The three main indexes were all slightly down this morning, although traders have abruptly decided that Chinese technology stocks, which have been unattractive for months, deserve a frenzy of buying today. The "risk on" mode that has dominated for the last two weeks remains globally activated.

If you are at all interested in financial news, you have probably already read or heard somewhere that September is the worst month for random investing (I am using data compiled by Yardeni from S&P and Haver Analytics). Statistically, September has only had 42 bulls in 95 years. It is the only month that has more declines than increases and has such a poor record: -1.1% on average. To give you an idea, February is in second-to-last place, with a record of 50 rises for 45 falls over 95 years and an average loss of -0.1%. In 2022, the S&P500 lost -9.3% in September, confirming the above trend. As for October, it does not particularly stand out in the historical data.

But it was particularly positive this year, as the S&P500 just closed up 8%. We even had an impressive +13.95% for the venerable Dow Jones. The more than 100-year-old index was pulled along by its old guard, in particular the trio Caterpillar (+32%), Chevron (+26%) and Honeywell (+22%). This is the revenge of the old economy on the new. At the same time, the Nasdaq 100 only rebounded by 3.96%, betrayed by its stars, if we make an exception of Apple. I don't know if investors' disappointment with the financial performance of Microsoft, Amazon, Alphabet and Meta Platforms will last, as the recent period has shown that cycles are not infinite, even for these companies.

Be careful today, however, as the energy sector may suffer after the White House announced that it is considering taxing oil super-profits. A project that has yet to be confirmed and which will in any case depend on the outcome of the mid-term elections that will take place in a week: it is difficult to see the Republicans supporting such a measure.

Yesterday, indexes closed the month on a mixed note, ranging from -0.4% for the Dow Jones, decidedly the big man of October, to -1.2% for the Nasdaq 100. Investors are a little more willing to take risks since they are starting to believe that a monetary policy easing could be looming. But the closer the verdict gets, the more tension mounts. Tomorrow the Fed will play its monetary cards at the end of its November meeting. There is little doubt that the Fed will raise interest rates by another 75 basis points, but the Fed is expected to be very tight-lipped about its comments. Investors are desperate for Jerome Powell to use slightly less inflexible semantics on the need to raise rates. Otherwise, they are likely to be very disappointed. Yesterday's report of out-of-control inflation in Europe is a cause for caution. The US bond market tells a slightly different story than the equity market. By letting the yield on 10-year debt sail close to 4%, it is expressing its caution on the eve of the Fed's key meeting.

 

Economic highlights of the day:

The ISM manufacturing index and the JOLTS survey on job openings are today’s main indicators. All the macro agenda is here. This morning, China's October manufacturing PMI fell to 49.2 points for a consensus of 49.8 points. Overnight, the Australian central bank raised rates by 25 basis points, as expected, to 2.85%. In addition, the Chinese manufacturing PMI compiled by Caixin remained in contraction zone in October (49.2), but comes out slightly less deteriorated than expected.

The dollar fell to EUR 1.0098 and to GBP 0.8694. The ounce of gold is stable around 1644 dollars. Oil recovered, with North Sea Brent crude at USD 94.36 per barrel and U.S. light crude WTI at USD 88.19. The yield on 10-year US debt is holding just above 4%. Bitcoin is trading around USD 20,500.

 

In corporate news:

* Pfizer raised its annual sales forecast for its COVID-19 vaccine to $34 billion on demand for its new bivalent vaccines. The pharmaceutical giant was up 3% in premarket trading.

* Eli Lilly lowered its annual profit forecast for the third time, as a stronger dollar put more pressure on the company, which is struggling with lower insulin prices and generic competition for its cancer drug. The stock was down nearly 4% in pre-market trading.

* Johnson & Johnson announced on Tuesday that it would buy Abiomed in a deal valued at $16.6 billion to strengthen its cardiovascular devices business. Abiomed was up 48% in pre-market trading.

* Uber technologies expects to post fourth-quarter operating profit ahead of Wall Street expectations, betting on increased demand and tight control of expenses. The stock was up 9% in pre-market trading.

* Thomson Reuters reported higher third-quarter revenue and operating income, driven by gains in its three largest divisions.

* Apple - Foxconn announced a sharp increase in bonuses for employees at its Zhengzhou, China, plant, in an effort to retain staff at the major iPhone manufacturing facility amid growing discontent over restrictions against COVID-19.

* Wells Fargo said the U.S. Securities and Exchange Commission, the U.S. securities regulator, has begun investigating its hiring practices after the Justice Department opened its own investigation.

* Tesla plans to start mass production of its electric pickup Cybertruck in late 2023, two sources close to the matter said. The stock was up 1.8% in pre-market trading.

* Marathon Petroleum reported an increase in quarterly profit on higher demand.

* Phillips 66 gained 2.6% in premarket trading after the U.S. refiner reported a rise in quarterly profit as it benefited from rising fuel demand and a tight supply market.

* Fox reported better-than-expected quarterly revenue, supported by a slight increase in advertising revenue ahead of the U.S. midterm elections.

* Energy and Mining stocks climbed in pre-market trading, supported by stronger crude and industrial metals prices against a falling dollar

* U.S. asset manager Atlas will be acquired by Poseidon in a deal valued at $10.9 billion, about three times the original proposal, the two groups announced.

* Newmont reported a weaker-than-expected third-quarter profit as the world's largest gold producer was hit by lower prices, higher input costs and a tight labor market.

* Meta Platforms - Instagram, owned by Meta Platforms, said it has fixed a software bug that led to users' accounts being suspended.

* Alphabet - Alphabet subsidiary Google is suspending a policy that requires app developers in India to use its proprietary billing system for selling digital goods.

 

Analyst recommendations:

  • American Tower: RBC Capital Markets lowers PT to $240 from $265. Maintains outperform rating.
  • Boston Properties: Truist Securities lowers PT to $85 From $96, retains Hold Rating
  • Elementis: Jefferies remains Buy with a price target reduced from GBp 140 to GBp 120.
  • Emerson Electric: Deutsche Bank downgrades to hold from buy. PT up 11% to $96.
  • Exxon Mobil: Exane BNP Paribas upgrades to neutral from underperform. PT up 3.8% to $115.
  • Getty Realty: RBC Capital Markets raised the target to $30 from $27. Maintains sector perform rating.
  • Helios Towers: Jefferies remains Buy with a price target reduced from GBp 212 to GBp 175.
  • Norfolk Southern: RBC Capital Markets upgrades to sector perform from underperform. PT up 3.9% to $237.
  • Lennox: J.P. Morgan raised the recommendation to neutral from underweight. PT down 3.2% to $226.
  • Principal Financial: Barclays downgrades to equal-weight from overweight. PT up 1% to $89.
  • Schwab: Credit Suisse downgrades to neutral from outperform. PT up 5.4% to $84.
  • Stryker: Canaccord Genuity downgrades to hold from buy. PT down 4% to $220.
  • Union Pacific: RBC Capital Markets downgrades to underperform from sector perform. PT down 5.1% to $187.