Yesterday, the markets had the choice between getting anxious about the evolution of key rates due to the resilience of US inflation, or moving forward again. The second option won. There's a powerful buying current in tech stocks, especially AI tech stocks. Everyone wants a piece of the pie, which isn't very varied at the moment, due to a lack of understanding of the stakes and potential. So, as in any gold rush, people flock to the sellers of shovels and pickaxes. The ten biggest US technology stocks gained over 2% yesterday, twice the performance of the S&P500 and five times that of the Dow Jones.

While investors are not too worried about monetary policy, they are still eager to get more clues about the timing of rate cuts this year. Chicago Fed President Austan Goolsbee estimated that slightly higher inflation data for a few months would not jeopardize a return to the central bank's 2% target. Comments from Governor Christopher Waller and Atlanta Fed President Raphael Bostic are also due today.

Data released this morning - including January retail sales and weekly jobless claims – offered some cues about the economy's health. US retail sales fell more than expected in January, weighed down by declines in receipts at auto dealerships and gasoline service stations. They declined by 0.8%, data from the Commerce Department's Census Bureau shows, while a 0.1% dip was expected by economists.

Meanwhile, initial claims for state unemployment benefits dropped by 8,000 to a seasonally adjusted 212,000 for the week ended February 10, while 220,000 claims were expected, highlighting again the resilience of the job market.

Traders give only a 44% chance for at least a 25-basis-point rate cut in May, down from over 60% earlier in the week, while odds for June stand at about 83%, according to the CME Group's FedWatch Tool.

In other news, data showed the UK economy had entered a recession in the second half of 2023. It shrank by 0.3% in the three months to December, a steeper decline than expected, and contracted by 0.1% between July and September. The data led to a fall in the yield on 10-year UK government bonds, with markets now pricing in about 78 basis points of interest rate cuts from the Bank of England this year, while it expected 70 bps a few days ago. Japanese GDP also contracted against all expectations in Q4 2023, so that Germany, which is barely better off, has become the world's 3rd largest economy.

On the geopolitical front, Vladimir Putin has publicly stated that Joe Biden is a better option for Russia because he is more predictable than Donald Trump. I'm not sure if this will help Biden... In the Middle East, Israel abandons peace talks, deeming Hamas's demands "delusional".

In Asia Pacific, green dominated overnight, except in South Korea where indices are hesitant. Mainland China is still closed for the Lunar New Year. Special mention goes to Taiwan, which set a new session record with a 3% surge in TAIEX, boosted by Taiwan Semiconductor, which analysts see as a good AI bet. European leading indicators are bullish, with the Stoxx Europe 600 up 0.5%. Futures on Wall Street are in the green.

Economic highlights today:

On the agenda today, we have Empire Manufacturing, new jobless claims, the Philly Fed business outlook, retail sales, capacity utilization and industrial production, business inventories and the NAHB housing market index. 

The dollar is stable at EUR 0.9292 and GBP 0.7958. The ounce of gold is slightly up to USD 2001. Oil is struggling for direction, with North Sea Brent at USD 81.76 a barrel and US light crude WTI at USD 76.64. The yield on 10-year US debt calms to 4.23%. Bitcoin is trading at USD 52,000.

In corporate news:

  • Cisco Systems lost 5.2% in after-hours trading, as the network equipment manufacturer lowered its annual sales forecast and said it expected lower-than-expected revenues for the current quarter amid slowing demand. The group also announced its intention to cut 5% of its workforce and focus on artificial intelligence and software.
  • Occidental Petroleum exceeded expectations on Wednesday evening with its fourth-quarter profit, as the oil group achieved its best production performance in three years and cut expenses.
  • Nvidia invests in artificial intelligence (AI)-based companies, supporting their share prices ahead of the opening. ARM received $147.3 million in investment and gained 2.6% before the opening. Recursion Pharmaceuticals, in which Nvidia invested nearly $76 million, gained 16.5%.
  • Deere cut its earnings forecast for 2024 on Thursday, as farmers were reluctant to buy equipment due to high borrowing rates and falling prices.
  • Microsoft will invest 3.2 billion euros in Germany in 2024-2025 and will focus on artificial intelligence, the group announced on Thursday.
  • Tripadvisor jumps 5.3% in after-hours trading after reporting better-than-expected fourth-quarter sales and earnings.
  • Albemarle - The world's leading producer of lithium for electric vehicle batteries falls 4.7% in after-hours trading after reporting a fourth-quarter net loss of $617.7 million.
  • Twilio plunges 10.6% in after-hours trading after the cloud computing specialist announces a sales forecast for the current quarter below expectations, according to LSEG data.
  • Intuitive Machines climbed 7.6% in pre-market trading after the successful launch in Florida on Thursday morning of a lunar craft built by the company as part of a mission to enable the USA to land a vehicle on the Moon.

Analyst recommendations:

  • Akamai Technologies, Inc.: HSBC downgrades to reduce from hold with a price target reduced from USD 109 to USD 96.
  • Coinbase Global, Inc.: JP Morgan upgrades to neutral from underweight with a target price of USD 80.
  • Comcast Corporation: Redburn Atlantic downgrades to neutral from buy with a target price reduced from USD 50 to USD 44.
  • Principal Financial Group, Inc.: Morgan Stanley upgrades to equal weight from underweight with a target price of USD 75.
  • Westinghouse Air Brake Technologies Corporation: Redburn Atlantic downgrades to neutral from buy with a price target raised from USD 123 to USD 135.
  • Charter Communications, Inc.: Redburn Atlantic maintains its neutral recommendation with a price target reduced from USD 377 to USD 293.
  • Eli Lilly And Company: Societe Generale maintains its sell recommendation and raises the target price from USD 430 to USD 610.
  • Hubspot, Inc.: Mizuho Securities maintains its buy recommendation and raises the target price from USD 580 to USD 700. Morningstar maintains its hold recommendation with a price target raised from USD 505 to USD 610.
  • Nucor Corporation: Morgan Stanley maintains its market weight recommendation and raises the target price from USD 154 to USD 187.
  • Nvidia Corporation: Piper Sandler & Co maintains its overweight recommendation and raises the target price from USD 620 to USD 850.
  • Palo Alto Networks, Inc.: BTIG maintains its buy recommendation and raises the target price from USD 343 to USD 425.
  • Uber Technologies, Inc.: Bernstein maintains its outperform recommendation and raises the target price from USD 70 to USD 95. Loop Capital Markets maintains its buy recommendation and raises the target price from USD 74 to USD 89. Fox Advisors LLC maintains its outperform rating and raises the target price from USD 80 to USD 100.
  • Kingfisher Plc: Citi upgrades to buy from neutral with a price target raised from GBP 2.10 to GBP 2.58. Jefferies downgrades to hold from buy with a price target reduced from GBX 330 to GBX 210.
  • Genus Plc: Peel Hunt maintains its buy recommendation and reduces the target price from 4500 to GBX 3500.
  • Relx Plc: Numis maintains its hold recommendation with a price target raised from GBX 2480 to GBX 3250.
  • Manulife Financial Corporation: BMO Capital Markets upgrades to outperform from market perform and raises the target price from CAD 31 to CAD 35.
  • Waste Connections, Inc.: ATB Capital Markets Inc. downgrades to sector perform from outperform with a price target raised from CAD 220 to CAD 235.