The debt ceiling problem is well on the way to being solved. Yesterday, the US House of Representatives approved the text suspending the ceiling until January 1, 2025. However, the deal must still pass through the Senate and this is where things can get tricky. But the guarantees obtained by Joe Biden and Kevin McCarthy seem solid enough for the text to be adopted by Monday, i.e. before things risk going seriously awry.

China is another topic among investors, after the depressing macroeconomic statistics of Tuesday. China's manufacturing PMI remained in contraction territory at 48.8 in May, while 49.5 was expected. Construction and services PMI fell for the second consecutive month. However, another manufacturing PMI, the Caixin, was published today and is in the expansion zone. I won't dwell today on the difference between the two PMIs, nor on the value of having two markers for industrial activity, but let's just say that it's a rather pleasant surprise. In any case, we're a long way from a full-blown economic recovery.

Interest rates and inflation had taken a back seat in recent times but they were back in the limelight yesterday. The latest US employment figures show that the labor market is as strong as ever, boosting expectations of a quarter-point rate hike at the Fed's June 14 meeting. CME's FedWatch tool raised the probability of a rate hike to 66%, compared with 33% for a pause But that was before two Fed members, Philip Jefferson and Patrick Harker, each suggested that a pause in rate hikes would be appropriate in two weeks' time. This prompted a reversal of bets, with the probability of a status quo now at 62%.

Yesterday on Wall Street, the main indices closed in the red, even the Nasdaq 100, weighed down by some profit-taking on Nvidia after the stock's bullish explosion. A decline fueled by the return of interest-rate concerns. So, if we go back to the idea of the shaker evoked far above, we can say that there are a majority of bullish elements, but that we need to keep an eye on the numerous US macroeconomic data, as a further reversal of forecasts on the Fed's next move would weigh on the trend.

US equity futures were little changed in premarket trading on Thursday after the release of new data showed initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 232,000 for the week ended May 27, vs 235,000 claims expected in the Reuters consensus.

Another report from Challenger, Gray & Christmas published today showed job cuts announced by U.S.-based employers climbed 20% to 80,089 in May.

 

Economic highlights of the day:

The second reading of May manufacturing GDP for several countries around the world will be unveiled throughout the day. European inflation for May and a series of US statistics are also on the agenda, including Challenger and ADP employment surveys, labor costs, weekly jobless claims, construction spending, ISM manufacturing and oil inventories. The full agenda is here. In China, the ISM manufacturing index compiled by Caixin returned to expansion territory, against all expectations.

The dollar is trading at EUR 0.9344 and GBP 0.8016. The ounce of gold remains stable at USD 1965. Oil is recovering from its contraction, with North Sea Brent at USD 72.84 a barrel and US light crude WTI at USD 68.55. The yield on 10-year US debt is little changed at 3.67%. Bitcoin is trading at USD 27,000.

 

In corporate news:

  • Salesforce lost 5.5% in pre-market trading after reporting its slowest quarterly sales growth in 13 years, as demand from financial services and technology companies for cloud-based software offerings slowed.
  • Nordstrom - The department store chain reported a surprise first-quarter profit on Wednesday, thanks to improved inventory management and demand. Its shares gained 8% in pre-market trading.
  • Macy’s reported lower-than-expected quarterly sales on Thursday, as consumers curbed non-essential spending in the face of persistently high inflation. The stock fell 10.2% in pre-market trading.
  • Dollar General lost 6.2% in premarket trading after lowering its sales forecast for the year.
  • The US FDA approved Pfizer's respiratory syncytial virus vaccine for the elderly.
  • Ford announced on Wednesday that it was recalling 142,000 Lincoln MKC SUVs in the United States due to a fire hazard under the hood.
  • Lucid Group - The electric-vehicle manufacturer plunged 12.4% in pre-market trading after announcing its intention to raise around $3 billion via a private placement.
  • American Airlines announced that it would appeal a court ruling forcing it to end a partnership with JetBlue Airways in the northeastern U.S., which a federal judge ruled violated antitrust law.
  • Apollo Global Management is reportedly interested in Fujitsu's majority stake in Shinko Electric Industries, Bloomberg reported Wednesday.

 

Analyst recommendations:

  • Advance Auto: J.P. Morgan downgrades to neutral from overweight. PT up 15% to $84.
  • Capri Holdings: CFRA upgrades to buy from hold. PT jumps 64% to $65.
  • Cheniere Energy: Wolfe Research downgrades to underperform from peerperform. PT down 3.3% to $43.
  • ConvaTec: Morgan Stanley upgrades from Overweight to Overweight, targeting GBp 250.
  • Crowdstrike: Wedbush raises price target to $170 from $145. Maintains Outperform rating.
  • Domino's Pizza: TD Cowen lowers price target on Domino's Pizza to $330 from $350, Maintains Market Perform rating
  • Dycom: Raymond James initiated coverage with a recommendation of outperform. PT up 18% to $120.
  • Johnson Controls: Barclays downgrades to equal-weight from overweight. PT up 17% to $70.
  • Salesforce: RBC is positive on the stock with a Buy rating. The target price is reviewed upwards from USD 225 to USD 240.
  • Target: J.P. Morgan downgrades to neutral from overweight. PT up 10% to $144.
  • Toll Brothers: Deutsche Bank initiated coverage with a recommendation of buy. PT set to $94.