After a boring session yesterday, stock markets look set to be more dynamic today, with an avalanche of corporate results. Investors were awaiting two macroeconomic deadlines: a second estimate of US GDP for the fourth quarter of 2022 this morning and a crucial inflation figure tomorrow.

 

The GDP figure has been released and it shows real gross domestic product increased at an annual rate of 2.7 percent in the fourth quarter of 2022, down from a first estimate of 2.9%. In the third quarter, real GDP increased 3.2 percent.

The Bureau of Economic Analysis said the updated estimates primarily reflect a downward revision to consumer spending that was partly offset by an upward revision to nonresidential fixed investment Imports were also revised up.

Stock markets seem to be at a crossroads after their sharp rise in January. Yesterday in Europe, indices hovered around the equilibrium all day, closing with relatively modest variations, both up and down. In the United States, the electroencephalogram was also flat, after the slap received the day before. The Nasdaq 100 recovered 0.05% after losing more than 2% on Tuesday, while the S&P500 returned 0.16%. Real estate and oil stocks underperformed.

Investors are concerned that high rates will continue for longer than expected, which will hurt the performance of the stock market (money is more expensive) and the bond market (yields go up, bond prices go down). Economic dynamics may suffer (oil is under pressure). The Fed's restrictive monetary policy is strengthening the dollar and pushing gold down. To invalidate the current configuration, macroeconomic indicators would have to be more frankly deflationary, which is no longer really the case with the latest announcements: the labor market is robust, activity indicators are tending to rise and the moderation in price increases is not sufficiently convincing.

The next important macro statistic in the US is PCE inflation (inflation that hits the consumer), which will be announced on Friday. The reading will probably be quite binary: either the figure is in line with expectations or slowing down more than expected and equity markets should appreciate, or it is more dynamic than expected and this will reinforce the feeling that inflation has not said its last word, which would force the Fed to keep up the pressure, which investors would not appreciate. The minutes of the last central bank meeting that were published last night don't really help the situation since they didn't bring any new information.

In the meantime, earnings season continues with good results for graphics card maker Nvidia, whose results could inspire the semiconductor sector, which is the driving force behind the technology sector. It was less of a party for eBay, however.

 

Economic highlights of the day:

The second reading of European inflation for January, the Chicago Fed index, the weekly unemployment figures and a new estimate of Q4 GDP are today's main highlights. All the agenda is here. 

The dollar is flat at EUR 0.9418 and GBP 0.8300. The ounce of gold remains under pressure at 1824 dollars. Oil is up, with North Sea Brent crude at USD 81.31 per barrel and US WTI light crude at USD 74.97. The yield on 10-year US debt remains high perched at 3.92%. Bitcoin is down to USD 24,100.

 

In corporate news:

* NVidia jumped 8.4% in after-hours trading after the company issued a revenue forecast for the current quarter on Wednesday that beat Wall Street expectations.

* Ebay fell nearly 6 percent in after-hours trading as the auction specialist warned Wednesday to expect a decline in demand in the current six months after a drop in profit in the last three months of 2022 amid pressure on consumer spending in the U.S. and Europe.

* Moderna gained 2.5% in after-hours trading after the company announced Wednesday that its experimental skin cancer vaccine combined with Merck& Co's Keytruda now has "breakthrough therapy" status as designated by U.S. regulators.

* Bank of America (BofA) set aside $1.2 billion for litigation and fine settlements last year, compared with $164 million in 2021, a regulatory filing on Wednesday shows.

* Wells Fargo laid off hundreds of mortgage bankers this week as part of its recent strategic plan, CNBC reported Wednesday, citing sources familiar with the matter.

* Bumble is up nearly 2 percent in premarket trading after announcing that it expects revenue growth this year of 16 percent to 19 percent, a rate higher than the market expected.

* NetApp falls 5% in after-hours trading after reporting adjusted fourth-quarter earnings per share below Wall Street expectations.

* Lucid Group plunges 10% in after-hours trading as the electric vehicle maker reports quarterly revenue below the Refinitiv consensus.

 

Analyst recommendations:

  • BP Plc: Berenberg downgrades from buy to hold, targeting GBp 590.
  • CarMax: Truist Securities reinstated coverage with a recommendation of hold. PT set to $66, implies a 5% decrease from last price.
  • Centene:  J.P. Morgan downgrades to neutral from overweight. PT up 25% to $90.
  • Experian: Bank of America raised its price target to 39.00 pounds sterling from 37.00 pounds and maintained its buy rating
  • Intel: Morgan Stanley upgrades to equal-weight from underweight. PT up 9.9% to $28.
  • Repligen: KeyBanc Capital Markets cut the target to $240 from $260. Maintains overweight rating.
  • Rio Tinto: JP Morgan maintains its advice to sell. The target price is slightly modified from 5380 to 5500 GBp.
  • Roper: Wolfe Research upgrades to outperform from peerperform. PT up 14% to $480.
  • Walgreens Boots:  Loop Capital Markets initiated coverage with a recommendation of buy. PT set to $45.