In addition, the ADP National Employment report, which has just been released, showed that private employment rose more than expected in December, by 235,000 jobs versus 150,000 jobs expected in a Reuters consensus of economists, signaling that the economy is resilient enough to support more rate hikes. U.S. stock index futures fell sharply today after the report.

Wall Street indices were up quite a bit until the release of the minutes of the last US central bank meeting. The content of the discussions between officials did not reveal any major scoop, but it did have a negative effect on the morale of the troops. The three indices fell sharply afterwards, before rebounding, then falling again, to finally close with moderate gains: +0.75% for the S&P500, +0.4% for the Dow Jones and +0.48% for the Nasdaq. Those who have a good knowledge of the American stock market could be surprised by this gap between the S&P500 and the Nasdaq, since they both include many large technology stocks. There are two reasons for this: first, the fact that the weight of technology in the S&P500 has declined in 2022 with the devaluation of the sector. Secondly, Microsoft has fallen by more than 4% after UBS lowered its recommendation. The Richmond-based group is 12.05% of the index (according to the latest score on the Invesco QQQ ETF).

Now, let's talk about the content of the minutes of the last Fed meeting, which are worth a look. The document mentions that none of the members of the central bank think it would be appropriate to cut rates at any point in this year 2023. But a little further on, we can read that some of the central bankers are afraid that the policy of raising rates will become excessive in relation to the objectives of bringing inflation back to around 2%. The immediate reaction of the equity markets was, as usual, quite bewildered, but the bond market tells a different story as it did not really blink: it does not believe that the Fed will remain hawkish if economic conditions really deteriorate (which some indicators suggest, but still not the labor market).

If I had to summarize all of the above, I would say that the two main engine of the financial world remain U.S. central bank policy and the Chinese recovery (a recovery that includes supportive economic policies and pandemic management). At the same time, there are events that help indexes rise and others that put downward pressure. Falling energy prices in Europe and reduced inflationary pressure are clearly among the events that are welcomed by the market. The stubborn resilience of the job market and hawkish speeches from central bankers, not so much.

 

Economic highlights of the day:

Today, we have the Challenger study on layoffs, the ADP study on employment, weekly unemployment registrations and trade balance, then the PMI services index. In Europe, November producer prices is the main event. All the agenda is here. 

The dollar is up 0.5% to EUR 0.9482 and up 1.2% to GBP 0.8394. The ounce of gold remains fell 1% to USD 1835. Oil rebounds modestly after a big drop, with North Sea Brent at USD 78.14 per barrel and US WTI light crude at USD 73.03. The yield on 10-year US debt rebounds slightly to 3.72%. Bitcoin is trading around 16,800 dollars.

 

Corporate news:

* Amazon will cut more than 18,000 jobs, the company's chief executive Andy Jassy announced Wednesday. The stock is up 2.8% in pre-market trading.

* Tesla delivered 55,796 electric vehicles produced in China in December, down 44% from November, the lowest level in five months, according to data released Thursday by the China Passenger Car Association (CPCA), an industry federation.

* Exxon Mobil, which will formally release its results on Jan. 31, said Wednesday it expects fourth-quarter operating profit of about $15.4 billion, which should give it a record full-year profit of more than $58 billion for 2022.

* Western Digital advanced 6.6 percent in premarket trading after Bloomberg reported that the U.S. memory-chip maker is considering resuming merger talks with Japanese semiconductor group Kioxia.

* Dell Technologies plans to stop sourcing Chinese semiconductors by 2024 and has asked its suppliers to start reducing the use of Chinese-made components in the face of tensions between the U.S. and China, the Nikkei business daily reported Thursday.

* Walgreens Boot Alliance and CVS Health announced on Wednesday their intention to offer drugs for voluntary termination of pregnancy after the U.S. Food and Drug Administration (FDA) decided to allow such products to be sold in U.S. pharmacies for the first time.

Separately, Walgreens Boots Alliance reported a quarterly net loss on Thursday related to a $6.5 billion charge in the opioid case. The stock is giving up 2.7% in pre-market trading.

* Constellations Brands is down 1.8% in premarket trading after it reported quarterly results.

 

Analyst recommendations:

  • Air Products: Vertical Research Partners downgrades to hold from buy. PT up 7% to $328.
  • Albemarle: Vertical Research Partners upgrades to buy from hold. PT up 28% to $275.
  • Armstrong World: Loop Capital Markets downgrades to hold from buy. PT up  6.5% to $75.
  • Close Brothers: Investec downgrades to sell from hold. PT down 9.3% to 1,020 pence.
  • HSBC: Jefferies upgrades from hold to buy targeting GBp 770.
  • Illumina: Scotiabank initiated coverage with a recommendation of sector perform. PT up 6.6% to $216.
  • Olin: Barclays upgrades to overweight from equal-weight. PT up 22% to $65.
  • Wolverine World Wide: Piper Sandler downgrades to neutral from overweight. PT up 12% to $13.
  • Zimmer Biomet: Raymond James upgrades to outperform from market perform. PT up 12% to $144.