The robust earnings reports are also lifting investor sentiment, although markets floundered yesterday, carried away by a new wave of sell-offs on the 2020 darlings, technology stocks, so-called Covid stocks and renewable energies. A small sentence from Janet Yellen contributed to the resurgence of volatility, which had been absent for some time. At the same time, corporate earnings are not weakening, and commodities continue to rise.
Janet Yellen is supposed to know that she should turn her tongue seven times before talking to the financial markets about rates. Joe Biden's Treasury secretary, who was president of the U.S. central bank from 2014 to 2018, caused a flurry of volatility yesterday when she said in an interview with The Atlantic, quote, " It may be that interest rates will have to rise somewhat to make sure that our economy doesn't overheat”. But perhaps she was trying to find out if her word still carries as much weight? If so, she succeeded. Markets became agitated, so much so that Yellen had to temper her remarks later in the evening, clarifying that she is not predicting or advocating anything, and that she does not expect inflation to become a drag. Even so, the Fed would be there to deal with the problem. In reality, there is nothing new under the sun. In fact, U.S. long rates have not even budged.
These statements came during a stock market session marked by another one of these indigestions that hit the market at regular intervals. As has been the case for the past few weeks, it was technology stocks that suffered and that accentuated the bearish sentiment. Investors also seem to be overdosing on renewable energy and hydrogen.
As for trying to explain yesterday's session, it's best to give up. We're hearing about Yellen's comments on inflation, but bond yields are stoic. There are shortages in semiconductors, but stocks in the sector are being slashed. Carbon prices are above EUR 50 per ton but Brent is back up to USD 70 and renewable energy players are sinking. The Bloomberg Commodity Index is at its highest level since 2011, but big mining companies are down. Let's not exaggerate too much, though: some guidelines remain. One of them is the punishment of "covid stocks". These stocks continue to show very strong earnings trajectories, but investors no longer seem to tolerate the exuberant valuation multiples that were neither hot nor cold for most of 2020. And the fact that corporate earnings and targets are still in line with a strong economic recovery.
For the sake of completeness, in addition to the coronavirus and the profligacy of central banks, we should add to the themes of the moment the relationship between China and the West. The subject is not new, of course, but relations are becoming tense and Europe is now also putting its weight behind it. The top leaders of the old continent have confirmed that discussions with China on investment have been frozen, while the members of the G7 have made no secret of their desire to present a united front against Beijing's economic and political ambitions. The atmosphere is not icy, but it is getting closer.
Economic highlights of the day
The final April services PMIs are announced throughout the day, from France to the US. The ADP April employment survey, ISM services, and DOE weekly oil inventories are also scheduled today..
The dollar rise to EUR 0.8328, while the ounce of gold stagnates at USD 1777.7. Oil continues to climb, with Brent crude nearing USD 70 again and WTI at USD 66.40. The yield on 10-year US debt reaches 1.59%. Bitcoin is climbing back above USD 55,000.
* General motors is gaining nearly 3% in premarket trading after reporting a quarterly profit that far exceeded expectations and said it is targeting pre-tax profit at the top end of its range for fiscal 2021 despite the impact of the semiconductor shortage.
* U.S Aviation safety officials have asked The Boeing Company to provide new analysis and documentation showing that power supply problems affecting the 737 max are resolved, two people familiar with the matter told Reuters.
* Lyft, the ride-hailing specialist, reported a much smaller-than-expected quarterly loss on Tuesday and said it expected to return to adjusted profit in the third quarter thanks to cost cuts. Its stock is gaining 6 percent in pre-opening trading.
* Hilton worldwide holdings posted a first-quarter loss on travel restrictions. For the same reason, its rival Hyatt saw its first-quarter losses widen year over year. In pre-market trading, Hilton is down 5.6%.
* Activision Blizzard raised its annual sales forecast as increased demand for its video games, including "Call of duty" and "Candy crush", helped it post better-than-expected sales in q1. The share price rose 3% in the aftermarket.
* Match group expects to post higher-than-expected sales for the current quarter, betting on the success of its online dating applications, such as tinder and hinge, with the easing of restrictions related to the pandemic. The stock was up 6% Tuesday after the close.
- ASM Associated British Foods: Jefferies remains Buy with a price target raised from GBp 2,300 to 2,800.
- Banco Santander: Kepler Cheuvreux remains Buy with a price target raised from EUR 3.60 to EUR 3.82.
- BNP Paribas: Jefferies remains Buy with a price raised from EUR 66 to EUR 69. Berenberg upgrades its sell rating to hold with a EUR 48 target.
- Caterpillar: UBS lifts price to $230 From $194, stays Neutral
- Deutsche Post AG: Barclays maintains his Buy rating on the stock. The target price remains set at EUR 58.
- NOVO Nordisk: Barclays advises its customers to buy the stock. The target price is unchanged and still at DKK 495.
- Papa John's International: UBS adjusts PT to $100 From $95, keeps Neutral rating
- Paramount: Goldman Sachs raises PT to $11 From $10, maintains Neutral rating
- Qualcomm: DA Davidson lifts price target to $179 From $177, maintains Buy rating
- Safran: Goldman Sachs remains Buy with a price raised from EUR 144 to EUR 146.
- Siemens Energy: Jefferies maintains his Buy rating on the stock. The target price is unchanged at EUR 37.
- T-Mobile US: Credit Suisse is positive on the stock with a Buy rating. The target price remains set at USD 165.
- Under Armour: Evercore ISI raises PT to $25 From $23, maintains In-line rating. JPMorgan ups PT to $25 From $20, keep Neutral rating
- WPP: Exane BNP Paribas upgrades its rating from neutral to underperform, targeting GBP 880.
- 3M Company: UBS change PT to $181 From $175, keeps Sell rating