Producer prices rose 0.9% year-on-year and by 0.3% on a monthly basis. Economists were projecting a 0.6% gain year-on-year, and a 0.1% rise month-on-month. The core PPI, excluding volatile components such as foods and energy, jumped 0.6%, while a 0.1% gain was expected in a Bloomberg consensus.

The US Bureau of Labor Statistics said the rise was mostly due to final demand services less trade, transportation, and warehousing. Bond yields jumped after the announcement, with the US 10-year rising from 4.25% to 4.33%.

The data comes a few days after the consumer price index for January, which also came in stronger than expected. It’s becoming clear that inflation is not as tamed as previously thought and investors are gonna have to rethink their expectations regarding rate cuts this year. And it looks like they already have: this morning, swaps gave only a 24% chance of the Fed holding rates steady in June, or a 76% probability of a rate cut. After the PPI data, traders gave a 39.6% chance that rates will remain steady in June, according to the CME FedWatch tool. Yesterday, Atlanta Fed President Raphael Bostic reminded us that inflation will indeed ease, but not as quickly as the market thinks.

Yesterday, equity markets continued to rally. Some would say it’s a bit much. Several Western indices are flying from record to record, like France's CAC40 and Germany's DAX yesterday. The Nikkei 225 is close to its 1989 peak. As for the US S&P500, Dow Jones and Nasdaq, they are still flirting with the highs they hit last Friday, after closing yesterday's session in the green, yet again. The rebound in oil prices and renewed optimism in the financial sector enabled the big players in fossil fuels and banks to regain some height.

Paradoxically, US yields were rather tense yesterday, with the 10-year yield rising to 4.26%, which didn't seem to bother the equity markets too much. For some time now, bonds and equities have been telling more or less the same story. But this week, we're witnessing a hint of dissonance.

On another note, my colleague Anthony Bondain – who obviously has too much time on his hands - did a little exercise that’s quite interesting: he’s identified the companies with a market capitalization of over $10 billion listed in the USA or Europe that have gained at least 20% in 2024. There are 44 of them. Of this total, here is the sector breakdown without taking capitalization into account:

Of these 44 companies :

  • 78% are based in the USA
  • 22% are based in Europe (two representatives for Italy, Germany, the Netherlands and Denmark, with the other countries present with a single representative).

The interesting point, which demonstrates the concentration of the market, is that when actual market capitalization is taken into account, technology and healthcare account for 90% of the total. This includes 67% for just four companies: Nvidia, Meta, Eli Lilly and Novo Nordisk. We'll have to take a look at the next SPIVA study of managers' performance. But with such concentration, both in terms of sectors and capital, those who haven’t hoped on the AI and the fight against obesity train have something to worry about. And for those who did, it will be hard for them to hang on to index performance, unless they have practiced a concentration that portfolio theory frowns upon.

In the Asia-Pacific region, Tokyo ended the week on a good note, approaching its 35-year high. Hong Kong soared by 2.4%, while mainland China remained closed for the Lunar New Year (resuming on Monday). European leading indicators are still bullish, with the Euro Stoxx 600 up 0.5%.

Economic highlights of the day:

January housing starts & building permits and producer prices are on the agenda, along with the University of Michigan's consumer confidence index. 

The dollar is rising, at EUR 0.9309 and GBP 0.7959. The ounce of gold is worth USD 1998. Oil bounced back, with Brent North Sea crude at USD 81.97 a barrel and WTI US light crude at USD 77.40. The yield on 10-year US debt climbed back to 4.33%. Bitcoin is trading at USD 52,400.

In corporate news:

  • Nike announced on Thursday that it was cutting around 2% of its workforce, or more than 1,600 jobs, as the sportswear giant seeks to reduce costs after posting lower profits this year. Oppenheimer also lowered its recommendation to "in-line performance".
  • Applied Materials - The semiconductor equipment supplier forecast second-quarter sales ahead of Wall Street estimates on Thursday, as it benefits from a recovery in demand for personal computers and a boom in artificial intelligence. The stock gained 13% before the opening.
  • Gilead Sciences said Thursday it had suspended enrollment in tests for its cancer drug magrolimab, a week after the U.S. regulator suspended some tests due to an increased risk of patient deaths.
  • Apple plans to launch an artificial intelligence tool to complete lines of software code, Bloomberg reported on Thursday.
  • Exxon Mobil plans to decide by the end of the year which lithium filtration technology it will use in Arkansas to become a leading producer of the metal, a group executive said Thursday.
  • DoorDash reported annual earnings well ahead of expectations and beat consensus in the fourth quarter, with more customers using its online delivery platform.
  • Roku on Thursday forecast first-quarter sales ahead of Wall Street estimates, with advertising and more content expected to underpin business. The stock lost 17% before the opening.
  • Coinbase Global reported a fourth-quarter profit, helped by higher interest income that the crypto-currency exchange earned on its stablecoin reserves. The stock gained 12.9% before the opening.
  • The U.S. Department of Justice intends to take a close look at a proposed sports streaming platform developed by Walt Disney, Fox and Warner Bros Discovery, Bloomberg Law reported on Thursday.

Analyst recommendations:

  • Alnylam Pharmaceuticals, Inc.: Goldman Sachs downgrades to neutral from buy with a price target reduced from USD 230 to USD 173.
  • Applied Materials, Inc.: Fubon Securities upgrades to buy from neutral with a price target raised from USD 145 to USD 215.
  • Booking Holdings Inc.: Edward Jones downgrades to hold from buy.
  • Coinbase Global, Inc.: Keefe Bruyette & Woods upgrades to market perform from underperform with a price target raised from USD 93 to USD 160.
  • Cummins Inc.: Baptista Research downgrades to hold from outperform with a price target raised from USD 259.40 to USD 280.
  • Ford Motor Company: Baptista Research downgrades to hold from buy with a price target raised from USD 12.90 to USD 14.
  • Fortinet, Inc.: Baptista Research downgrades to hold from buy with a price target raised from USD 69.30 to USD 77.
  • Gilead Sciences, Inc.: Baptista Research upgrades to outperform from hold with a price target reduced from USD 89.60 to USD 88.70.
  • Idexx Laboratories, Inc.: Baptista Research downgrades to underperform from outperform with a price target raised from USD 544.50 to USD 594.
  • Iqvia Holdings Inc.: Morningstar downgrades to hold from buy with a target price of USD 250.
  • Nike, Inc.: Oppenheimer downgrades to market perform from outperform with a price target reduced from USD 150 to USD 110.
  • Palantir Technologies Inc.: Baptista Research downgrades to underperform from hold with a target price of USD 21. President Capital Management Corp downgrades to neutral from buy with a price target raised from USD 21 to USD 25.
  • Snap Inc.: President Capital Management Corp downgrades to neutral from buy with a price target reduced from USD 22 to USD 13.
  • Stellantis N.v.: Banca Akros (ESN) downgrades to neutral from accumulate with a price target raised from EUR 25.50 to EUR 26.90.
  • United Parcel Service Inc.: Baird upgrades to outperform from neutral with a price target raised from USD 165 to USD 170.
  • Xylem Inc.: Baptista Research downgrades to underperform from hold with a price target raised from USD 118.80 to USD 129.20.
  • Chipotle Mexican Grill, Inc.: Baptista Research maintains a hold recommendation with a price target raised from USD 2199 to USD 2772.
  • Digital Realty Trust, Inc.: Raymond James maintains its strong buy recommendation and raises the target price from USD 140 to USD 170.
  • DoorDash, Inc.: KGI Securities Co Ltd maintains its outperform recommendation and raises the target price from USD 115 to USD 140. Morgan Stanley maintains its market weight recommendation and raises the target price from USD 95 to USD 135. Evercore ISI maintains its outperform rating and raises the target price from USD 120 to USD 145.
  • Nvidia Corporation: Wells Fargo maintains its overweight recommendation and raises the target price from USD 675 to USD 840. Barclays maintains its overweight recommendation and raises the target price from USD 650 to USD 850. Oppenheimer maintains its outperform rating and raises the target price from USD 650 to USD 850.
  • Palo Alto Networks, Inc.: Wells Fargo maintains its overweight recommendation and raises the target price from USD 280 to USD 450. Wedbush maintains its outperform rating and raises the target price from USD 350 to USD 425.
  • The Trade Desk, Inc.: BMO Capital Markets maintains its outperform rating and raises the target price from USD 88 to USD 107. D.A. Davidson maintains its buy recommendation and raises the target price from USD 78 to USD 95.
  • Uber Technologies, Inc.: KGI Securities Co Ltd maintains its outperform recommendation and raises the target price from USD 70 to USD 95.
  • West Pharmaceutical Services, Inc.: Jefferies maintains its buy recommendation and reduces the target price from USD 536 to USD 423.
  • Clarkson Plc: HSBC maintains its hold recommendation with a price target raised from 27.70 to GBP 35.30.
  • Close Brothers Group Plc: Berenberg maintains its buy recommendation and reduces the target price from 1100 to GBX 425. RBC Capital maintains its sector perform recommendation and reduces the target price from GBX 650 to GBX 375.