The index rich in technological values lost more than 3.1%, without being able to count on its aristocrats stocks. Apple lost more than 2.5%, Microsoft almost 4% and Alphabet or Nvidia even more. Meta Platforms has not found a hiding place in the metaverse either: -3.7% at the bell for the ex-Facebook. To get an idea of the mini seism endured by growth stocks, let’s check out Cathie Wood's Ark Innovation fund, a concentrate of bold bets on up-and-coming stocks: -7% yesterday after -4.4% the day before. The tech goddess sees its main ETF fall to USD 86.12 after flirting with USD 160 in February 2021.
The slide of growth stocks swept the S&P500, which gave up 1.9% at the end of the day, and did not spare the Dow Jones, down -1.07%, helped by its old guard: Merck, Walmart and Verizon. Intel gained 1.4%, a small incongruity: for some time now, the leader in processors has been out of step with its peers because it has been severely judged by investors for having missed some of its technological turns. But the innovations presented yesterday at CES in Las Vegas, in particular the mobile processor self-proclaimed the fastest in the world, have restored the group's reputation. Intel, the cheap tech stock of the year? To be continued.
The Fed minutes showed that the central bank is more nervous than expected about inflation. This is all the more embarrassing since it had spent a good part of 2021 underestimating the impact of inflation, before changing its tune at the end of last year. In reaction to yesterday's news, more economists are now anticipating the announcement of a quarter-point rate hike at the meeting scheduled for March 16 and 17 (this will be the second FOMC meeting of the year, the first being scheduled for January 26 and 27).
The Fed is not raising rates for the sake of it, but to prevent the U.S. economy from overheating, where the labor market has lost its fluidity and where cost inflation is driving price tags up. By raising rates, a central bank makes it more expensive for households and businesses to borrow money, which means that banks reduce the number of loans they make, which in turn reduces the amount of money in circulation and helps limit economic spillovers. The art and skill of a central bank is to avoid going too far, so that the economy does not fall into a slump, otherwise the cure would be worse than the disease. Technology stocks are overhyped because they are generally richly valued and higher rates are squeezing the multiples that investors are willing to pay.
The minutes from the latest Fed meeting also caused damage to cryptocurrencies, with Bitcoin falling below USD 43,000. The central bank's hawkish stance has finally caused the bond market to react, with a 10-year US T-Bond yielding 1.73%, up 20 basis points from its year-end level last year.
Economic highlights of the day:
A busy schedule with the Challenger survey on December layoffs in the US and the first estimate of German inflation for December, along with the US November Trade Balance and new weekly jobless claims, followed by Durable Goods Orders and ISM Services.
The dollar is trading at EUR 0.8837. Gold is down to USD 1787 per ounce. You will need to pay USD 82.75 for Brent and USD 80.16 for WTI. The US 10-year yield is up to 1.72%. Bitcoin falls heavily to around USD 43,000.
* Netflix is down 1% in premarket trading to $561.7 and is headed for its fifth straight session of declines after JP Morgan lowered the group's price target, with the intermediary expecting a medium-term decline in the number of subscribers to the platform.
* General Motors is up nearly 1% in pre-market trading on Thursday after the automaker unveiled an electric version of its Chevrolet Silverado pickup truck, which will go on sale next year.
* Warner Media, an AT&T subsidiary, and ViacomCBS are considering a possible sale of a large stake in CW Network, or even the entire jointly owned company, The Wall Street Journal reported Wednesday, citing sources close to the matter. Nexstar Media Group is among the potential buyers, the U.S. newspaper added. AT&T shares gained 1.5% in pre-market trading and ViacomCBS shares gained 0.3%.
* Snap is down 1% in pre-market trading and heading for a near 14-month low after RBC Capital Markets lowered its price target on the stock, with the intermediary not expecting the social network's business to improve since Apple changed its policy on data collection on its devices.
* The U.S. Centers for Disease Control and Prevention (CDC) announced Wednesday that it has expanded the COVID-19 booster dose to adolescents ages 12 to 15 with the vaccine jointly developed by Pfizer and BioNTech.
* Hasbro announced Wednesday that it has promoted Chris Cocks, the head of its digital games division, to group CEO, replacing Brian Goldner who died last October.
* Walmart - The U.S. retailer has decided to reduce the compensation period for employees forced into solitary confinement after testing positive for COVID-19 to one week from two, according to an internal memo seen by Reuters. Walmart, the largest private employer in the United States with about 1.6 million employees, is one of the first groups to take such a step.
Analyst recommendations :
- Akamai: Piper Sandler downgrades to neutral from overweight. PT rises 10% to $127
- Ansys: Baird downgrades to neutral from outperform. PT up 7.4% to $405
- Bank of America Corporation: Societe Generale downgrades Bank of America to Hold from Buy
- Bank of Hawaii: Keefe, Bruyette & Woods initiated coverage with a recommendation of market perform. PT set to $94
- CrowdStrike Holdings: Wells Fargo starts at Overweight with $275 Price Target
- Dollar General: Wells Fargo Securities downgrades to equal-weight from overweight. PT down 5.9% to $220
- DTE Energy: Morgan Stanley upgrades to overweight from equal-weight. PT up 12% to $133
- Entergy: Morgan Stanley downgrades to underweight from equal-weight. PT down 5% to $106
- Evercore: Goldman Sachs cut the recommendation on Evercore Inc. Class A to neutral from buy. PT up 4.7% to $141
- Gilead: Morgan Stanley downgrades to equal-weight from overweight. PT up 2.5% to $74
- Houlihan Lokey: Goldman Sachs upgrades Houlihan Lokey Inc. Class A to buy from neutral. PT lifted 20% to $126
- Johnson Matthey: Bernstein moves from Outperform to Market Perform with a target of GBP 2,500
- L3Harris: Baird upgrades to outperform from neutral. PT up 18% to $248
- Palo Alto Networks: Wells Fargo starts at Overweight with $700 Price Target
- Reckitt Benckiser: Jefferies remains Hold with a price target raised from GBp 6100 to GBp 6150
- RPM International: J.P. Morgan upgrades to neutral from underweight. PT up 2.6% to $100
- Target Corporation: Wells Fargo Securities cut the recommendation to equal-weight from overweight. PT inches up 0.5% to $230
- UniFirst Corporation: Baird raised its recommendation to outperform from neutral. PT up 20% to $236
- Unilever: Jefferies remains Buy with a price target reduced from GBp 4,700 to GBp 4,650.
- Washington Federal: Keefe, Bruyette & Woods initiated coverage with a recommendation of outperform. PT up 22% to $42
- WestAmerica Bancorp: Keefe, Bruyette & Woods initiated coverage with a recommendation of market perform. PT set to $65