Good results from large caps such as Netflix and Tesla boosted investors' appetite for growth stocks such as Alphabet or Amazon, which were out of favor recently due to rising interest rates.
The European Central Bank has just released its monetary policy decision, and went for a more aggressive 0.50% rate hike, instead of the traditional 0.25% rate hike.
The bloc had to act to curb inflation, which is rising strongly, while rates are still at the bottom. It rose to 8.6% in June on an annual basis, compared to +8.1% in May according to Eurostat data. There is a great deal of disparity, with the lowest annual rates observed in Malta (6.1%), France (6.5%) and Finland (8.1%), while the highest rates were recorded in the east in Estonia (22%), Lithuania (20.5%) and Latvia (19.2%).
Markets remained little changed after the rate announcement. In parallel with its decision on rates, the European Central Bank announced a new instrument, the Transmission Protection Instrument (TPI) to protect weaker states against speculative attacks on their debt, especially Italy, which is currently in political turmoil after Mario Draghi resigned from its Prime Minister role.
The tool should prevent excessive bond yield premiums and borrowing spreads between the eurozone's major creditors, such as Germany and Italy.
Investors are also anxiously awaiting next week's Fed meeting, on July 27, where the FOMC is expected to raise rates by 75 basis points to curb inflation, although some investors believe that a 1.0% rate hike could be on the cards, after US inflation accelerated in June.
New employment data released today will certainly influence the Fed's decision. The number of Americans filing new claims for unemployment benefits increased for a third consecutive week last week to a level not seen since November, which shows that the job market is cooling.
Initial claims for state unemployment benefits climbed 7,000 to a seasonally adjusted 251,000 for the week ended July 16, vs expectations of 240,000 applications in a Reuters poll.
Investors are also awaiting July 28, when second-quarter U.S. gross domestic product data will be released. It is likely to be negative and to confirm that the US has entered into a technical recession.
Let's stay with centrals banks - the Bank of Japan just opted for the status quo despite inflation rising above its 2% target. The archipelago has a special relationship with rising prices after years of lost battles to get the country out of deflation. The BOJ therefore raised its inflation forecast for the current year from 1.9% to 2.3%, and also reduced its economic growth forecast from 2.9% to 2.4%.
On the corporate side, there are still a lot of earnings reports today, with some big names such as AT&T, Philip Morris, and Anglo American.
Economic highlights of the day:
On the agenda today, weekly unemployment figures and the Philly Fed index (08:30 am). All the macro agenda here.
The dollar is trading at 0.9803. The ounce of gold is losing ground at USD 1703. Oil is losing ground with North Sea Brent at USD 103.08 per barrel and US WTI light crude at USD 95.89. The yield on 10-year US debt is stabilizing at 3.02% over 10 years. Bitcoin is trading at USD 22580.
* Tesla on Wednesday reported a rise in quarterly profit while higher prices for several of its top models helped the automaker offset production challenges. The group's stock was up 1.7% in pre-market trading.
* Ford on Thursday announced a series of agreements to accelerate its shift to electric vehicles, including the supply of battery capacity and raw materials.
The agreements are part of Ford's efforts to reach an annual EV production rate of 600,000 vehicles globally by the end of 2023 and more than 2 million by the end of 2026. Ford expects the compound annual growth rate for EVs to exceed 90% through 2026, more than double the expected industry growth rate.
* United Airlines reported adjusted quarterly profit of $1.43 on Wednesday, below analysts' expectations as strong demand failed to offset higher operating costs. The stock was down 6.4% in pre-market trading.
* The Boeing Company - Qatar Airways announced Thursday an order for 25 737 MAX 10 aircraft, confirming a deal that had been pending for months and bringing the number of single-aisle aircraft ordered this week to 125. Cargolux also chose the 777-8 Freighter to replace its 747-400 fleet, with the first delivery of the 777-8 Freighter scheduled for 2027.
* Dow reported a decline in second-quarter earnings as inflation and the effects of COVID-19 in China dampened demand.
* Bank of America - The U.S. bank announced an increase in its quarterly dividend on common stock to $0.22 per share.
* Blackstone - The world's largest alternative asset manager posted an 86% increase in second-quarter distributable income on Thursday, thanks to strong asset sales despite a depreciation in the value of most of its funds amid a market slowdown.
* AT&T - The U.S. telecom giant on Thursday raised its annual revenue growth forecast for its wireless business, driven by an increase in the number of subscribers traveling during the summer and using its roaming services. The stock lost 2.3% in pre-market trading.
* Danaher - The stock gained 1.8% in premarket trading as the U.S. conglomerate reported second-quarter sales above analysts' expectations.
* Philip Morris - The stock gained 1.3% in premarket trading after the U.S. cigarette maker reported second-quarter results that beat estimates.
* American Airlines reported its first adjusted quarterly profit since the start of the COVID-19 pandemic on Thursday, as a boom in travel demand more than offset rising costs. The stock was down 1.5% in premarket trading.
* ConocoPhillips is considering selling its stake in the Ursa platform and Princess subsea well in the Gulf of Mexico, people familiar with the matter said Wednesday, and thus withdrawing from deepwater energy production off the U.S. Gulf Coast. The oil producer has set a goal of divesting between $4 billion and $5 billion by the end of 2023.
* Las Vegas Sands - The casino operator announced that its second-quarter revenue fell by about 11% to $1.05 billion, a result that was nevertheless higher than analysts' estimates at $984.8 million. The stock was up 5.4% in pre-market trading.
* Biogen said the timing and costs of clinical trials in Russia and Ukraine may be affected by the war between the two countries.
- Biogen: Wedbush keeps neutral rating. PT down to $183 from $188.
- Comerica: Wedbush raises price target to $94 from $89, maintains outperform rating.
- Compass: Morgan Stanley downgrades to equalweight from overweight and lowers price target to $5 from $7.
- GSK Plc: Spin-Off Research downgrades to hold from buy. PT up 11% to $45.
- Henry Schein: Goldman Sachs cut the recommendation to neutral from buy. PT up 9% to $85.
- Hologic: BofA Securities lowers its price target to $75 from $81, to neutral from buy.
- Idexx Laboratories: Goldman Sachs raised to buy from neutral. PT up 13% to $435.
- L Brands: Goldman Sachs lowers price target to $32 from $37, maintains buy rating.
- Lululemon: Stifel adjusts price target to $381 from $500. Maintains buy rating.
- Jupiter Fund Management: Keefe, Bruyette & Woods moves to underperform from market perform with 121 pence.
- Mondi Plc: ABSA Securities downgrades to equal-weight from overweight. PT up 11% to 1,662.29 pence.
- Netflix: Credit Suisse maintains neutral rating. PT down to $263 from $360.
- Nike: Stifel maintains buy rating and price target down to $130 from $135.
- Nordstrom: KeyBanc starts at overweight with $30 price target.
- PVH Corp: Goldman Sachs downgrades to neutral from buy. PT down 6.9% to $59.
- Tapestry: Goldman Sachs adjusts price target to $35 from $39. Maintains neutral rating.
- Tesla: Goldman Sachs gives a buy rating. Price target set at USD 1000.
- Under Armour: Stifel cut the target to $10 from $13. Maintains hold rating.