The cleanup in US technology stocks, which are overrepresented on Wall Street, is causing considerable damage to some portfolios. The rotation towards value stocks is not enough to stem the slide sparked by the Fed’s hawkish turn.
This is going to be an eventful week for financial markets, which are being battered by the bears. Investors are closely watching the results of tech companies, the Fed's monetary policy and the path of inflation. Microsoft releases its quarterly results tomorrow, Tesla and Intel on Wednesday and Apple on Thursday. Meanwhile, the U.S. central bank will release its monetary policy on Wednesday, likely refining its rate hike schedule. And on Friday, the Federal Administration will publish the PCE inflation figures for the United States in December.
It's worth noting that statistically, periods of monetary tightening are not as nightmarish as this early 2022 suggests. In fact, the opposite is true, as 11 of the 12 rate hike cycles launched by the Fed since 1950 have resulted in a positive stock market year. The average increase during this period is 9% for US stocks. Bloomberg pointed out in an article published yesterday that the only monetary tightening episode that resulted in a negative performance of stocks was the one in 1973/1975. It is worth noting that this was characteristic of stagflation, which has been talked about a lot recently.
Analysts, who are mostly optimists, think that the US index will rebound this year by 13%. Beware, developments are not linear and not all sectors are experiencing this monetary tightening equally well. And even those that do well a few weeks after the first increase are not necessarily better off afterwards. Bloomberg takes cyclicals as an example, which are favored at the beginning and less so afterwards. Like any good economic rule, this one works until it doesn't. Especially with a looming economic crisis. Bloomberg relied on the work of Truist Advisory Services and LPL Financial to produce its assessment.
Flash PMI indicators for January will be released throughout the day for the major economies. In the U.S., the Chicago Fed Activity Index is also on the agenda.
The dollar/euro pair is trading at EUR 0.8853. Gold is trading at USD 1836, close to its recent highs. Oil is down, with Brent crude at USD 86.64 and WTI at USD 83.69. U.S. debt is offering an almost unchanged 10-year yield of 1.77%. Bitcoin is under attack at USD 33,458.
* Kohl’s - The U.S. department store chain has been approached by private equity firm Sycamore Partners about a possible takeover offer that would value it at around $9 billion, three sources familiar with the matter said Sunday. The stock jumps 29% in pre-market trading.
* KKR - A consortium led by the U.S. fund announced Monday its intention to buy Accell Group, owner of the Sparta, Batavus and Raleigh bicycle brands, for a cash consideration of 1.56 billion euros, representing a 26% premium to its target's closing price on Friday.
* Peloton Interactive - Activist investor Blackwells Capital is seeking the departure of John Foley, the co-founder and chief executive of the sports equipment maker, as well as a possible sale of the company to a fitness or new technology company, two sources close to the matter said Sunday. Peloton's stock is up 2% in pre-market trading.
* Tesla - Japan's Panasonic Group will start production of its new lithium-ion batteries for Tesla early next year and plans to invest about 80 billion yen in production facilities in Japan, the Nikkei daily reported Monday.
* JPMorgan - The U.S. bank announced Monday that it has consolidated the bulk of its European operations into a single entity based in Germany to make them more competitive in the wake of Brexit.
* Goldman Sachs- The U.S. bank promoted Luke Sarsfield to head its $1.7 trillion asset management division, Bloomberg reported Sunday.
* Pfizer, BioNTech - People over age 60 who received four doses of the COVID-19 vaccine developed by Pfizer and BioNtech have three times the resistance against severe forms of the disease than the same age group who received only three doses, according to an Israeli study presented Sunday. Meanwhile, Pfizer CEO Albert Bourla said Saturday that an annual COVID-19 vaccine would be preferable to more frequent boosters in the fight against the pandemic.
- Associated British Foods: RBC upgrades from Outperform to Market Perform with a target of GBp 2250.
- Bellway: Jefferies downgrades from Buy to Hold with a target of GBP 3339.
- Berkeley: Jefferies downgrades from buy to hold with a target of GBP 4703.
- Equifax: Baird analyst upgrades Equifax Inc. to outperform from neutral. PT up 25% to $281
- The Hain Celestial Group: Cowen reinstated coverage with a recommendation of outperform. PT set to $64
- Halma: HSBC moves to Hold with a target of GBp 2120.
- Keycorp: Wedbush raises PT to $30 from $29, Outperform rating kept
- PPG Industries: Wells Fargo downgrades PPG Industries to Equalweight from Overweight, adjusts PT to $170 from $200
- M&T Bank: Piper Sandler raised the recommendation to overweight from neutral. PT up 19% to $190
- Netflix: Jefferies downgrades to hold from buy. PT up 4.4% to $415
- QinetiQ: Jefferies starts tracking as Buy, targeting GBp 350.