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It sounded like a green light from an investor's perspective. Jerome Powell had the opportunity last night in a public speech to refine the message that the US central bank had sent in early February. And for the second time in a row, he refused to temper the optimism of the financial markets when he had the chance.
Wall Street had started in the same way. Before going in all directions according to Powell's statements. First violently up, then brutally down, then up again. Movements that my great skills in technical analysis allow me to describe as a reverse Totoro configuration, as you can see below. And, no, I'm not drunk, although using the Studio Ghibli character in technical analysis is quite personal.
The famous figure of the Reverse Totoro
In the end, American investors felt that Jerome Powell's words supported their analysis of a Fed that will not go much further in its restrictive monetary policy. The central banker was a little more combative than the previous week on the uncertainties that persist and that could lead the institution to raise rates several times, but the market does not believe too much. And not only the stock market: the bond market did not really blink at the comments. As I explained yesterday, the financials had planned to be carried away by their current enthusiasm anyway, unless Powell was to be a VERY wet blanket. This was not the case. This explains why the Nasdaq 100 resumed its advance by gaining more than 2% and erasing most of the decline accumulated over the first two sessions of the week. The S&P500 followed suit, gaining 1.3%. On this day of "perfect nirvana" for the Buddhist tradition, as I could learn while browsing the internet this morning, the libido of investors is still flourishing. And their preferred scenario remains valid: the economy is not doing so bad, inflation continues to fall and the US central bank can end its monetary tightening cycle. This means easier access to financing in the months to come, economic momentum is picking up and equity markets are rising. That's for the smooth plan, the one written on paper. Reality often holds other surprises.
Meanwhile, companies continue to publish their results. There are still some heavy hitters, including Walt Disney, CVS Health, and Uber. The macroeconomic agenda sounds rather hollow on the other hand, even if the Indian central bank has given a small turn of monetary screw last night, by raising its main policy rate to 6.50%.
In other news, the human toll from the double earthquake in Turkey and Syria is increasing by the hour. Joe Biden gave his State of the Union address to the Senate last night. In the economic section, he attacked the big technology, health, and energy companies for their huge profits and their tax engineering.
Economic highlights of the day:
In corporate news:
Analyst recommendations:
- Brunswick: D.A. Davidson maintained the recommendation at neutral. PT up to $92.
- DuPont de Nemours: Wells Fargo Securities maintains overweight rating. Price target increases to $85 from $77.
- Illumina: Stifel cut the target to $235 from $285. Maintains buy rating.
- Microsoft: Mizuho Securities raised the target to $300 from $280. Maintains buy rating.
- Old Dominion Freight Line: Raymond James maintains outperform rating. Price target up to $395 from $335.
- Omnicom Group: Wells Fargo Securities raised the target and maintains overweight rating. PT up 20% to $109.
- Shake Shack: Wedbush maintains neutral rating. PT up to $55 from $49.
- TransDigm Group: Susquehanna Financial remains neutral. Price target up to $750 from $665.
- Vertex Pharmaceuticals: HC Wainwright maintains buy rating. PT up to $326 from $300.
- VF: Barclays raised the target to $31 from $28. Maintains equal-weight rating.
- Werner Enterprises: Stifel raised the target to $54 from $48. Maintains buy rating.
