Stock markets recovered yesterday, despite new worrying inflation statistics. In Europe, the eurozone’s core inflation jumped to 5.6% year-on-year from 5.3% in January, sending bond yields higher. In the United States, the employment and wages figures shook investors, strengthening the case for an even more restrictive monetary policy.

But the salvation came from Raphael Bostic, the Atlanta Fed President, who played the dove. In a commentary published on the institution's website, the central banker emphasized that inflation is still too high, but that it can be tamed with moderate rate hikes (i.e., 25 basis points of tightening) and without going too high. Exactly the kind of stuff the market wants to hear, even though Bostic has no vote this year in rate decisions. He cited a 5 to 5.25% ceiling zone for Fed Funds, while rates are currently 4.50 to 4.75%. The latest market expectations included a higher peak of at least 5.5%. Bostic's intervention moved the very volatile market sentiment slider from the red zone to the green zone. Once again, it's all down to a few things. However, US yields have not really followed the easing, or rather moderately, with the 10-year yielding 4.03%.

However, the S&P500 rallied 0.8%, the Nasdaq 100 nearly 0.9% and the Dow Jones 1.05%. The old index on top of the podium because Salesforce soared by 11.5%, which weighs heavily in an index limited to 30 stocks. The software company caught everyone off guard with much stronger than expected results.

The end of the week is also dominated by another strong macroeconomic indicator in China, this time from the purchasing managers of the services sector, with a Caixin PMI up sharply to 55 points, which means that the end of the zero covid policy is giving the economy a boost. The PMI indicators released this week are welcome, because investors were beginning to wonder if China would ever recover. They will be able to gauge Beijing's ambitions soon enough with the annual double session of the Chinese parliament (National People's Congress on one side and People's Consultative Conference on the other), during which the country's 2023 economic targets will be announced (probably on March 4).

In a completely different register, crypto-currencies took a beating last night with the fall of Silvergate Capital, whose stock collapsed by 58% on Wall Street after the announcement of a postponement of its accounts and a non-negligible risk of default. The group oversees Silvergate Bank, a financial institution specializing in cryptocurrencies. Another player in the sector is therefore likely to bite the dust, which has caused bitcoin to lose USD 1,000 and is trading this morning at around USD 22,400.

In pre-market trading, Wall Street’s main index trio was in the green. Investors will surely have their eyes riveted on the ISM services index in the United States at 10:00 am, after the services PMI indicators of the major economies throughout the day.

 

Economic highlights of the day:

We're filling up on services PMI indicators today, with the second reading for February for the major economies, as well as the ISM services. All the agenda is here.The Caixin services PMI for China rose to 55 points, above the initial reading and well anchored in the expansion zone.

The dollar is down 0.2% to EUR 0.9417 and 0.5% to GBP 0.8327. The ounce of gold is back up to 1846 dollars. Oil is steady, with North Sea Brent at USD 84.04 per barrel and U.S. light crude WTI at USD 77.65. The 10-year US debt yield continues to strengthen to 4.05%. Bitcoin falls to USD 22,400.

 

In corporate news:

* Dell said Thursday it expects revenue and profit for the current quarter to be below estimates, due to a continued decline in demand in the PC industry. The stock is down 3.8 percent in premarket trading.

* Marvell Technology dropped 8.6% in premarket trading after reporting lower-than-expected first-quarter earnings and revenue.

* Hewlett Packard Enterprise gained 2.6% in premarket trading as the laptop maker reported upbeat full-year earnings guidance.

* Artificial intelligence (AI)-based product makers are climbing between about 5% and 24% on C3.ai's optimistic fourth-quarter and fiscal 2023 forecasts, which amplified euphoria over the launch of chatbot ChatGPT, developed by U.S. OpenAI.

* Verizon announced Friday that its CFO and executive vice president Matt Ellis will leave the group in May and be replaced by Tony Skiadas, as part of several management changes.

* Costco missed second-quarter revenue expectations Thursday as consumers curbed spending on non-essentials due to inflation. The stock lost 2.5% in premarket trading.

* Nordstrom said Thursday it would end its operations in Canada, resulting in a $400 million drop in net sales in 2023. The store chain also expects lower-than-expected annual sales as inflation curbs its customers' non-essential spending.

* Tesla sold 74,402 Chinese-made electric vehicles in February, up 31.65 percent from a year earlier, according to data released Friday by the China Passenger Car Association (CPCA).

* Boeing - Greater Bay Airlines (GBA) announced Friday an order for 15 Boeing 737-9 aircraft, as well as a "commitment" for five 787 Dreamliners to support GBA's plans for long-haul international services.

* Citi and Bank of America have cut jobs in their Asian investment banking businesses, two sources familiar with the matter told Reuters, joining fellow banks J.P. Morgan, Goldman Sachs and Morgan Stanley, which are also cutting staff due to the slowdown in China trading.

* Broadcom expects second-quarter revenue to beat estimates as increased investment in artificial intelligence drives demand for its chips.

* Walmart - Chief Executive Doug McMillon, 56, plans to stay on as head of the largest U.S. retailer for at least three more years, The Wall Street Journal reported Thursday.

* Riot Platforms announced Thursday that it plans to delay the release of its annual financial report because of errors identified in earlier financial statements.

* Walgreens Boots Alliance will stop selling its abortion pills in some Republican states whose attorneys general have told the group that it could violate the law if it distributes them by mail.

 

Analyst recommendations:

  • Admiral: Citigroup downgrades from buy to neutral with a target of GBp 2272.
  • Beazley: Jefferies remains Buy with a price target raised from 825 to 930 GBp.
  • Capital One: Odeon Capital Group downgrades to sell from hold. PT down 12% to $94.20.
  • Chesapeake Energy: Wells Fargo Securities downgrades to equal-weight from overweight. PT up 6% to $87.
  • Flowers Foods: Deutsche Bank upgrades to hold from restricted. PT down 2.7% to $27.
  • Hormel: J.P. Morgan downgrades to underweight from neutral. PT down 9.2% to $38.
  • Hunting: Berenberg upgrades from buy to hold, targeting GBp 325.
  • Itron: J.P. Morgan downgrades to underweight from neutral. PT down 12% to $50.
  • Kroger: J.P. Morgan upgrades to overweight from neutral. PT up18% to $54.
  • Marathon Petroleum: Jefferies upgrades to buy from hold. PT up 21% to $157.
  • Pioneer Natural: Wells Fargo Securities upgrades to equal-weight from underweight. PT up 4.9% to $220.
  • PPHE Hotel Group: Jefferies upgrades from hold to buy targeting GBp 1600.
  • Procter & Gamble: J.P. Morgan upgrades to overweight from neutral. PT up 11% to $155.
  • Rightmove: Numis Securities downgrades to add from buy. PT up 20% to 660 pence.
  • Salesforce: Already positive, Goldman Sachs still considers the stock as a Buy opportunity. The target price is being increased from USD 310 to USD 320.
  • Tesla: KGI Securities downgrades to neutral from outperform. PT up 2.7% to $196.