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OFFON

Today on Wall Street: Is it time to leave cyclicals?

05/31/2021 | 09:57am EDT

Wall Street is mixed as the month comes to an end. Trading is quiet, with holidays in the U.S. and the U.K. Overall, this was a fourth consecutive month of gains is in the offing for the New York, London, Paris and Frankfurt stock exchanges. The context remains the same: the strong economic momentum on both sides of the Atlantic is keeping optimism alive, barely dented by fears of overheating.

Slowly but surely, global stock market indices are pushing their limits. The big exuberant moves of the period between March 2020 and March 2021 have given way to gentler but positive slopes. This is not stopping a good portion of indices from posting double-digit gains since January 1.

Financial professionals are wondering whether the winning allocations of 2021, a combination of cursed stocks (European banks, for example) and companies ultra-correlated to the economic cycle (mining), still have potential. In general, they use PMI indices, which measure monthly and for each major economy the confidence of purchasing managers of a large panel of companies. These are excellent leading indicators. To put it simply, an investor would have an almost perfect strategy and timing by getting into cyclical stocks when the PMI indicators are at their lowest and getting out when they are at their highest. To apply this theory to the recent period, it was appropriate to position in the early spring of 2020 when the PMI's collapsed due to the confinements. But should we now leave the cyclical ship when these same indices are at or near their zenith?

Not yet, say Bank of America's flow analysts, for example, who believe that stocks riding the economic recovery have not said their last word. They suggested that the peak in global PMI indicators will come in August (in the US, it will have come earlier). They focused on Europe, where they therefore recommend continuing to like banks, building materials, luxury goods, capital goods and energy. They are now neutral on automobiles and commodities, after the recent fever. Finally, they are staying away from overly defensive sectors such as pharmaceuticals, utilities and food & beverage.

 

Economic highlights of the day:

April's M3 money supply in the euro zone, the preliminary German consumer price index for May. As reported above, New York and London will be on break for an extended weekend. Earlier today, Japan reported a less dynamic April industrial production increase than expected, while China's manufacturing PMI came in at 51 points in May (51.1 for the consensus).

The dollar is trading at EUR 0.8197. Gold is touching recent highs at $1904 per ounce. Oil is up slightly, at USD 69.60 per barrel for Brent and USD 67.22 per barrel for WTI. U.S. debt is down 1.59% on the 10-year yield. Bitcoin is down to USD 36,900. 

 

Analyst recommendations:

  • Advanced Micro Devices : Benchmark at Buy with $100 Price Target
  • AstraZeneca: Kepler Cheuvreux has a Buy rating. The target price is set at 9000 versus 9200 GBp.
  • Best Buy : R5 Capital raises PT to $118 from $110, maintains Hold rating
  • Beyond Meat: Credit Suisse lifts PT to $123 from $120, stays Neutral
  • Bodycote: Jefferies remains long with target raised from GBp920 to GBp1000.
  • Dollar General : JPMorgan adjusts PT to $260 from $250, maintains Overweight rating
  • GAP  : JPMorgan changes PT to $39 From $37, keeps Overweight rating
  • Johnson & Johnson : Morgan Stanley at Overweight with $187 Price Target
  • Medtronic : Oppenheimer raises PT to $147 From $134, maintains Outperform rating
  • Royal Bank of Canada : BMO Capital changes PT to C$139 From C$131, maintains Market Perform rating
  • Ulta Beauty : Goldman Sachs lifts PT to $399 from $348, maintains Buy rating
  • Valneva: Guggenheim starts tracking the ADR as Buy with a USD 35 target.

 


ę MarketScreener.com 2021
Stocks mentioned in the article
ChangeLast1st jan.
ADVANCED MICRO DEVICES, INC. 3.62% 112.56 Delayed Quote.15.79%
ASTRAZENECA PLC 0.28% 8297 Delayed Quote.12.97%
AUSTRALIAN DOLLAR / EURO (AUD/EUR) 0.53% 0.62294 Delayed Quote.-1.78%
BEST BUY CO., INC. 1.92% 114.65 Delayed Quote.12.73%
BEYOND MEAT, INC. -1.23% 122.55 Delayed Quote.-0.74%
BITCOIN - EURO -3.06% 32113.33 Real-time Quote.40.07%
BITCOIN - UNITED STATES DOLLAR -3.04% 38058.08 Real-time Quote.35.69%
BODYCOTE PLC 1.84% 912 Delayed Quote.20.12%
BRITISH POUND / EURO (GBP/EUR) 0.25% 1.17283 Delayed Quote.4.65%
BRITISH POUND / US DOLLAR (GBP/USD) 0.19% 1.3914 Delayed Quote.1.62%
CANADIAN DOLLAR / EURO (CAD/EUR) -0.20% 0.672215 Delayed Quote.5.03%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) -0.28% 0.79729 Delayed Quote.2.14%
CREDIT SUISSE GROUP AG 0.26% 9.36 Delayed Quote.-18.11%
DOLLAR GENERAL CORPORATION 1.10% 235.05 Delayed Quote.10.56%
EURO / US DOLLAR (EUR/USD) -0.09% 1.1862 Delayed Quote.-2.85%
FEEDER CATTLE?FUTURES (GF) - CMG (ELECTRONIC)/C1 -0.02% 158.225 End-of-day quote.13.84%
INDIAN RUPEE / EURO (INR/EUR) 0.19% 0.011348 Delayed Quote.1.13%
INDIAN RUPEE / US DOLLAR (INR/USD) 0.14% 0.013468 Delayed Quote.-1.75%
JPMORGAN CHASE & CO. 1.14% 152.89 Delayed Quote.18.97%
LIVE CATTLE (LE) - CMG (ELECTRONIC)/C1 -0.02% 122.1 End-of-day quote.8.08%
LONDON BRENT OIL -0.85% 72.46 Delayed Quote.45.28%
MEDTRONIC PLC 0.15% 131.46 Delayed Quote.12.10%
MORGAN STANLEY 0.38% 96.6 Delayed Quote.40.06%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) 0.39% 0.7013 Delayed Quote.-2.87%
ROYAL BANK OF CANADA 0.08% 126.28 Delayed Quote.20.64%
S&P 500 0.82% 4423.15 Delayed Quote.17.02%
S&P GSCI CRUDE OIL INDEX -0.68% 386.7148 Delayed Quote.46.87%
THE GOLDMAN SACHS GROUP, INC. 0.57% 380.36 Delayed Quote.43.41%
ULTA BEAUTY, INC. 2.94% 346.66 Delayed Quote.17.27%
US DOLLAR / EURO (USD/EUR) 0.08% 0.843028 Delayed Quote.2.93%
VALNEVA SE -1.83% 11.81 Real-time Quote.55.23%
WTI -1.11% 70.598 Delayed Quote.52.97%