Meanwhile, the Dow Jones fell 0.66%. This is because Walt Disney released some not-so-good statistics for Disney+ and collapsed by a rare -8.7%. The S&P500 did a little balance between the two (-0.17%), with the return of risk aversion in banking stocks. Pacwest fell 23% after an exodus of deposits last week, dragging down its more fragile peers. As for the big banks, they fell more moderately despite the prospect of being taxed more heavily to replenish the federal guarantee fund and statements by the influential boss of JPMorgan Chase, Jamie Dimon, who called on political authorities to respond more effectively to the crisis of regional banks.

In Europe, indices also went in all directions yesterday. A rather rare big gap, as the Swedish OMX jumped 1% while the Italian FTSE Mib gave up 0.6%. In this North-South duel, Milan was betrayed by its industrials, while Stockholm was supported by its industrials. OK, it doesn’t really make sense. In France, LVMH held its own, allowing the CAC40, which was weighed down by its banks and TotalEnergies, to finish up by 0.28%. The German DAX, which has no LVMH to save the day, lost 0.33%, its third consecutive session of decline.

Today, I wanted to review trend-setting stocks. By investing in indices that have 500 and 100 stocks respectively, you’re hoping to benefit from some diversification. But in fact, not so much. If we take QQQ, the biggest Nasdaq ETF in the world, you have 44% of the index positioned on Microsoft, Apple, Amazon, Alphabet and Nvidia. For the S&P500, based on the iShares CSPX ETF, it is less impressive but the concentration is still remarkable: 22.5% of the index on the same 5 stocks. Roughly speaking, these stocks have risen by 25 to 30% since the beginning of the year, except for Nvidia which has almost doubled. The term "index locomotives" is not overused. It is therefore easier to understand why the Nasdaq 100 has gained 23% since the beginning of the year, while the S&P500 has limited its gains to 8%. Reuters columnist Jamie McGeever points out that the average of the other stocks in the S&P500 has only risen by about 2%. Add to that the fact that the average P/E of these stocks is 30 times expected year-end earnings (from 22 times for Alphabet to 87 times for Nvidia), compared to about 16.5 times for the rest of the S&P500. We only lend to the rich. But is this really a surprise? All this to say that the market continues to perform well thanks to its darlings and that without them, the picture would be much less flattering in the US.

Futures on the S&P 500, the Nasdaq 100 and the Dow Jones were slightly up this morning. Investors remain confused by mixed signals for the economic outlook. On the one hand, there’s the prospect of a more flexible US monetary policy and rumors of attempted diplomatic appeasement between Washington and Beijing, and on the other hand, we’ve got the debt ceiling, recession fears, the disappointing Chinese economy and the US banking crisis… The outlook remains quite unclear for markets.

 

Today's economic highlights

The University of Michigan's Consumer Sentiment Index is today’s main indicator. All the agenda is here. 

The dollar is up 0.2% against the euro to 0.9183 and down 0.1% against the pound to GBP 0.7984. Gold is down to USD 2003. Oil is pulling back, with North Sea Brent crude at USD 75.17 a barrel and US WTI light crude at USD 71.13. The yield on 10-year US debt fell to 3.37%. Bitcoin is still losing some ground at 27,000 dollars.

 

In corporate news:

  • Tesla was up 1% in pre-market trading in reaction to Elon Musk's announcement that a new CEO has been hired to lead Twitter. According to the Wall Street Journal, it could be Linda Yaccarino, head of advertising at NBCUniversal. The carmaker has also slightly increased the prices of the Model S, X and Y in the United States.
  • Meta Platforms, owner of Facebook, said Thursday it would begin testing advertising tools powered by artificial intelligence.
  • Media group News Corp reported a better-than-expected third-quarter profit, buoyed by cost-cutting measures and strong subscription growth on its business data and news platforms.

 

Analyst recommendations:

  • American States Water: Wells Fargo Securities upgrades to equal-weight from underweight. PT up 5.1% to $94.
  • Charles River: CFRA upgrades to buy from hold. PT up 19% to $233.
  • Crest Nicholson: Berenberg upgrades from hold to buy targeting GBp 310.
  • Derwent London: Goldman Sachs upgrades from Buy to Neutral targeting GBp 2380.
  • Diageo: Jefferies upgrades from buy to hold, targeting GBp 3800.
  • Electronic Arts: DZ Bank AG upgrades to buy from hold. PT up 13% to $142.
  • Euronav: Deutsche Bank upgrades to buy from hold. PT up 21% to $20.
  • Great Portland: Goldman Sachs upgrades from Buy to Neutral targeting GBp 520.
  • Iris Energy: Cantor Fitzgerald upgrades to overweight from neutral. PT up 101% to $7.
  • Linde: Berenberg is positive on the stock with a Buy rating. The target price is being increased from USD 375 to USD 415.
  • Pearson: Morgan Stanley upgrades from in-line to overweight targeting GBp 920.
  • Redrow: Berenberg upgrades from hold to buy targeting GBp 643.
  • SJW: Wells Fargo Securities downgrades to underweight from equal-weight. PT down 0.2% to $76.
  • Twilio: Mizuho Securities Co Ltd downgrades to neutral from buy. PT up 16% to $55.
  • Walt Disney: Guggenheim Cuts PT to $125 from $130, Buy rating kept.