The Fed head reminded investors that the job of fighting inflation is not over, despite appearances. The announcement made them a little nervous. The yield on US 10-year debt rose by 10 points to 4.61%. Well, actually, it had already started to rebound after a sluggish T-Bond auction earlier in the day, which raised the specter of the US debt burden. The 30-year bond sold poorly, and needed a higher-than-expected rate to lure customers.
Equity markets felt the pinch a little, depriving Wall Street of a multi-decade record in the process, as the S&P500 could have enjoyed nine consecutive sessions in the green, its first since November 2004. The Nasdaq 100 fell 0.8% and so did S&P 500, while the Dow Jones gave up 0.6%.
How can Powell's stance be explained? The Fed can't let financial markets off the hook completely, so a tough talk is almost inevitable. This does not mean, however, that the central bank is necessarily ready to raise rates. That's what the game between investors and the Fed is all about. ING economist James Knightley points out that this strategy is logical, but has its limits. There will come a time," he explains, "when the rhetoric and the macroeconomics diverge to such an extent that either the markets will call the Fed's bluff and start anticipating cuts, or the Fed will have to make an abrupt U-turn and throw in the towel. But we're not quite there yet, and investors continue to scare themselves whenever Powell lectures them.
The bond market was also disrupted yesterday - in addition to the US Treasury's difficulty in selling its 30-year issue - by a major cyber-attack targeting China's leading bank ICBC (Industrial and Commercial Bank of China). The bank apparently fell victim to the same attack as Boeing or Royal Mail recently, attributed to Lockbit. ICBC is both the world's largest bank by balance sheet size, and a key intermediary in the US Treasury bond market, of which the Chinese are major holders. The situation has apparently been brought under control, but it has caused a certain stir because the target is important and hacking of Chinese companies is rarely covered by the media. But in this case, it was impossible to conceal the attack, given ICBC's place on the global financial stage.
Friday is usually a quieter day for earnings releases. On the macro agenda, the only line of interest to investors today is the US consumer confidence indicator compiled by the University of Michigan, which will reveal whether the main pillar of the US economy is still in good shape. Elsewhere, oil has tried to make a comeback, but the downward pressure on black gold is still strong: A month and a half ago, we were still eyeing the USD 100 a barrel mark for Brent crude oil, whereas the question now is whether the USD 80 mark will hold.
Economic highlights of the day:
The University of Michigan's consumer confidence is today’s main indicator.
The dollar is trading at EUR 0.9362 and GBP 0.8182. The ounce of gold is slightly down to USD 1947. Oil recovers a little, with North Sea Brent at USD 80.86 a barrel and US light crude WTI at USD 76.45. The yield on 10-year US debt has risen to 4.61%. Bitcoin is trading at around 37,100.
In corporate news:
- Capri was down 2.5% in after-hours trading as Jimmy Choo's parent company missed the consensus on sales and earnings for the past quarter, due to lower demand for luxury shoes and handbags.
- News Corp exceeded Wall Street targets for quarterly sales and earnings and profit targets and announced that it was in advanced discussions to conclude agreements enabling for the use of its content in artificial intelligence (AI).
- Apple will pay $25 million to settle a dispute litigation with the U.S. Department of Justice, which accuses the American group of illegally recruiting employees to the detriment of American citizens for certain jobs.
- Meta Platforms has signed an agreement with Tencent Holdings to market a new low-cost virtual reality (VR) headset, the WSJ reported.
- Walmart have ended their legal dispute, with the parent company of the Vans brand the retail giant of copying its own shoe designs.
- Illumina fell 7.8% in after-hours trading after lowering its adjusted annual earnings per share forecast.
- General Motors - The joint venture between the American automaker and China's SAIC Motor, SAIC-GM, is planning to recall more than 1.13 million Buick, Chevrolet and Cadillac vehicles.
- Groupon plunged 27% in after-hours trading after the publication of quarterly sales down 12% year-on-year and the announcement of a capital increase.
- Astrazeneca Plc: ABG Sundal Collier maintains its buy recommendation and raises the target price from 1686 to SEK 1697.
- Biogen Inc.: DZ Bank AG Research maintains its hold recommendation with a price target reduced from USD 300 to USD 242.
- Constellation Software Inc.: Veritas Investment Research maintains its buy recommendation and raises the target price from CAD 3100 to CAD 3300.
- Great-West Lifeco Inc.: Veritas Investment Research upgrades to buy from reduce with a price target raised from CAD 40 to CAD 46.
- Hologic, Inc.: JP Morgan maintains its overweight rating and reduces the target price from USD 95 to USD 85.
- Illumina, Inc.: Canaccord Genuity downgrades to hold from buy with a price target reduced from USD 210 to USD 120.
- Lowe's Companies, Inc.: Wells Fargo maintains its overweight recommendation and reduces the target price from USD 250 to USD 215.
- Meta Platforms, Inc.: Everbright Securities upgrades to buy from neutral.
- Netflix, Inc.: JP Morgan maintains its overweight rating and raises the target price from USD 480 to USD 510.
- Occidental Petroleum Corporation: Wolfe Research downgrades to peerperform from outperform.
- Take-Two Interactive Software, Inc.: MoffettNathanson LLC upgrades to buy from outperform with a price target raised from USD 165 to USD 169.
- Target Corporation: Telsey Advisory Group maintains its outperform rating and reduces the target price from USD 162 to USD 145.
- The Home Depot, Inc.: Wells Fargo maintains its overweight rating and reduces the target price from USD 360 to USD 340.
- The Trade Desk, Inc.: Morgan Stanley maintains its overweight rating and reduces the target price from USD 105 to USD 70.
- Transdigm Group Inc.: Morningstar upgrades to hold from sell with a price target raised from USD 760 to USD 920.
- Unity Software Inc.: Needham maintains its buy recommendation and reduces the target price from USD 50 to USD 40.
- Veeva Systems Inc.: Barclays maintains its overweight recommendation and reduces the target price from USD 250 to USD 220.