Stock markets closed in the green yesterday, even before hearing the good news that there will be no default by the United States of America, since the Senate validated, without a hitch, the debt-ceiling deal that the House of Representatives had approved a little earlier. This reduces the risk premium and eliminates a source of tension until the end of 2024.

In the United States, the gap between solid but poorly valued companies and growth companies continued to widen. The MSCI Value index lost 4% in 2023, while the MSCI Growth is up 27%. The former is home to good old industrial and financial companies such as Exxon, UnitedHealth, Johnson & Johnson and JPMorgan Chase. The second is home to the Nasdaq's top performers. The Nasdaq 100 rallied 1.3% yesterday to 14,442 points, compared with a mere 0.5% rise for the Dow Jones.

The return of rate hike fears earlier this week quickly dissipated as yesterday's statistics showed some signs of economic cooling. The fall in the dollar and the US 10-year yield showed that the market had quickly dismissed the hypothesis of a rate hike on June 14. To drive the point home, Patrick Harker, head of the Philadelphia Fed, reiterated what he had implied twenty-four hours earlier, namely that the central bank could afford to do nothing in June. The main sticking point between hawks and doves remains the labor market, which is still buoyant despite the economic slowdown. And this is a little bit confusing today since data showed US payrolls increased by 339,000 in May, compared to estimates of 195,000, while the unemployment rate rose to 3.7%, while 3.4% was expected. The data also showed that average hourly wages also slightly cooled. In any case futures on Wall Street indices didn’t react much initially after the announcement and remained firmly in the green.

Equity markets have no desire to fall, it seems, and the Nasdaq looks like it has regained the invincibility lost last year.

 

Today's economic highlights:

The US May employment report is the highlight today. The full agenda is here.

The dollar is stable at EUR 0.9289 and GBP 0.7992. The ounce of gold is worth USD 1975. Oil continues its recovery, with North Sea Brent at USD 76.07 a barrel and US light crude WTI at USD 71.90. The yield on 10-year US debt contracts to 3.61%. Bitcoin is trading at USD 27,000

 

In corporate news:

  • Lululemon Athletica jumped 15% in pre-market trading after the sporting goods distributor raised its sales and earnings forecasts for the full year. 
  • Dell was down by around 4% in premarket trading, the Texas-based IT group having published a sales forecast for the current quarter on Thursday evening that fell short of expectations.
  • Broadcom announced that it expected sales for its third fiscal quarter to be above market forecasts, with the group benefiting from huge investments in artificial intelligence. Broadcom shares were down 2% in after-hours trading, as some analysts judged the group's outlook insufficient compared to Nvidia.
  • Johnson & Johnson - The U.S. Food and Drug Administration (FDA) announced on Thursday that it had revoked the emergency use authorization granted to the group's COVID-19 vaccine.
  • Boeing announced on Thursday a further postponement of the Starliner test mission to space, scheduled for July, due to new technical problems.
  • JetBlue Airways announced on Thursday its intention to sell Spirit Airlines’ assets at New York's LaGuardia airport following the planned merger of the two airlines.
  • Southwest Airlines - The airline's CEO, Bob Jordan, said on Thursday that the current shortage of pilots in the industry is expected to last three years, due in part to difficulties in training them.
  • Netflix - In a non-binding vote on Thursday, shareholders of the streaming video platform voted against the amount of compensation proposed for the group's executives, following a call to do so from Hollywood screenwriters.
  • EQT - The Wall Street-listed Swedish private equity firm is to buy animal health specialist Dechra Pharmaceuticals for £4.46 billion ($5.62 billion).
  • Costco was down 1% in after-hours trading, as the distributor reported like-for-like sales down 0.3% year-on-year in May.

 

Analyst recommendations:

  • AJ Bell: Jefferies remains Buy with a price target reduced from 450 to 370 GBp.
  • Alnylam: Baptista Research initiated coverage with a recommendation of buy. PT set to $219.90.
  • Ascent Industries: Stifel initiated coverage with a recommendation of buy. PT set to $20.
  • Dollar General: Piper Sandler downgrades to neutral from overweight. PT up 10% to $178.
  • EPR Properties: KeyBanc Capital Markets upgrades to overweight from sector weight. PT up 14% to $47.
  • GSK : AlphaValue remains Buy with a price target raised from 2066 to 2115 GBp.
  • Quaker: Stifel initiated coverage with a recommendation of buy. PT up 29% to $250.
  • Salesforce: Societe Generale downgrades to hold from buy. PT up 8.6% to $230.
  • Warner Music: Atlantic Equities downgrades to neutral from overweight. PT up 6.6% to $26.
  • Xcel Energy:  J.P. Morgan downgrades to neutral from overweight. PT up 7% to $68.