Investor sentiment also took a hit from reports that Gazprom told customers in Europe it cannot guarantee gas supplies because of “extraordinary” circumstances, which is force majeure, according to a letter seen by Reuters.

U.S. stock index futures bounced back today, along with Apple, as investors focused on another set of earnings reports to assess the strength of the economy.

Analysts now expect aggregate year-on-year S&P 500 second-quarter profit growth of 6%, down from the 6.8% estimate at the beginning of the quarter, according to Refinitiv data.

Investors are also keeping an eye on macroeconomic data, the rise in bond yields but also the number of coronavirus cases. They are hesitating between a strategy geared towards cheap stocks that have driven the market over the past ten years, and a more defensive strategy. Their choice will depend on the results and outlook of companies, which are rather favorable so far overall, even if fears of recession force companies to be very cautious with their guidance.

Johnson & Johnson, Lockheed Martin and Netflix are releasing their results today. J&J has already published them, and again lowered its adjusted earnings outlook for 2022, as the rising dollar weighed on the pharmaceutical giant's sales outside the United States in the second quarter.

This accumulation of results and forecasts is important because it will allow analysts to test their annual scenarios and will contribute to guide market sentiment. By the end of next week, we will have a clearer picture, since the majority of companies will have posted their results, allowing data providers to produce their usual array of statistics. At this stage, we only have 35 S&P500 companies, but it seems that earnings season will be positive. At least, that is what the first Refinitiv report reveals, which indicates that 80% of the companies that have published their half-year results have exceeded analysts' expectations. But it is still too early to draw conclusions.

Let’s end this morning's column with a few words on Europe's dependence on Russian gas and its catastrophic impact on importers such as the German energy company Uniper, which is majority owned by the Finnish group Fortum. The group, lacking liquidity, is bound to take emergency measures, such as drawing on its stocks instead of buying on the market, where prices have soared.

Uniper is among the companies that recently received a letter from Gazprom to announce that gas supplied can’t be guaranteed due to force majeure, and it recently had to activate a credit line of 2 billion euros to avoid bankruptcy. Force majeure is a provision in a contract that releases both parties from any obligation if an extraordinary event directly prevents one or both parties from performing, which means that Gazprom could potentially not honor its gas delivery commitments due to exceptional circumstances. It seems that Putin has decided to stop supplies through the Nord Stream 1 pipeline, which brings gas to Germany. It started annual maintenance on July 11, that was meant to end on Thursday. It is too early to say what consequences this will have on the global economy.

 

Economic highlights of the day:

On the agenda today, building permits and housing starts (10:00 am). All the macro agenda here.

The dollar is down to EUR 0.9753. The ounce of gold is stagnant at USD 1714. North Sea Brent is trading at USD 104.51 a barrel and US WTI light crude at USD 100.64. US 10-year debt yield climbs to 2.97% over 10 years. Bitcoin is trading at USD 22000

 

On markets:

* The Boeing Company - Investment firm 777 Partners has announced the purchase of 30 additional 737 MAX aircraft for the development of its low-cost carriers Flair Airlines and Bonza Airline. The Wall Street Journal also reports that the aircraft manufacturer is about to announce the sale of several 787 Dreamliners to AerCap Holdings, which specializes in aircraft leasing. In pre-market trading, Boeing gained 1.5%.

* Lockheed Martin lowered its 2022 revenue and earnings-per-share targets after sales of F-35 fighter jets fell due to the pandemic and several one-time charges were taken. The defense group was down 1.8% in pre-market trading.

* Hasbro - The toy maker reported better-than-expected quarterly earnings thanks to strong demand for its "Magic: The Gathering" trading card game and higher prices.

* Halliburton reported a 41% increase in adjusted earnings in the second quarter compared to the first quarter as soaring oil prices boosted demand for its oilfield services. The stock was up 1.4% in pre-market trading.

* Twitter on Monday accused Elon Musk of "dragging his feet" in slowing down the process the company has launched to force the businessman to finalize his $44 billion buyout, asking for a trial in September to preserve the terms of the deal, according to a court filing.

* IBM reported quarterly revenue above expectations Monday but warned that the impact of the strong dollar could be about $3.5 billion this year. Before the Wall Street opening, the computer group's stock was losing 5% in electronic trading.

* Berkshire Hathaway announced Monday that it has bought an additional 1.94 million shares of Oxy, bringing it closer to the threshold of a 20 percent stake in the oil company.

* Delta Air Lines announced on Tuesday that it has exercised an option to buy 12 additional Airbus A220-300 aircraft.

* Lockheed Martin has reached an agreement with the U.S. Department of Defense to supply about 375 F-35 fighter jets over three years, it announced Monday, without specifying the amount of the deal.

* Pfizer, BioNTech and European Union member states are close to agreeing to delay deliveries of the Covid-19 vaccine until 2024 amid a vaccine glut, the Financial Times reports.

Analysts recommendations:

  • Cboe: Morgan Stanley upgrades to overweight from underweight. PT up 18% to $140.
  • ChargePoint Holdings: Fox Advisors upgrades to overweight from equalweight, sets $15 price target.
  • Exxon Mobil: Piper Sandler upgrades to overweight from neutral, adjusts price target to $109 from $102
  • Fevertree Drinks: HSBC upgrades from Buy to Hold with a GBp 800 price target. 
  • Haleon: Barclays starts coverage with an equal weight rating and a 3.48 pounds sterling price target.
  • PPG industries: Wells Fargo Securities adjusts  price target to $126 from $140, maintains equal weight rating.
  • The Sherwin-Williams Company: Wells Fargo Securities adjusts price target to $270 from $285, maintains equalweight rating.
  • UnitedHealth: Goldman Sachs remains Buy with a price target raised from USD 605 to USD 625.
  • US Bancorp: Morgan Stanley remains neutral but with a price target raised from 54 to 57 USD.
  • Vodafone: Oddo BHF resumes its monitoring at neutral with a price target of GBp 140.
  • Vulcan Materials: Morgan Stanley adjusts price target to $180 from $203, maintains equalweight rating
  • Wells Fargo: Morgan Stanley adjusts price target to $62 from $59, maintains overweight rating.
  • Whitbread: Peel Hunt downgrades to add from buy. PT up 7.3% to 2,850 pence.
  • W.W. Grainger: Morgan Stanley adjusts price target to $421 from $449, maintains underweight rating.
  • Zimmer BioMet Holdings: Morgan Stanley adjusts price target to $115 from $132, maintains equal weight rating.