The latest GDP figures reveal a mixed bag of economic signals. According to the Commerce Department's Bureau of Economic Analysis, the economy saw a boost from personal consumption expenditures, nonresidential fixed investment, inventory growth, and government spending. However, this growth was partially offset by declines in net exports and residential fixed investment. Inflation showed signs of easing, with the core Personal Consumption Expenditures (PCE) price index rising at a 2.9% rate, down from 3.7% in the previous quarter. This cooling inflation bolsters the case for a potential interest rate cut by the Federal Reserve in September. In response to the stronger-than-expected economic data, the U.S. dollar trimmed its losses. US stock index futures, initially in the red, also showed signs of recovery post-release.

Additionally, weaker-than-expected durable goods data lifted hopes for earlier Fed rate cuts even further. Durable goods orders fell 6.6% in June, contrary to expectations of a 0.3% rise.

Wall Street had a rough day, with high hopes for US corporate earnings being dashed. The Nasdaq took a 3.65% nosedive, with Tesla (-12%), Nvidia (-6.8%), and Alphabet (-5%) among the casualties. The S&P 500 didn't fare much better, shedding 2.3%. Only the more conservative sectors like healthcare, utilities, and telecoms managed to stay afloat.

It seems the financial world is waking up to the possibility that the artificial intelligence hype might be just that—hype. This isn't the first time this bubble theory has surfaced, but technophiles have always bounced back quickly. Will it be different this time? Small stocks, which had been enjoying a rally since mid-July, also took a hit, losing over 2%. Analysts are debating whether this is a simple rotation between assets or a more general movement. And as always in finance, opinions are divided.

In Europe, the downgrading of luxury goods stocks weighed heavily on the Paris Bourse. The mood was further dampened by a series of downward target revisions, including Ford, Nestlé, Renesas, and STMicroelectronics. High valuations combined with an uncertain economic recovery, despite looming rate cuts in the US and Europe, have added to market jitters. The VIX index, which measures market volatility, broke the 18-point barrier for the first time since April. Sectors causing the most concern include semiconductors and, by extension, technology, automotive, and consumer cyclical sectors.

With corporate results failing to provide the expected support, can we rely on the macroeconomy? Europe has started its rate-cutting cycle but is cautious about an inflationary revival. The US is expected to start easing the pressure in September, explaining the recent rebound in small caps. Once again, expectations are high for central banks.

In China, the PBOC made its second unexpected decision in four days, cutting the 1-year medium-term lending facility (MLF) rate by 20 basis points, from 2.5% to 2.3%. This double surprise in timing and scale aims to reinvigorate the economy in the second half of the year, as the 5% GDP growth target for this year is in jeopardy. However, this new boost has not triggered a rebound in Hong Kong and Shanghai, as Chinese indices ended in the red, weighed down by Wall Street's decline.

In the rest of the Asia-Pacific region, the correction intensified in Japan, where the Nikkei 225 lost 3%, caught between the misfortune of US equities and the strengthening yen. South Korea dropped 1.7%, Australia 1.2%, and India 0.1%. Taiwan fared best, but not for financial reasons: the stock exchange has been closed for two days due to a cyclone warning. Leading indices are bearish in Europe, while Wall Street opened flat.

Today's Economic highlights:

The eurozone M3 money supply and the IFO business climate data in Germany are on the agenda in Europe. In the US, we have durable goods orders, annualized GDP and new jobless claims. The full agenda is here. 

The dollar is worth EUR 0.9225 and GBP 0.7772. The ounce of gold falls to USD 2,367. Oil declines, with North Sea Brent at USD 80.50 a barrel and US light crude WTI at USD 76.42. The yield on 10-year US debt stands at 4.23%. Bitcoin is trading at USD 64,000.

In corporate news:

  • Apple's market share in China dropped from sixteen percent to fourteen percent in the second quarter, facing increased competition from players such as Huawei.
  • IBM reported second-quarter sales that exceeded expectations, with the stock rising in pre-market trading.
  • Dow's shares fell in pre-market trading after missing second-quarter earnings forecasts with an adjusted EPS of sixty-eight cents against a consensus of seventy-two cents.
  • Ford Motor's second-quarter adjusted earnings were lower, with the stock dropping eleven point five percent before the opening.
  • American Airlines lowered its annual profit forecast, resulting in an 8% decrease in pre-market trading.
  • Boeing The U.S. Department of Justice said Boeing had agreed to plead guilty to conspiracy to commit criminal fraud and pay a $243.6 million fine.
  • AbbVie raised its annual profit forecast following strong second-quarter sales of key immunology drugs.
  • Honeywell International's pre-market trading fell as the company lowered its adjusted EPS forecast for fiscal 2024.
  • Hasbro's stock jumped 9% in pre-market trading after reporting a smaller-than-expected decline in second-quarter sales.
  • Chipotle Mexican Grill's premarket trading saw a three point nine percent gain after reporting second-quarter sales of two point nine seven billion dollars.
  • Keurig Dr Pepper reported increased second-quarter sales and earnings, thanks to higher prices and sustained demand for its products.
  • Warner Bros Discovery's stock fell two point eight percent in pre-market trading as broadcast rights for the NBA went to Walt Disney's ESPN, Comcast's NBCUniversal, and Amazon.
  • Newmont's earnings exceeded expectations in the second quarter, but shares fell one point five percent before the opening.
  • Teradyne forecast third-quarter sales below estimates due to sluggish demand for its semiconductor test equipment.
  • Raymond James Financial reported a 27% rise in profit for its third quarter.
  • Edwards Lifesciences reported below-consensus second-quarter sales, with shares plummeting 21.2% before the opening.
  • Lineage raised 4.45 billion dollars in its U.S. IPO, marking the largest IPO of the year.
  • Ford, IBM, and AT&T are expected to release their quarterly results on Wednesday.

Analyst recommendations:

  • Edwards Lifesciences Corporation: JP Morgan downgrades to neutral from overweight with a price target reduced from USD 105 to USD 72.
  • Lamb Weston Holdings, Inc.: Stifel downgrades to hold from buy and reduces the target price from USD 115 to USD 60.
  • Omega Healthcare Investors, Inc.: Mizuho Securities downgrades to neutral from outperform with a price target raised from USD 34 to USD 35.
  • Roper Technologies, Inc.: Baird upgrades to outperform from neutral with a price target raised from USD 617 to USD 635.
  • Sirius Xm Holdings Inc.: Citi downgrades to sell from neutral with a target price of USD 2.80.
  • Tesla, Inc.: KGI Securities Co Ltd downgrades to neutral from outperform with a price target raised from USD 210 to USD 236.
  • Chipotle Mexican Grill, Inc.: Jefferies remains at a hold recommendation with a target price reduced from USD 2900 to USD 56.
  • New Fortress Energy Inc.: Citigroup maintains its buy recommendation with a price target reduced from USD 43 to USD 34.
  • Spotify Technology S.A.: Phillip Securities maintains its buy recommendation and raises the target price from USD 340 to USD 420.
  • Stellantis N.V.: Bernstein maintains its market perform recommendation and raises the target price from 17 to EUR 22.
  • Teladoc Health, Inc.: Citigroup maintains a neutral recommendation with a price target reduced from USD 15.50 to USD 11.50.
  • Tenet Healthcare Corporation: Raymond James maintains its strong buy recommendation and raises the target price from USD 130 to USD 175.
  • Teradyne Inc.: Cantor Fitzgerald maintains a neutral recommendation with a price target raised from USD 120 to USD 180.
  • Walgreens Boots Alliance, Inc.: HSBC maintains its reduce recommendation with a target price reduced from 11 to USD 7.
  • Ascential Plc: Berenberg downgrades to hold from buy with a price target raised from GBX 395 to GBX 568. Barclays downgrades to equalweight from overweight with a price target raised from GBP 3.75 to GBP 5.70.
  • RS Group Plc: HSBC downgrades to hold from buy with a target price reduced from GBP 9.35 to GBP 8.10.
  • Spectris Plc: Berenberg upgrades to buy from hold with a price target raised from GBX 3520 to GBX 3920.
  • Rogers Communi-B: Canaccord Genuity downgrades to hold from buy with a target price reduced from CAD 59 to CAD 57.