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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.

Inflation is sticking… How long is temporary?

10/29/2021 | 09:46am EST
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Stock market indexes continued to rise yesterday under a deluge of earnings reports. But the last session of the week is tainted by disappointing figures from Apple and Amazon, which together weigh $4.3 trillion.

The causes of the two companies' misfortune are not quite the same. Apple, like many, has suffered from component shortages. But for Amazon, it’s because its costs swell, in particular because recruitment has been more expensive and complicated. The online retail giant makes extremely low, sometimes even negative, margins on its merchant business, with most of the profits coming from the more technology-based businesses, especially AWS, the server division.

But this disappointment is all relative. In absolute terms, Apple's quarterly revenue was up 29% to $83.3 billion, while Amazon's was up 15% to $110.8 billion. In any case, they are the two weakest performing stocks this year. Apple is "only" gaining 15% before today's expected drop and Amazon is already in slightly negative territory. Even Facebook, which is under so many attacks that it has decided to take refuge in the meanders of the metaverse, is doing better: +16%. As for Microsoft and Alphabet, their increases are respectively 46% and 66% in 2021.

Overall, this quarterly earnings season has been marked by very strong numbers, which allowed indices to hit new highs in the US last night. Macroeconomic news today includes the publication of the PCE inflation index in the United States. It rose 0.3% in September, matching economists' expectations. It looks like high inflation is sticking.

Yesterday, the European Central Bank was busy explaining to investors that it was not taking inflation lightly, but that it still considered it temporary. Without seeming to touch it, the institution did acknowledge that it had been a bit wrong in its expectations of price developments, which are a bit more worrying than expected. The advantage of the term temporary is that it can mean 17 minutes or 8 years, depending on the context. In this case, the correct definition would be that high inflation is going to last a little too long for the ECB to really feel comfortable.


Economic highlights of the day:

Core PCE inflation, along with household income and spending and the University of Michigan’s second reading of its consumer confidence indicator.

The euro is up to EUR 0.8601. The ounce of gold is losing some ground at USD 1778. Oil is trading at $83.29 a barrel for Brent and $82.20 for WTI. The yield on 10-year US debt is up to 1.58% (+4 points), as is the yield on German debt at -0.14%. Bitcoin is recovering to USD 61,200


On markets:

* Apple said Thursday that supply chain tensions weighed on its revenue in the July-September quarter, including lower-than-expected iPhone sales, and said it expects even more disruption in the current quarter. Its stock is down 3.5% in pre-market trading.

* Amazon reported Thursday a decline in profit for the July-September period and said it expects this trend to continue in the current quarter, for which its revenue forecast is below market consensus. The online retail giant's stock is down 4.4% in pre-market trading.

* Facebook will now be called Meta, its co-founder and CEO Mark Zuckerberg announced Thursday, a move designed to highlight the digital giant's new focus on the 'metaverse', an online world where users interact in shared virtual spaces. In pre-market trading, the stock is up 0.8%.

* Starbucks lost 4.8% in pre-market trading after reporting lower-than-expected quarterly same-store sales, as the impact of the health crisis in China overshadowed a strong performance in its U.S. operations.

* Chevron reported its highest quarterly profit in eight years on Friday, the result of soaring oil and natural gas prices combined with recovering demand. The stock gained 2% in pre-market trading after the release of the financial statements.

* Exxon Mobil is scheduled to release its quarterly results before the opening of the U.S. markets.

* Coca-Cola is set to sign a deal to buy a majority stake in sports drink maker BodyArmor, valued at nearly $8 billion (6.9 billion euros), Bloomberg reported Thursday, citing people close to the matter.

* Gilead Sciences on Thursday reported higher-than-expected third-quarter profit on strong demand for its COVID-19 treatment but noted that sales of its other drugs would be below previous estimates for the full year. The stock is down 1.7% in pre-market trading.

* ZenDesk, a software company, announced on Thursday that it had acquired Momentive Global, owner of the online survey platform SurveyMonkey, for nearly $4 billion.


Analyst recommendations:

  • Altria: Morgan Stanley downgrades to equal-weight from overweight. PT up 5.4% to $47
  • Amazon: UBS advises its customers to buy the stock. The target price remains set at USD 4020. Goldman Sachs research considers the stock attractive and recommends it with a Buy rating. The target price is decreased from USD 4250 to USD 4100.
  • Brunswick: RBC Capital Markets upgrades to outperform from sector perform. PT up 23% to $115
  • Caterpillar: UBS raised its recommendation to buy from neutral. PT up 15% to $235
  • Comcast: Pivotal lowers price target to $72 from $75, maintains buy rating
  • Comerica: Citigroup adjusts price target to $100 from $93, reiterates buy rating
  • Garmin: Morgan Stanley adjusts price target to $141 from $147, keeps equal-weight rating
  • General Dynamics: Wells Fargo adjusts price target to $230 from $220, maintains overweight rating
  • Hilton: JPMorgan adjusts price target to $144 from $135, maintains neutral rating
  • Microsoft: DA Davidson adjusts price target to $349 from $330, maintains buy rating
  • Skechers: Wedbush lifts price target to $47 from $43, maintains neutral rating
  • Starbucks: Stifel cut its recommendation to hold from buy. PT down 1.1% to $112
  • Union Pacific: Morgan Stanley adjusts price target to $215 from $205, keeps equal-weight rating
  • United Utilities: HSBC upgrades its rating to Hold from Light from Hold with a target of GBP 1090.
  • SVB Financial Group: Stephens adjusts price target to $790 from $700, keeps equal-weight rating
  • Visteon: Barclays upgrades to overweight from equal-weight. PT up 26% to $140
  • Western Alliance Bancorp.: UBS lifts price target to $150 from $123; buy rating kept

© MarketScreener.com 2021
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Stocks mentioned in the article
ChangeLast1st jan.
ALTRIA GROUP, INC. -0.02% 50.32 Delayed Quote.6.18%
AMAZON.COM, INC. -5.95% 2852.86 Delayed Quote.-14.44%
APPLE INC. -1.28% 162.41 Delayed Quote.-7.35%
AUSTRALIAN DOLLAR / EURO (AUD/EUR) -0.69% 0.6333 Delayed Quote.-0.13%
BRITISH POUND / EURO (GBP/EUR) -0.04% 1.1942 Delayed Quote.1.02%
BRUNSWICK CORPORATION -3.78% 84.08 Delayed Quote.-16.53%
CATERPILLAR INC. -1.17% 214.09 Delayed Quote.4.78%
CHEVRON CORPORATION -1.20% 126.91 Delayed Quote.8.15%
COCA-COLA EUROPACIFIC PARTNERS PLC -0.97% 51.2 Real-time Quote.4.32%
COMCAST CORPORATION -0.98% 49.73 Delayed Quote.-1.19%
COMERICA INCORPORATED -4.11% 89.7 Delayed Quote.7.52%
EXXON MOBIL CORPORATION -1.50% 72.17 Delayed Quote.19.74%
GARMIN LTD. -1.50% 121.44 Delayed Quote.-10.82%
GENERAL DYNAMICS CORPORATION -1.17% 206.54 Delayed Quote.-0.93%
GILEAD SCIENCES, INC. 1.03% 68.51 Delayed Quote.-5.65%
HILTON WORLDWIDE HOLDINGS INC. 0.01% 142.26 Delayed Quote.-8.80%
META PLATFORMS, INC. -4.23% 303.17 Delayed Quote.-9.86%
MICROSOFT CORPORATION -1.85% 296.03 Delayed Quote.-10.32%
S&P 500 -1.89% 4397.94 Delayed Quote.-7.73%
SKECHERS U.S.A., INC. -1.39% 41.19 Delayed Quote.-3.76%
STARBUCKS CORPORATION 0.62% 96.31 Delayed Quote.-18.17%
SVB FINANCIAL GROUP -10.21% 581.76 Delayed Quote.-14.23%
UNION PACIFIC CORPORATION 1.76% 246.33 Delayed Quote.-2.22%
UNITED UTILITIES GROUP PLC -0.65% 1065.5 Delayed Quote.-2.11%
US DOLLAR / EURO (USD/EUR) -0.03% 0.881601 Delayed Quote.0.50%
VISTEON CORPORATION -1.32% 104.8 Delayed Quote.-5.70%
WESTERN ALLIANCE BANCORPORATION -2.07% 110.56 Delayed Quote.2.70%
ZENDESK, INC. -3.02% 94.74 Delayed Quote.-9.16%
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