Equities took a beating yesterday, much like a rubber band that is stretched and then released a little abruptly. In reality, the explanation is a bit more subtle than that, as the pullbacks are quite targeted. For example, in Europe, the United Kingdom, the Netherlands and, to a lesser extent, Germany have not suffered much. But the Nasdaq and the S&P500 both lost a little more than 1%. In a period of low volatility, this change is noticeable.

The cause of this decline is the same that sparked the bullish sessions that have dominated since the beginning of the year: big tech. Because of course, what works in the ascending phase also works in the other direction. In addition, the negotiations on the US debt ceiling are stalling, which is adding to the grim mood. After having seemed relatively close on Sunday, Republicans and Democrats moved apart on Tuesday. This is all very political, and drama is part of the process.

The macro agenda for the day is quite full. UK inflation figures released earlier today showed that inflation remains sticky. CPI data revealed that core inflation – which excludes volatile components such as food and energy – soared to a 31-year high in April to 6.8%, fueling expectations of further rate hikes by the Bank of England.

Overall consumer price inflation fell to 8.7% in April from March's 10.1%, the Office for National Statistics said. This is higher than the 8.6% expected in the Reuters consensus of economists.

Later today, we have comments on the debt ceiling from Janet Yellen, guest at a conference organized by the Wall Street Journal, and the Fed will publish the minutes of its last monetary policy meeting.

On the corporate front, some tech results are due in the United States, including those of Nvidia, after Intuit or Agilent yesterday. Nvidia has reached the status of trend-setter in the same way as Apple or Microsoft, which makes it a key player in the US market. Let's not forget that with a capitalization of $760 billion, the graphics processor specialist has risen to the 5th position of American capitalizations, far ahead of Berkshire Hathaway, Tesla or Meta. Nvidia's boss has just warned American congressmen that a "chip war" with China could be disastrous for American tech.

US stocks opened lower this morning. The Dow Jones Industrial Average was down 0.3%, S&P 500 fell 0.5%, and the Nasdaq 100 fell 0.6%.

 

Economic highlights of the day:

British inflation and the German Ifo business confidence index, U.S. oil inventories and the release of the minutes of the last Fed meeting are today’s main events. All the agenda is here. 

The dollar is worth EUR 0.9269 and GBP 0.8063 The ounce of gold falls back to USD 1977. Oil rebounds, with North Sea Brent crude at USD 78.05 a barrel and U.S. light crude WTI at USD 74.32. The yield on 10-year US debt is strengthening 3.71%. Bitcoin is trading at USD 27,000.

 

In corporate news:

  • Kohl’s - The department store chain climbed 11% in premarket trading after reporting a surprise first-quarter profit, helped by tighter inventory and cost management.
  • Abercrombie & Fitch raised its annual sales forecast, betting on continued demand for its clothing and accessories despite the impact of inflation. The group was up 20% in pre-market trading.
  • Meta Platforms - The Luxembourg-based Court of Justice of the European Union on Wednesday rejected Meta's appeal challenging a request for more information from the European Commission regarding an investigation into user data protection and anti-competitive practices.
  • Abbott Laboratories - The Federal Trade Commission (FTC), the U.S. competition watchdog, has launched an investigation into Abbott and other infant formula makers over a possible cartel in bidding for government contracts, The Wall Street Journal reported Wednesday.
  • PacWest Bancorp climbed 7.7 percent in premarket trading as the regional bank sold its home-loan division to real estate finance company Roc360 for an undisclosed amount to restore investor confidence amid concerns about its liquidity.
  • Intuit fell 5% in after-hours trading after the software company issued a profit forecast for the current quarter that fell short of analyst expectations. The company also lowered its annual growth forecast in the consumer segment to 5%-6% from a previous estimate of 9%-10%.
  • VF Corp on Tuesday reported quarterly earnings that beat Wall Street expectations on higher prices and solid demand for its North Face brand products, particularly in Europe and Asia. The stock was up 3.5% in premarket trading.
  • Urban Outfitters jumped 9% in after-hours trading after the company reported higher quarterly sales and earnings, driven by strong demand for its apparel and lower inventories.
  • Palo Alto Networks on Tuesday raised its full-year revenue and adjusted earnings guidance amid rising cybersecurity spending. The stock was gaining 4% in after-hours trading.
  • Agilent Technologies was down 9.05% in pre-market trading after the company lowered its full-year revenue and profit forecasts.

 

Analyst recommendations:

  • Advanced Micro Devices: BofA Securities lifts price target to $120 from $105, keeps Neutral rating.
  • Autodesk: BMO Capital Markets initiated coverage with a recommendation of market perform. PT set to $224.
  • Broadcom: BofA Securities raises PT to $800 from $725, maintains Buy rating.
  • First Horizon: Jefferies upgrades to buy from hold. PT up 16% to $13.
  • Integra LifeSciences: J.P. Morgan downgrades to underweight from neutral. PT up 6.2% to $43.
  • National Grid: Credit Suisse remains Outperform with a price target raised from 1,250 to 1,280 GBp.
  • Owens Corning: Barclays upgrades to overweight from equal-weight. PT up 25% to $135.
  • PDC Energy: Mizuho Securities downgrades to neutral from buy. PT up 0.4% to $72.
  • PTC: BMO Capital Markets initiated coverage with a recommendation of outperform. PT up 27% to $166.
  • Sherwin-Williams: Jefferies upgrades to buy from hold. PT up 21% to $275.
  • Textron: Vertical Research Partners downgrades to hold from buy. PT up 9.4% to $70.