It’s worth noting that the base of the rally has broadened to include most sectors, and is no longer confined to technology. The sector still shone, apart from Apple, which is admittedly having a bit of a winter slump. The theme of artificial intelligence should continue to drive the market, as demonstrated by the results of Super Micro Computer, the darling of the American market. Earnings from Microsoft, Alphabet and Advanced Micro Device will be released after the bell.
We're going to have to hang on to this, because China isn’t delivering right now. Since last week, investors have been dreaming that country's stock markets would return to a bullish phase, following the announcement of a stimulus plan for the ailing financial sector. But then, all hell broke loose again due to the liquidation of China Evergrande, which has reawakened the sore spot for property developers. "Of the nine private Chinese property developers we track who have defaulted on their liabilities, only two have managed to restructure their debt," notes Bloomberg analyst Kristy Hung in a note. This obviously dampens the mood, especially after Hong Kong authorities confirmed that they’ll rapidly adopt more restrictive "national security" regulations. This will further reduce the attractiveness of Hong Kong as a financial center, according to industry insiders. The Hang Seng lost 1.8% this morning, while the MSCI China returned 1.9%.
In other news, the market is awaiting tomorrow's Fed monetary policy decision with a certain degree of serenity. The central bank is unlikely to change its stance. It will remain cautiously optimistic, while chastising investors for being over-optimistic about the pace of rate cuts. Meanwhile, US yields eased yesterday because the Treasury will be issuing less debt than forecast. Why is that? Because US tax revenues are higher than expected. Why? Because the US economy is firing on all cylinders, despite high interest rates. Clearly, nothing is going the way economists predicted. Europe isn’t doing too bad either, after a series of Q4 2023 GDPs released this morning showed that Italy and Spain were growing faster than expected, while France remained unchanged. Germany’s GDP fell 0.3%, but overall, the eurozone remained steady, with zero growth, meaning that recession was just averted.
In Asia Pacific this morning, China is down. Japan and South Korea are near zero. India lost 0.3%, while Australia gained 0.3%. European leading indicators are bullish. The French CAC40 gained 0.4% , the UK’s FTSE 100 0.6% and the German DAX 0.1%. Futures on all three Wall Street indices are down 0.2%.
Today's economic highlights:
Plenty of Q4 2023 European GDP are on the agenda today, along with the FHFA house price index, the Conference Board consumer confidence and JOLTS job openings.
The dollar is stable against the euro at EUR 0.9228 and up against the pound to GBP 0.7897. The ounce of gold is little changed at USD 2035. Oil falls, with North Sea Brent at USD 80.89 a barrel and US light crude WTI at USD 75.89. The yield on 10-year US debt falls to 4.05%. Bitcoin trades at USD 43,250.
In corporate news:
- Super Micro Computer jumps 12.4% after raising its full-year guidance. In its quarterly report, Super Micro said its net sales for the first quarter of 2024 would reach between $3.7 and $4.1 billion, against a consensus of $2.87 billion. Artificial intelligence-related stocks rose before the opening, with NVIDIA gaining 1.1% and MICROSOFT 1%.
- UPS said it was targeting below-consensus full-year sales, as delivery demand remains sluggish. The company expects full-year sales for 2024 to be between $92.0 billion and $94.5 billion, below consensus of $95.57 billion. FEDEX loses 1.4% in pre-market trading in the wake of UPS, down 5%.
- General Motors reported lower fourth-quarter pre-tax earnings on Tuesday, but gave investors an optimistic outlook for 2024 and signaled that more capital could be returned to shareholders. The automaker expects adjusted pre-tax profits of between $12 and $14 billion this year, compared with $12.4 billion for 2023. The stock gained 5.2% in pre-market trading and Ford Motors 2.3% in its wake.
- Whirlpool reported annual sales and profit forecasts below analysts' estimates on Monday, as the appliance maker faces pressure from rivals and higher expenses. The stock lost around 4% after the close.
- Ford Motor - The chairmen of two House of Representatives committees have asked the Biden administration to investigate four Chinese companies they believe are involved in Ford Motor's battery plant project in Michigan, according to a letter seen by Reuters on Monday. Ford Motor also said on Tuesday that it would supply more than 1,000 F-150 Lightning and Mustang Mach-E electric vehicles to ECOLAB to replace the company's gasoline-powered vehicles.
- Boeing confirmed on Monday that it was withdrawing last year's application to the Federal Aviation Administration for a waiver of a safety standard for its 737 MAX 7. Ryanair will buy as many Boeing MAX 10s as possible, the airline told Reuters on Tuesday, reiterating its confidence in the American manufacturer.
- Gilead Sciences said on Monday it had increased its stake in ARCUS BIOSCIENCES to 33% and expanded its presence on the drug developer's board, deepening their collaboration in cancer drug development. The company made a $320 million investment by purchasing Arcus shares at $21 per share, a 37.3% premium to the last closing price. Arcus jumped 11.8% to $17.2 after the close.
- Nucor - The steelmaker posted a drop in fourth-quarter earnings on Monday, penalized by lower product prices and sales volumes in all segments.
- Albemarle, the world's largest lithium producer, laid off more than 300 employees, or 4% of its workforce, The Information reported on Monday.
- American Airlines said Monday that about 600 jobs in its customer support team would be affected by its efforts to reorganize the team.
- Silicon Laboratories lost 3.4% after the close, after the company announced that it would delay the publication of its fourth-quarter results by a week.
Analyst recommendations:
- Adobe: Redburn Atlantic drops coverage on the stock previously rated as a buy.
- Advanced Micro Devices: Raymond James upgrades to outperform from strong buy with a price target raised from USD 190 to USD 195.
- Antofagasta: Peel Hunt downgrades to reduce from hold with a price target raised from GBX 1350 to GBX 1360.
- Ashtead Group: JP Morgan maintains its overweight recommendation and raises the target price from GBP 56 to GBP 68.
- Astrazeneca: Wolfe Research maintains its outperform recommendation and raises the target price from USD 75 to USD 121.
- Autodesk: Redburn Atlantic drops coverage on the stock.
- Bank Of America: Morgan Stanley upgrades to overwt from equalwt with a price target raised from USD 32 to USD 41.
- Blackstone: CICC maintains its outperform recommendation and raises the target price from USD 103 to USD 130.
- Cadence Design Systems: Redburn Atlantic drops coverage on the stock.
- Costco Wholesale: Bernstein drops coverage on the stock.
- Fortinet: Redburn Atlantic drops coverage on the stock.
- Goldman Sachs: Morgan Stanley upgrades to overwt from equalwt with a price target raised from USD 333 to USD 449.
- The Home Depot: Bernstein drops coverage on the stock.
- Idexx Laboratories: Piper Sandler & Co downgrades to neutral from overweight with a target price of USD 525.
- International Consolidated Airlines Group: Morgan Stanley downgrades to underweight from equal weight with a price target reduced from EUR 2.20 to EUR 2.05.
- Intuit: Redburn Atlantic drops coverage on the stock previously rated as a buy.
- Jpmorgan Chase & Co: Morgan Stanley maintains its overweight rating and raises the target price from USD 191 to USD 221.
- Kroger: Bernstein drops coverage on the stock previously rated outperform.
- Lam Research: Cowen maintains its outperform recommendation and raises the target price from USD 710 to USD 975.
- Lowe's Companies: Bernstein drops coverage on the stock previously rated outperform.
- Meta Platforms: KeyBanc Capital Markets maintains its overweight recommendation and raises the target price from USD 380 to USD 465.
- Netflix: CITIC Securities Co Ltd upgrades to buy from add with a price target raised from USD 485 to USD 600.
- Northern Trust: Morgan Stanley downgrades to underweight from equal weight with a target price raised from USD 82 to USD 86.
- Pets At Home Group: Liberum maintains its hold recommendation and reduces the target price from 390 to GBX 290.
- Pnc Financial Services Group: Morgan Stanley maintains its underweight rating with a price target raised from USD 142 to USD 158.
- Regions Financial: Morgan Stanley maintains its overweight rating and raises the target price from USD 21 to USD 27.
- Relx: Citigroup maintains its outperform recommendation and raises the target price from GBP 31.90 to GBP 38.85.
- Salesforce.com: Redburn Atlantic drops coverage on the stock.
- State Street: Morgan Stanley maintains its market weight rating and raises the target price from USD 83 to USD 88.
- Synopsys: Redburn Atlantic drops coverage on the stock previously rated as a buy.
- Target: Bernstein drops coverage on the stock.
- Truist Financial: Morgan Stanley maintains its market weight rating and raises the target price from USD 38 to USD 43.
- Us Bancorp: Morgan Stanley maintains its market weight rating and keeps the target price at USD 44.
- Walmart: Bernstein drops coverage on the stock previously rated market perform.
- Wells Fargo & Company: Morgan Stanley maintains its overweight rating and raises the target price from USD 54 to USD 63.