Conflicting signals on U.S. inflation in March are giving investors food for thought. Meanwhile, companies are starting to release their Q1 results, including JPMorgan and Blackrock.
JPMorgan Chase posted quarterly profits of $2.63 per share, slightly below expectations. However, revenues topped analysts' forecasts. Meanwhile, BlackRock reported Q1 earnings of $9.52 per share, beating the $8.75 consensus. Revenues were in line with expectations.
Today were published producer prices, which jumped a record 11.2% in March on an annual basis. On a monthly basis, it advanced 1.4%, exceeding the 1.1% estimate from economists polled by Dow Jones.
This comes after yesterday's inflation figures. Price increases were about as impressive as expected between February and March, and even more so on an annual basis, but it is the underlying component (called "core"), i.e., stripped of the most volatile elements, that marked an inflection.
The overall price increase reached 8.5% over one year in the United States, including a 1.2% increase in one month. But excluding energy and food, the annual increase was "limited" to 6.5% and the monthly change to 0.3%. Skeptics have noted that it is the used car market that has finally slowed down, as well as education costs. For the rest, it is still overheating.
Investors initially focused on the lower-than-expected core inflation, hoping that the peak has passed or was very close, so that the Fed would not be forced to be too aggressive with rate hikes. U.S. central bank vice-president Lael Brainard did indeed find the numbers encouraging after they came out. But she also reminded us that one month does not make a trend, and that – in any case - the Fed will have to implement a more restrictive monetary policy.
In the end, Wall Street ended lower yesterday, after starting the session with a bang. A small decline, around 0.3% for the three indexes. It seems that appetite for risk has diminished a bit in the last few weeks. Once again, the bond market seems to have had the most rational approach. The yield on 10-year US debt, which had exceeded 2.8% the previous day, returned to around 2.7%, a sign that the market has incorporated a slightly less aggressive price increase and therefore a move in key rates.
A few words on geopolitics. On the Ukrainian front, if the consensus scenario is true, Moscow is preparing its weapons for an assault in the south of the country. Meanwhile, Joe Biden accused Russia of genocide and called on American industrialists to strengthen the Ukrainian arsenal. Vladimir Putin, for his part, stressed that peace talks are at a standstill and that his country's determination is intact. These statements have contributed to the rise in the price of oil.
Economic highlights of the day:
March UK inflation, February European industrial production and March US producer price index are the three main indicators of the day.
The dollar inches up 0.1% to EUR 0.9247. Gold is back in trend at USD 1976. Oil rallied with North Sea Brent crude at USD 106.1 per barrel and U.S. WTI light crude at USD 102.1. The yield on 10-year US debt is down from the previous day at 2.74%. Bitcoin is trading around USD 40,000 a unit.
On markets:
* Blackrock reported a better-than-expected quarterly profit on Wednesday. The group also plans to launch its first ETFs in the Chinese market later this year and has started hiring staff to do so, two sources with direct knowledge of the matter told Reuters. The share is up 0.4% in pre-market trading.
* Delta Air Lines reported a smaller-than-expected net loss on Wednesday on strong travel demand, sending the stock up 6% in premarket trading.
* Alphabet - Google's parent company announced Wednesday it plans to invest about $9.5 billion in its U.S. offices and data centers this year, up from $7 billion a year ago. The stock is up 0.8% in pre-market trading.
* Former Twitter shareholders filed a lawsuit against Elon Musk on Tuesday, claiming they missed out on the recent rise in the share price due to a late disclosure of the Tesla boss's stake in the social network.
* Russian users of Netflix have launched a class action against the American video streaming platform because of its departure from Russia following the war in Ukraine. They are demanding compensation of 60 million rubles, the RIA news agency reported Wednesday.
* Sierra Oncology - Glaxosmithkline announced the acquisition of the American laboratory on the basis of a valuation of 1.9 billion dollars. Sierra's share price soared 37% in pre-market trading.
* Deutsche Telekom announced that it has acquired additional shares of T-Mobile US from Softbank for $2.4 billion, moving closer to its goal of securing direct control of the U.S. telecom operator.
* Blackstone - The Benetton family and U.S. private equity group Blackstone are working on a bid for Atlantia that includes a premium of about 30 percent on the average price over the past six months and could unveil their proposals on Wednesday, according to three sources close to the matter.
* Phillips 66 announced Tuesday that it has promoted Mark Lashier, its current deputy chief executive, to the rank of chief executive of the oil group, replacing Greg Garland, effective July 1.
* Walmart announced Tuesday that it has hired John Rainey, the current CFO of PayPal Holdings, to serve in the same role at the U.S. supermarket chain effective June 6.
* Novavax shares gain 2.4% in pre-market trading after Switzerland approves the company's COVID-19 vaccine in adults.
* AMC - The movie theater operator is up 0.8% in premarket trading after announcing it will double its presence in Connecticut with the acquisition of seven locations in the state.
Analyst recommendations:
Booz Allen: Goldman Sachs upgrades to buy from neutral. PT up 16% to $102.
CACI international: Goldman Sachs downgrades to neutral from buy
CarMax: J.P. Morgan downgrades to neutral from overweight. PT up 18% to $110.
Derwent: J.P. Morgan upgrades from neutral to overweight targeting GBp 4200.
Great Portland Estates: J.P. Morgan upgrades from neutral to overweight targeting GBp 900.
Hammerson: J.P. Morgan downgrades from neutral to underweight targeting GBp 2860.
ITM Power: RBC upgrades from sector perform to outperform targeting GBp 500.
Integra LifeSciences: Truist Securities downgrades to hold from buy, adjusts price target to $71 from $72.
J.B. Hunt transport Services: Deutsche Bank upgrades to buy from hold, adjusts price target to $230 from $210
JetBlue: Wolfe Research downgrades to underperform from peerperform. PT down 17% to $10.
Land Securities: J.P. Morgan downgrades from overweight to neutral, targeting GBp 900.
Mckesson Corporation: Morgan Stanley raises price target to $370 from $292, maintains overweight rating
Medtronic: Truist Securities downgrades to hold from buy, adjusts price target to $121 from $124.
Moderna: Morgan Stanley adjusts price target to $217 From $205, maintains Equal Weight rating.
PepsiCo: Credit Suisse adjusts price target to $163 from $164, maintains neutral rating.
Procter & Gamble: Credit Suisse lowers price target for procter & gamble to $140 from $145, maintains neutral rating.
Regeneron Pharmaceuticals: Morgan Stanley adjusts price target to $632 from $605, maintains equal weight rating.
The Boeing Company: JP Morgan advises its customers to buy the stock. The target price is lowered from USD 270 to USD 235.
The Clorox Company: Credit Suisse adjusts price target to $140 from $155, maintains underperform rating
Thor Industries: Exane BNP Paribas downgrades to underperform from neutral. PT down 19% to $65.
Winnebago Industries: D.A. Davidson & Co initiated coverage with a recommendation of buy. PT up 29% to $70.
Zimmer Biomet: Truist Securities downgrades to hold from buy, adjusts price target to $142 from $128.
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