The two-year and 10-year U.S. Treasury yield curve inverted for a short time, which is often seen before a recession.

Wall Street took a hit last week, with the S&P500 index losing a little over 5%. Risk assets were once again the most exposed, such as the ARK Innovation index fund, which lost 13% over the last two sessions, or bitcoin, which is currently trading at USD 26,000 apiece, compared to a high of USD 67,000 last November.

On Friday, investors saw all their hopes that the Fed would manage a soft landing dashed. Last year, they went along with Powell's transitory inflation theory, and markets went up.

Seeing the situation deteriorate on the inflation side but the economy still going full steam, they then thought the central bank could regain control with a few smart speeches and some technical adjustments.

Well, as things got really bad and the positive thinking was no longer enough, a more painful policy had to be integrated. This was the panic phase that characterized the beginning of the year, compounded by the Russian invasion of Ukraine.

Lately, investors thought they had a valid scenario of a more or less soft economic landing with an aggressive Fed but initial successes in fighting inflation. But this scenario failed with US consumer prices for May, showing prices continue to rise even though production bottlenecks are being reduced.

Events are accelerating and institutional investors now seem to have completely lost track of the narrative, which is not very reassuring. But excesses are often erased by other excesses and perhaps we are in this second phase. After all, as one US bank pointed out on Friday, if someone had told you in June 2020 that two years later US retail sales would rise by 67%, unemployment would fall by 17 million, inflation would rise from 0.1% to 8.3%, oil would rise from $12 to $120 a barrel, and a pandemic would be followed by war and famine, you would have been taken for a raving lunatic... but that's what happened.

The current period is the most complicated to manage on stock markets since 2008. It separates investors who have only followed the liquidity in the past few years, from the savvy investors who are able to identify opportunities for the medium term, while maintaining an acceptable level of risk. This is a good time to look at the fundamentals of any sound investment.

All eyes are all on the Fed's June meeting on Wednesday. Even if investors have lost a little faith in central banks, they may cling to Captain Powell's speech, for lack of another Captain for complicated situations.

 

Economic highlights of the day:

There are no major indicators today.

The dollar is up to EUR 0.9577. The ounce of gold is trading at USD 1832. North Sea Brent at USD 121.20 per barrel and US WTI light crude at USD 119.91. The yield on 10-year US debt accelerates to 3.18% while the 5-year rises to 3.33%. Bitcoin is down to USD 23,400.

 

On markets:

* Tesla announced on Friday evening that it would submit to its shareholders a project of division by three of the nominal value of its shares in order to make them more accessible to individual investors. In addition, RBC upgraded its recommendation on the stock to "outperform" from "sector perform" saying it expects a positive surprise for the current quarter.

* Goldman Sachs - The U.S. Securities and Exchange Commission (SEC) has opened an investigation into the bank's asset management business, targeting investment funds with ESG strategies, the Wall Street Journal reported.

* Pfizer - A U.S. Food and Drug Administration (FDA) committee said Sunday that the COVID-19 vaccine developed by Pfizer and BioNTech is effective and safe for children ages 6 months to four years.

* Revlon was down 11% in premarket trading after already falling 52.8% on Friday in response to Wall Street Journal reports that the cosmetics maker, which had $3.31 billion in debt at the end of March, is expected to file for bankruptcy protection this week.

* LHC Group and UnitedHealth announced Friday that they have received a request from the Federal Trade Commission (FTC), the U.S. antitrust authority, for additional information on the insurer's proposed $5.4 billion takeover of the health care group. In pre-market trading, UnitedHealth was down 2.3%.

* Electric last mile Solutions- The electric utility vehicle maker announced on Sunday that it was filing for bankruptcy protection after the Securities and Exchange Commission (SEC) opened an investigation and withdrew all business projections presented in March.

 

Analyst recommendations:

  • Auto Trader: Jefferies remains Buy with a price target reduced from GBp 870 to GBp 790.
  • Blackstone: Orient Securities initiated coverage with a recommendation of buy. PT up 31% to $141.26.
  • British American Tobacco: Jefferies remains Buy with a target raised from GBp 3900 to GBp 4200.
  • Qualcomm: KeyBanc adjusts price target to $220 from $200, reiterates overweight rating.
  • Micron: Summit Insights downgrades to hold from buy.
  • Microsoft: Jefferies still consider the stock as a Buy opportunity. The target price is slightly modified from USD 325 to USD 320.
  • New residential Investment: Piper Sandler cuts to underweight from neutral, price target to $10 from $12
  • Rolls-Royce: Morgan Stanley upgrades from Equal-weight to Overweight, targeting GBp 118.
  • Royal Gold: Canaccord Genuity upgrades to buy from hold. PT up 22% to $140.
  • Shell: Bernstein initiated coverage with an outperform rating and a price target of 31.00 pounds sterling.
  • Tesla: RBC Capital Markets upgrades to outperform from sector perform. PT rises 58% to $1,100.
  • T. Rowe: BMO Capital Markets downgrades to market perform from outperform. PT up 18% to $135.
  • Vesuvius: Jefferies remains Buy with a price target reduced from GBp 705 to GBp 535.