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OFFON

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.

Fresh data highlights strength of US economy ahead of Fed meeting

11/03/2021 | 10:14am EST
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Wall Street is slightly down today, as investors await the conclusion of the Federal Reserve's monetary policy meeting. This comes as fresh data shows that the US economy is in good shape, despite rising prices. The great momentum seen on the financial markets on Monday continued yesterday, allowing Wall Street to reach record highs.

All eyes are now on the Fed, as the U.S. central bank is expected to make a statement later today on its monetary policy and provide guidance that investors hope will be as unobtrusive as possible. Most commentators believe that the US central bank will reduce its monthly bond purchases. This amounts to $80 billion in Treasury bonds and $40 billion in mortgage-backed securities each month. Federal Reserve chairman Jerome Powell also prepared the ground for this change of course, so as not to distress markets too much. Unless there is a major reversal of strategy, the monetary policy committee should also reaffirm that a possible interest rate increase will depend on the evolution of macroeconomic indicators. As such, the content of Jerome Powell's speech will be analyzed in depth to try to discover if the first Fed rate hike will occur before mid-2022 as expected by the consensus.

The Federal Reserve has for a long time reiterated that rising prices are only temporary, but it is hard to see how inflationary pressures could dissipate quickly, especially if you take a look at the price chart of some commodities. Much has been said about the explosion of logistics costs due to lack of capacity in sea freight, the shortages of electronic chips that are making the consumer industries unhappy, or the surge in energy prices with the infernal trio of oil, coal and natural gas, and let's keep in mind that these price shocks spread to other parts of the economy, a spread that can take the form of a real snowball effect.

There’s no obvious link between natural gas and wheat, or even a baguette. At first glance, not much, but if you're a farmer, you should know what I'm getting at, especially if you haven't placed your nitrogen fertilizer order yet. The fertilizer market is being hit hard by rising gas prices in Europe, a key input in fertilizer production. Energy price inflation could also tighten the supply of certain foodstuffs that are relatively fertilizer-intensive, such as wheat, for example, whose price is reaching high levels in Chicago, up more than 30% year-on-year. I'm obviously taking shortcuts since there are other factors at play, but you get the idea of the snowball.

Back to today's session, which will be marked by October services PMIs, as well as the US employment numbers from the ADP report and oil inventories. U.S. private employment rose by 571,000 jobs last month, the ADP National Employment Report shows. Economists polled by Reuters had forecast private payrolls would increase by 400,000 jobs.

Also today, the ISM services index came out at 66.7 in October against a consensus of 62 after 61.9 in September. This shows that growth in U.S. service sector activity reached an all-time high in October.

In addition to these macroeconomic indicators, there are still a few earnings releases today, such as Costco Wholesale and Qualcomm in the US and Novo Nordisk and BMW in Europe.

 

Today's economic highlights:

October services PMIs, the ADP employment survey, factory orders, ISM services, and oil stocks are the main indicators of the day. China's services PMI remains in an expansionary phase and rises from the September reading.

The USD/EUR pair is stable at EUR 0.8649. Gold is trading at USD 1761 per ounce. Oil is down to USD 82.9 for Brent and USD 81.8 for WTI. The US government bond yield stands at 1.55% over 10 years. Bitcoin continues to climb to USD 62000.

 

On markets:

* CVS Health on Wednesday raised its adjusted earnings forecast for 2021 after posting above-expectations quarterly earnings on strong demand for its COVID-19 tests and vaccination.

* Discovery reported better-than-expected quarterly revenue on higher advertising revenue from the European broadcast of the Tokyo Olympics.

* Capri Holdings raised its full-year profit target, dismissing concerns about supply chain strains and rising costs. The owner of the Michael Kors brand climbs 9.5% in pre-market trading.

* Pfizer A panel of advisors from the U.S. Centers for Disease Control and Prevention (CDC) unanimously recommended the use of the COVID-19 vaccine developed by the two companies for children ages five to 11.

* Uber drivers in London will now be able to buy or lease vehicles from the U.S. automaker as part of a subsidy program aimed at increasing the use of electric cars, the VTC services group announced.

* T-Mobile US gained 3.3% in pre-market trading after reporting better-than-expected new subscribers in the third quarter.

* Deere & Co Employees at 12 of the group's U.S. plants are set to continue their three-week strike after rejecting a new draft contract reached between the farm equipment maker and a union that called for higher wages and bonuses.

* Jen Oneal, Activision Blizzard's co-chief executive, decided Tuesday to resign and leave Mike Ybarra alone at the helm of the video game publisher. The group has also postponed indefinitely the launch of two highly anticipated titles, "Overwatch 2" and "Diablo IV". The share fell by 12.1% in after-hours trading.

* Avis Budget Group is down nearly 5 percent to $340.36 in premarket trading Wednesday. The stock had doubled in value Tuesday in reaction to statements by its executives about discussions with manufacturers to increase the number of electric vehicles in its fleet. Avis also reported better-than-expected quarterly results.

* Match Group - Tinder's parent company said Tuesday it expects fourth-quarter revenue of between $810 million and $820 million, compared with the consensus of analysts surveyed by Refinitiv of $838.5 million.

 

Analyst recommendations:

  • Avis Budget: Deutsche Bank downgrades to sell from hold. PT soars 41% to $210
  • Chegg: Morgan Stanley upgrades its Buy rating to Neutral and lowers its target to USD 53 from USD 88.
  • Devon Energy: Benchmark Upgrades Devon Energy to Buy From Hold; Price Target is $48
  • DuPont de Nemours: Credit Suisse upgrades to outperform from neutral. PT up 23% to $95
  • Edison International: Guggenheim Securities lowers PT to $74 from $79. Maintains buy rating.
  • Exact Sciences: BTIG lowers PT to $120 from $145. Maintains buy rating.
  • Exelixis: Barclays cut the price target to $27 from $30. Maintains overweight rating.
  • Generac Holdings: BofA Securities downgrades Generac Holdings to Neutral from Buy; price target is $500
  • Ingredion: Credit Suisse upgrades to outperform from neutral. PT rises 23% to $95
  • Inspire Medical: Guggenheim Securities lifts PT to $320 from $285. Maintains buy rating.
  • KKR: Deutsche Bank rise PT on KKR to $87 from $75. Maintains buy rating.
  • Lyft: Wedbush lowers price target to $77 from $85; outperform rating kept.
  • Paycom Software: Needham adjusts price target to $640 from $495, keeps buy rating
  • Rogers: B Riley Securities downgrades to neutral from buy. PT up 2.6% to $277
  • T-Mobile US: JP Morgan advises its customers to buy the stock. The target price remains set at USD 175.
  • The Clorox Company: Barclays adjusts price target to $131 from $138, maintains underweight rating
  • The Estée Lauder Companies: DA Davidson adjusts price target to $439 from $393, keeps buy rating
  • Under Armour: JP Morgan upgrades its target to buy from USD 30 to USD 32.
  • Zillow: Evercore ISI cut the recommendation on Zillow Group Inc. Class A to inline from outperform. PT up 4.1% to $89.

© MarketScreener.com 2021
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Stocks mentioned in the article
ChangeLast1st jan.
ACTIVISION BLIZZARD, INC. -0.50% 81.35 Delayed Quote.22.28%
AVIS BUDGET GROUP, INC. -5.92% 175.09 Delayed Quote.-15.57%
BELIEVE -0.79% 15.798 Real-time Quote.-6.51%
CAPRI HOLDINGS LIMITED -1.29% 53.61 Delayed Quote.-17.41%
CHEGG, INC. -2.35% 26.21 Delayed Quote.-14.63%
CVS HEALTH CORPORATION -0.81% 101.56 Delayed Quote.-0.75%
DEERE & COMPANY -0.74% 364.28 Delayed Quote.6.24%
DEVON ENERGY CORPORATION -5.16% 46.12 Delayed Quote.4.70%
DISCOVERY, INC. -4.73% 26.19 Delayed Quote.11.26%
DUPONT DE NEMOURS, INC. -2.16% 77.47 Delayed Quote.-4.10%
EDISON INTERNATIONAL -0.63% 62.98 Delayed Quote.-7.14%
EXACT SCIENCES CORPORATION -2.63% 74.03 Delayed Quote.-4.88%
EXELIXIS, INC. 1.70% 17.32 Delayed Quote.-6.84%
GENERAC HOLDINGS INC. -4.56% 271.16 Delayed Quote.-22.95%
INGREDION INCORPORATED -2.03% 97.69 Delayed Quote.1.09%
INSPIRE MEDICAL SYSTEMS, INC. -2.59% 206.68 Delayed Quote.-10.16%
KKR & CO. INC. -1.88% 65.82 Delayed Quote.-11.65%
LYFT, INC. -2.13% 36.8 Delayed Quote.-13.88%
MATCH GROUP, INC. -2.38% 115.84 Delayed Quote.-12.41%
PAYCOM SOFTWARE, INC. -5.57% 310 Delayed Quote.-25.34%
PFIZER, INC. -2.33% 52.79 Delayed Quote.-10.60%
ROGERS COMMUNICATIONS INC. -0.65% 61.14 Delayed Quote.2.18%
S&P 500 -1.89% 4397.94 Delayed Quote.-7.73%
T-MOBILE US -2.34% 101.62 Delayed Quote.-12.38%
THE CLOROX COMPANY 1.49% 178.6 Delayed Quote.2.43%
THE ESTÉE LAUDER COMPANIES INC. -1.34% 297.02 Delayed Quote.-18.68%
UBER TECHNOLOGIES, INC. -4.97% 35.94 Delayed Quote.-14.29%
UNDER ARMOUR, INC. 1.40% 18.77 Delayed Quote.-11.42%
ZILLOW GROUP, INC. -5.58% 50.24 Delayed Quote.-19.25%
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