-than-expected decline in like-for-like sales and the appointment of Mary Dillon as CEO.

* Chevron and Exxon Mobil were down 1.2% and 1.5%, respectively, in premarket trading as oil prices fell on concerns about a slowing global economy.

* Applied Materials, an equipment maker for semiconductor manufacturing, reported record quarterly sales and a better-than-expected revenue forecast for the current quarter on Thursday, easing concerns about slowing demand. The stock was up 4% Thursday in after-hours trading.

* Bed Bath & Beyond was down 40% in premarket trading, having already lost about 20% on Thursday after billionaire investor Ryan Cohen sold his stake in the home goods retailer.

* Keurig Dr Pepper is in talks to buy beverage maker Vital Pharmaceuticals, which would be valued at more than $2 billion, Bloomberg reported Thursday, citing sources.

* Rivian was giving up 2% in pre-market trading as the electric vehicle maker decided to discontinue the entry-level "Explore" model, according to a letter sent to customers.

 

Analyst recommendations:

  • Advanced Micro Devices: Haitong International starts with a recommendation of outperform. Price target up 29% to $130.
  • Analog Devices: Piper Sandler maintains overweight rating. PT down to $190 from $210.
  • Apartment Income REIT: BMO Capital downgrades to underperform from market perform. Price target is $43
  • Applied Materials: Fubon Securities initiated coverage with a recommendation of neutral. PT up 11% to $120.
  • Ashtead Group: Jefferies boosts and maintains buy rating. PT up to 55 pounds from 50 pounds.
  • Bath & Body Works: Credit Suisse maintains neutral rating. PT down to $42 from $49.
  • Bunzl: Wells Fargo decreases to underweight from equal-weight. PT lowers 15% to $30.
  • Globant: Piper Sandler reiterates overweight rating. Price target adjusts to $249 from $231.
  • Horace Mann Educators: Piper Sandler raised the recommendation to overweigh from neutral.  PT set to $42.
  • Laredo Petroleum: Raymond James cut the target to $95 from $110. Maintains outperform rating.
  • Lowe's: Wedbush raised the target to $225 from $200. Maintains neutral rating.
  • HP Inc: Wells Fargo cut the recommendation to underweight from equal-weight. PT set to $30, implies a 15% decrease from last price.
  • MACOM Technology Solutions: Piper Sandler adjusts price target to $75 from $65. Reiterates overweight rating.
  • Nasdaq: Atlantic Equities downgrades to neutral from overweight. Price target adjusts to $200 from $190.
  • UDR: BMO Capital lowers to market perform from outperform. Price target is $54.
  • ZTO Express: J.P.Morgan upgrades to overweight from neutral. Price target jumps to $35 from $27.

© MarketScreener.com 2022
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Stocks mentioned in the article
ChangeLast1st jan.
ADVANCED MICRO DEVICES, INC. 1.31% 67.17 Delayed Quote.-53.32%
ANALOG DEVICES, INC. 0.70% 141.81 Delayed Quote.-19.88%
APARTMENT INCOME REIT CORP. -1.30% 37.91 Delayed Quote.-30.66%
APPLIED MATERIALS, INC. 1.46% 84.15 Delayed Quote.-47.29%
ASHTEAD GROUP PLC -1.07% 3893 Delayed Quote.-34.48%
BED BATH & BEYOND INC. 0.16% 6.38 Delayed Quote.-56.24%
BUNZL PLC -0.04% 2730 Delayed Quote.-5.37%
CHEVRON CORPORATION 0.04% 141.02 Delayed Quote.20.17%
DEERE & COMPANY 1.04% 335.68 Delayed Quote.-2.10%
EXXON MOBIL CORPORATION 2.10% 85.74 Delayed Quote.40.12%
FOOT LOCKER, INC. 0.06% 33.96 Delayed Quote.-22.21%
GLOBANT S.A. -1.09% 189.48 Delayed Quote.-39.67%
HORACE MANN EDUCATORS CORPORATION 0.20% 35.77 Delayed Quote.-7.57%
HP INC. 0.08% 24.98 Delayed Quote.-33.69%
KEURIG DR PEPPER INC. -3.51% 35.97 Delayed Quote.-2.41%
LAREDO PETROLEUM, INC. 3.90% 55.15 Delayed Quote.-8.28%
LOWE'S COMPANIES, INC. 0.89% 187.67 Delayed Quote.-28.03%
MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. 1.28% 53.06 Delayed Quote.-32.24%
NASDAQ 0.69% 56.96 Delayed Quote.-18.63%
PAX DOLLAR (USDP/USD) 0.07% 0.9997 End-of-day quote.-0.02%
RIVIAN AUTOMOTIVE, INC. -0.18% 33.79 Delayed Quote.-67.41%
UDR INC. -0.86% 40.55 Delayed Quote.-32.41%
ZTO EXPRESS (CAYMAN) INC. 0.82% 24.7 Delayed Quote.-12.47%
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