Are stock market indexes experiencing uncertainty? It seems so, as the S&P500 underwent a significant reversal. Initially, the index showed strong gains, but suddenly, the tide turned, and buyers disappeared. As a result, the S&P500 closed down 0.67%, near its session low. Meanwhile, the European stock market had already closed, and the Stoxx Europe 600 NR (including dividends) reached almost its all-time high. Specifically, it was only 4 points away from its peak at 1016 points. However, this was before the U.S. indices started showing signs of weakness.

The major macroeconomic event from the previous day unfolded predictably. Similar to the Federal Reserve (Fed), the European Central Bank (ECB) raised its rates again, marking the ninth consecutive rate hike and bringing the refinancing rate to 4.25%. Like the Fed, the ECB now assesses the situation meeting by meeting, based on the latest available data. Also, akin to the Fed, the ECB did not elaborate on their future decisions. In fact, Christine Lagarde, the ECB's President, echoed Jerome Powell's sentiment from the day before, stating, "We could raise rates or we could opt for the status quo." The message conveyed by the ECB is entirely consistent with that of the Fed.

The narrative appealing to financiers is that the monetary tightening cycle is coming to an end, despite the adjustments made by the major central banks. However, the bond markets are painting a different picture. US government bond yields haven't eased; instead, the US 10-year yield is once again above the 4% threshold. This situation is connected to other macroeconomic news - the US economy is still causing concerns among economists. In the second quarter, the US economy grew faster than expected, mainly due to strong consumer spending, with an annualized growth of 2.4% against a consensus of 1.8%. As a result, repeated rate hikes are being positively received in the equity markets, validating the optimistic scenario of a soft landing that the financial community hopes for. However, in the bond markets, this suggests there is still room for further rate hikes. The central banks' message appears to be unclear, possibly intentionally so, creating confusion among observers.

To conclude, let's talk about the Bank of Japan (BoJ). The BoJ is one of the few central banks that maintain an ultra-accommodative policy. Despite the archipelago's unique relationship with inflation, which is currently above the BoJ's target, Japanese policy remains very flexible. Interest rates are being kept low, but the central bankers have decided to widen the allowed fluctuation range for 10-year government bonds, increasing the ceiling from 0.5% to 1%. This move signals the BoJ's preparation for normalizing its monetary policy while leaving its main policy rate unchanged. The market's reaction to this decision was notable. Japanese 10-year yields sharply rose, exceeding the previous 0.5% ceiling. Simultaneously, the Nikkei stock index experienced a decline, and the value of the yen appreciated.

On the corporate front, quarterly publications continue unabated. In the US, Exxon Mobil and Chevron are the oil companies of the day, while in Europe, the participants of the day are Hermès, AstraZeneca and Sanofi, to name but a few. As usual, you'll find a summary of publications in this morning's column.

In Asia-Pacific, the final session of the week was mixed. Japan was down 1.10%, but China was up again, with the Hang Seng up 1.3%. South Korea held up well, hovering around equilibrium. Sydney lost around 0.70%. European leading indicators are slightly down.

Economic highlights of the day

In the United States, the day starts with the PCE inflation and household income and spending (8:30am), and the University of Michigan's consumer confidence index (10:00am). In addition, the full macro agenda here.

The dollar wins ground against the euro at EUR 0.9096 and GBP 0.7781. The ounce of gold reverses course at USD 1952. Oil remains bullish, with North Sea Brent at USD 83.36 a barrel and US light crude WTI at USD 79.60. The yield on 10-year US debt has risen to 4%. Bitcoin is still trading below the USD 30,000 mark.

In corporate news:

  • Intel posted a surprise quarterly profit on Thursday, and forecast third-quarter earnings ahead of Wall Street expectations. The stock rose by around 6% after the close, dragging the entire semiconductor sector with it. Marvell Technology, Qualcomm, Advanced Micro Devices, Nvidia and Micron Technology were all up between 0.9% and 1.5% before the opening.
  • On Thursday, Ford Motor presented a major change in its strategy, notably slowing production growth for its electric vehicles. The share lost more than 1% before the opening.
  • Mondelez International raised its full-year growth forecasts on Thursday for the second time this year, helped by robust demand for snacks, despite rising prices.
  • U.S.-listed Chinese stocks (ADRs) advanced, buoyed by hopes of further economic stimulus. E-commerce groups Alibaba Group, and Pinduoduo rose from 2.8% to 3.6% before the opening.
  • First Solar announced its financial results for the second quarter of 2023 on Thursday and plans to invest $1.1 billion in a plant in the USA.
  • Enphase Energy is down 12.5% after the close, with the company forecasting third-quarter revenues below Wall Street estimates due to weak demand in the US. Solaredge Technologies lost 5.8% in the wake of Enphase before the opening.
  • Live Nation Entertainment beat Wall Street estimates with its second-quarter sales on Thursday.
  • Roku forecast higher third-quarter sales and reported above-consensus second-quarter results. The stock gained 9% after the close.
  • Kla reported first-quarter sales and earnings above consensus on Thursday. The share gained 3% after the close.
  • Verisign reported a rise in second-quarter sales on Thursday, but the stock was down around 2% after the close due to a slowdown in demand growth.
  • Juniper Networks was down 6% after the close, with third-quarter revenues below estimates.
  • T-Mobile US reported above-consensus new subscriptions on Thursday, although second-quarter sales fell.
  • Gamestop announced the departure of CFO Diana Saadeh-Jajeh on August 11, sending the stock down nearly 0.5% before the open.
  • Quarterly results from Chevron, Procter & Gamble, and Exxon Mobil are due on Friday. 

Analyst recommendations:

  • Helmerich & Payne: Susquehanna Financial raised the target to $53 from $45. Maintains positive rating.
  • Juniper Networks: Piper Sandler cut the target to $28 from $32. Maintains neutral rating.
  • KLA: Susquehanna Financial raised the recommendation to $560 from $490. Maintains positive rating.
  • Lennox International: Mizuho Securities maintains neutral rating. Price traget increases to $340 from $260. 
  • Mettler-Toledo International: Citi cut the target to $1,350 from $1,525. Maintains neutral rating.
  • Microsoft: First Shanghai Securities  raised the recommendation to buy from hold.
  • Netflix: First Shanghai Securities downgrades to hold from buy. PT down 8.9% to $450.
  • Piper Sandler raised the target .to $35 from $20. Maintains neutral rating.
  • Pentair: Mizuho Securities maintains buy rating. PT up to $78 from $65.
  • Royal Caribbean Cruises: Susquehanna Financial upgrades its target to $127 from $85. Maintains positive rating.