The whole build-up to a June Fed rate cut is falling apart. Jerome Powell pretty much said so in his speech yesterday. After two days of sharp declines, the New York Stock Exchange was nervous on Tuesday. The S&P500 oscillated between green and red for part of the day, a sign that the bears had kept the upper hand, as attempts to rebound from the index's sharp contraction were nipped in the bud. The Fed chairman took a surprisingly hawkish stance, hinting at a tighter monetary policy than the market had been anticipating until recently. Basically, he explained that the Fed's rate cuts could be delayed if inflation doesn't come down, while pointing out that there hasn't been much progress on lowering prices.

The plan isn't going exactly as the central bank had planned. The market's first epidermal reaction was to pull back, which is logical since monetary easing in the United States seems to have been postponed indefinitely. Then the indices yo-yoed, and the final result was not so catastrophic. The S&P500 still closed in the red for the third consecutive time, albeit by -0.2%. The Dow Jones and Nasdaq 100 even managed to finish symbolically in the green. The Dow Jones was helped by its largest weighting, UnitedHealth, which soared by 5%. The health insurer reported surprisingly robust results.

Just a reminder of the workings of Wall Street's oldest index. It is weighted by share price, not capitalization. So, UnitedHealth, whose share price is the highest on the Dow Jones (USD 469 as of yesterday), has much more influence than Apple, for example, which has a share price of just USD 169. Yet the technology group's market capitalization is $2,667 billion, or 6.5 times more than the insurer. On the Nasdaq 100, the return of investors to semiconductors saved the day, while Tesla and Apple continued to suffer. 

Elsewhere in the news, China is trying its best to reassure investors, with mixed success. The market regulator had to set the record straight after its earlier statements. It clarified that the recently announced tightening of listing rules was aimed solely at cleaning up zombie companies, and not at delisting as many as possible. Following the initial announcements, Chinese small-cap indices collapsed (-10% in two sessions) on fears of a broader purge. In China, as elsewhere, short-sighted policy-making only amplifies the confusion.

Oil prices have eased after diplomatic efforts to promote de-escalation between Iran and Israel seem to be bearing fruit for the time being, even if no one knows for sure what the belligerents' intentions are.

Asia-Pacific markets remain cautious, even if touches of green have appeared here and there. Mainland China regained 0.4%, while Taiwan rebounded by 1.5% after a difficult session yesterday. Australia closed down 0.1%. South Korea and India remain well in the red. In Tokyo, the Nikkei 225 lost a further 1.3%, again in the red for the fifth session down in six days. European leading indicators are bouncing back, with the Stoxx EU 600 up 0.5%. Futures on Wall Street are slightly bullish.

Investors are now awaiting comments from Fed Board Governor Michelle Bowman and Cleveland Fed President Loretta Mester, who are scheduled to speak later in the day.

Economic highlights of the day:

The UK consumer price index, the eurozone consumer price index and the US Department of Energy's crude oil inventories are on the agenda

The dollar is down to EUR 0.9405 and GBP 0.8032. The ounce of gold is firm at USD 2,382. Oil has lost ground, with North Sea Brent at USD 88.74 a barrel and US light crude WTI at USD 84.64. The yield on 10-year US debt stands at 4.66%. Bitcoin is trading at USD 62,300.

In corporate news:

  • United Airlines Holdings announced Tuesday that it expects higher-than-expected earnings for the current quarter, thanks to strong travel demand. The carrier expects adjusted earnings in the range of $3.75 to $4.25 per share for the quarter ending in June, compared with $3.76 per share expected by consensus. The stock gained 4.8% before the opening. American Airlines, Delta Air Lines, Alaska Air gain 1% before the opening.
  • Tapestry - The US antitrust regulator is preparing to block Tapestry's $8.5 billion takeover of Capri Holdings, the NYT Dealbook reported on Wednesday. Capri loses 5% before the opening.
  • Citizens Financial reported lower first-quarter earnings on Wednesday, due to lower interest income.
  • Omnicom - Group sales and earnings beat Wall Street expectations thanks to strong demand for its advertising services. On an adjusted basis, the company earned $1.67 per share, compared with $1.55 expected by consensus, according to LSEG data.
  • Ford will recall 456,565 Bronco Sport and Maverick vehicles due to a battery problem, the U.S. National Highway Traffic Safety Administration (NHTSA) said Wednesday.
  • Eli Lilly - The weight-loss drug produced by the group helped reduce the frequency of irregular breathing in patients with obstructive sleep apnea by up to 63% on average in two late-stage trials, the company said Wednesday.
  • Tesla asked its shareholders on Wednesday to vote in favor of CEO Elon Musk's compensation proposal.
  • Envestnet, a software provider with a market value of around $3.5 billion, is considering options that could include a potential sale after receiving expressions of interest in a takeover bid, authorized sources said on Tuesday.
  • Nike gains 1% before the opening, after good results from Adidas.
  • Apple will consider building a factory in Indonesia, the group said on Wednesday.

Analyst recommendations:

  • Danaher Corporation: HSBC upgrades to buy from hold with a price target raised from USD 250 to USD 280.
  • Fortive Corporation: JP Morgan downgrades to neutral from overweight with a target price reduced from USD 95 to USD 90.
  • Kinder Morgan, Inc.: Baptista Research downgrades to hold from outperform with a price target raised from USD 19.80 to USD 20.30.
  • Marsh & Mclennan Companies: Piper Sandler & Co downgrades to neutral from overweight with a target price of USD 211.
  • Omnicom Group., Inc.: Wells Fargo upgrades to overweight from equalweight with a price target raised from USD 91 to USD 106.
  • Regeneron Pharmaceuticals, Inc.: Baptista Research downgrades to hold from underperform with a price target raised from USD 866.30 to USD 1039.50.
  • Eqt Corporation: Morgan Stanley maintains its overweight recommendation and raises the target price from USD 37 to USD 49.
  • Freeport-Mcmoran Inc.: JP Morgan maintains a neutral recommendation with a price target raised from USD 43 to USD 52.
  • Rivian Automotive, Inc.: RBC Capital maintains its sector perform recommendation and reduces the target price from USD 15 to USD 11.
  • Ge Vernova Inc.: Raymond James initiates an Outperform recommendation with a target price of USD 160.
  • Royal Caribbean Group: Mizuho Securities initiates a Buy recommendation with a target price of USD 164.
  • Astrazeneca Plc: Intron Health upgrades to buy from hold with a price target raised from GBP 115 to GBP 125.
  • The Sherwin-Williams Company: Baptista Research downgrades to underperform from hold with a price target raised from USD 259.30 to USD 336.30.
  • Fresnillo Plc: JP Morgan upgrades to overweight from neutral with a price target raised from GBP 5 to GBP 7.50.
  • Pennon Group Plc: Bernstein downgrades to market perform from outperform with a target price reduced from GBX 930 to GBX 810. RBC Capital upgrades to outperform from sector perform with a price target reduced from GBX 875 to GBX 850.
  • Las Vegas Sands Corp.: Baptista Research upgrades to outperform from hold with a price target reduced from USD 64 to USD 63.40.
  • Severn Trent Plc: Bernstein upgrades to outperform from market perform with a price target raised from GBX 2740 to GBX 2760.
  • Ivanhoe Mines Ltd.: Canaccord Genuity maintains its buy recommendation and raises the target price from 16 to CAD 21.