The last four CPI data have exceeded expectations, particularly June's with prices up 0.9% from May. This consensus-matching CPI shows that the overheating could be starting to slow down. Given the economic dynamics in the US and the marked improvement in the labor market, it is reasonable to think that a higher-than-expected inflation rate would have led the Fed to accelerate the unraveling of its economic support measures, to avoid too much slippage in prices. Since the latest reading is in line with expectations, the Fed should not be in a hurry.

Stock markets are still moving at a slow pace, which allowed for further modest gains across the board yesterday. Except on the Nasdaq, because technology stocks tend to suffer whenever investors think the cyclical bet is still on.

Until now, the dominant thinking has been towards "reflation trade", i.e. to bet on companies that benefit from the economic rebound. This orientation has not disappeared of course, but we now see a bit of everything in terms of advice: preferring defensive stocks, returning to qualitative growth or even favoring the technology segment. This heterogeneity is essentially the consequence of keeping Covid-19 in the equation, whereas basic scenarios only included it at the margin for September.

Nevertheless, the exceptional index performance continues despite an uncertain environment. It is always important to keep things in perspective, especially in a stock market environment where double-digit gains have become the norm, which encourages greed.

Yesterday, indexes were driven by the public investment plan approved by the US Senate. The infrastructure part, which was voted with the support of a fraction of elected Republicans, includes $550 billion to upgrade the country's basic facilities, from highways to railroads, including the dilapidated bridges that dot the US. It's a victory for Joe Biden, even if it meant cutting back on promises made during the election campaign.

Also in the United States, the Wall Street Journal reports on the cracks that are appearing among Democrats regarding the reappointment of Fed boss Jerome Powell next February. He was appointed for four years by Donald Trump, to whom he courageously stood up to defend the independence of the institution. He also had to manage the unknown covid-19, usefully drawing on the lessons of the 2008 crisis. As a result, he enjoys strong legitimacy on both sides of the aisle in the US, and the Biden team seems inclined to renew his lease. But the WSJ notes that the left wing of the party does not like Powell's penchant for financial deregulation. This is an important choice, although I grant you that it is a bit early to speculate on who the next Fed strongman will be – it could be a strong woman, since the member of the Board of Governors Lael Brainard could be next in line for the throne.

 

Economic highlights of the day:

As well as US and German consumer prices, weekly US oil inventories are also on the agenda. Earlier today, Singapore raised its 2021 growth forecast to the 6 to 7% range.

The dollar is up to EUR 0.8536. The ounce of gold is rebounding slightly to USD 1737. Oil, which rebounded yesterday, is losing ground again at USD 69.3 for Brent and USD 67.0 for WTI. The T-Bond yield is back up to 1.36%, while the Bund is unchanged at -0.46%. Bitcoin still hovers around USD 45,500.

 

On markets:

* NortonLifeLock - The U.S. cybersecurity group announced Tuesday that it has completed the acquisition of British rival Avast for between $8.1 billion and $8.6 billion in cash and stock.

* The Boeing Company conducted a test flight of the 737 MAX in China on Wednesday, another step toward lifting the ban on the model's operation in Chinese skies that has been in place for nearly two and a half years.

* WarnerMedia, a subsidiary of telecommunications group AT&T, is in talks with FOX to sell the online tabloid TMZ, The Information reported Tuesday.

* Uber Technologies - The Federal Trade Commission (FTC) is investigating Uber's partnership with GoPuff, a startup that specializes in fast delivery of groceries and alcohol, The Information reported, citing two sources close to the matter.

* Exxon Mobil has put shale gas assets up for sale in the U.S. in a bid to reduce its debt, among other things.

* Southwest Airlines - The airline warned Wednesday that it could be in the red in the third quarter because of the impact of the Delta variant of the coronavirus on its bookings, which led it to reduce its revenue forecast. The stock lost 2% in pre-market trading.

* Wendy’s - The fast-food chain reported Wednesday better-than-expected second-quarter like-for-like sales, up 16.1% year over year, and raised its full-year growth forecast.

* Chesapeake Energy on Tuesday raised its full-year adjusted EBITDA and production guidance following better-than-expected second-quarter results. The company also announced Wednesday that it will acquire VINE ENERGY for about $2.2 billion.

* Wix - The small business internet services specialist slightly lowered its annual revenue forecast due to uncertainties related to the evolving health situation.

* Canada Goose reported better-than-expected quarterly revenue on Wednesday thanks to a recovery in demand in the high-end market and 80.8% growth in online sales.

 

Analyst recommendations:

  • Axsome Therapeutics : Ladenburg Thalmann adjusts pt to $162 from $186, maintains buy rating
  • Berkshire Hills: Piper Sandler downgrades to neutral from overweight. PT up 8.4% to $31
  • BioNTech: Bryan Garnier & Co raised the recommendation on BioNTech SE ADRs to buy from neutral. PT up 8.3% to $451
  • Callaway Golf : Stephens adjusts price target to $40 from $37, maintains overweight rating
  • Cerence : Goldman Sachs adjusts pt to $134 from $124, maintains buy rating
  • Flutter: JP Morganmaintains his Buy rating on the stock. The target price is increased from GBp 16290 to GBp 17250.
  • Fusion Pharmaceuticals : Wedbush reduces price target to $21 from $24, outperform rating kept
  • Hargreaves Lansdown: Jefferies remains Hold with a reduced target price of GBp 1,640 to 1,350.
  • International Consolidated Airlines Group: Liberum raised the recommendation to buy from hold. PT up 29% to 215 pence
  • L3Harris: Morgan Stanley downgrades to equal-weight from overweight. PT up 2.3% to $238
  • Qualys : JPMorgan adjusts price target to $110 from $90, maintains underweight rating
  • SSE: Jefferies remains a Hold with a price target raised from GBp 1680 to GBp 1710.
  • STERIS : Needham lifts price target to $254 from $233, buy rating kept
  • Synaptics: Arete downgrades to neutral from buy. PT up 2.2% to $175
  • Travis Perkins: Jefferies remains Buy with a target price raised from GBP 2150 to 2168.
  • Tyson Foods : BMO Capital adjusts price target to $95 from $84, maintains outperform rating
  • Virgin Galactic: Morgan Stanley downgrades to underweight from equal-weight. PT down 20% to $25
  • WW International: Jefferies downgrades to hold from buy. PT down 7.1% to $30