Bye Bye H1, you won't be missed

06/30/2022 | 09:36am

Fed Chair Jerome Powell confirmed yesterday in a conference in Portugal that more rate hikes are coming in a bid to curb inflation, sending Wall Street in the red this morning.

There's lots of consumer data today. The US household income and spending data is the highlight, since the ability of American consumers to absorb the inflationary shock without giving up on purchases is essential to the health of the economy.

Today's Commerce Department data shows that US inflation-adjusted consumer spending fell in May for the first time this year, due to persistently high inflation.

Real Disposable personal income decreased 0.1 percent in May and Real personal consumption expenditures decreased 0.4 percent, after a 0.3% gain a month earlier. Spending on services rose, while outlays on goods declined.

The May personal income and spending includes the core PCE price index, which is the Fed's favorite indicator. It fell to 4.7% year-on-year in May, from 4.9% in April, which is in line with markets expectations. Meanwhile, the Personal Consumption Expenditures Price Index stayed unchanged at 6.3% on a yearly basis in May.

These stats come on the last session of this first semester, which will remain one of the worsts in 50 years for stock markets. Most of the world's major indexes will close tonight with double-digit declines, even flirting with 30% for the fallen angel of the stock market, the Nasdaq. Abroad, the Tokyo and London stock exchanges are down much more modestly. The FTSE100 index is largely dominated by Oil, Finance, Commodities and Health, the winning cocktail 2022.

Yesterday was a choppy session. The health care sector remained strong, while oil stocks retreated. Big labs and biotechs had been experiencing some disaffection in the post-pandemic world, but this now seems to be over, as Covid surges across many countries, and investors return to defensive stocks to escape the current turmoil.

Chinese manufacturing data shows the county's industry returned to the expansion zone in June, but was weaker than expected. On the other hand, the Chinese services data surprised positively.

Investors are now waiting for the first half-year corporate results, expected in two weeks, will provide a clearer picture of the economy.


Economic highlights of the day

Today, we have Initial jobless claims and Personal income and spending, as well as the Chicago PMI. All the macro agenda here.

The dollar is down to EUR 0.9611. The ounce of gold is worth USD 1822. Oil remains firm with North Sea Brent at USD 111.80 per barrel and U.S. light crude WTI at USD 109.23. US 10-year debt yields are falling to 3.10% over 10 years. Bitcoin remains glued to the USD 20,000 area.


On markets:

*The Boeing Company - The Department of Transportation's Office of Inspector General announced Wednesday that it will conduct an audit of the U.S. Federal Aviation Administration's (FAA) oversight of Boeing 737 and 787 production. The aircraft manufacturer's stock was down 1.55% in pre-market trading.

* Drugstore chain Walgreens Boots Alliance reported Thursday a 76% drop in quarterly profit due to lower demand for COVID-19 vaccines and a $683 million settlement with Florida to resolve opioid litigation. It was down 2% in pre-market trading.

* Constellation Brands reported quarterly sales up 17% to $2.36 billion, above the Reuters consensus.

* Pfizer and BioNTech announced Wednesday that they have signed a $3.2 billion agreement with the U.S. government to deliver 105 million doses of their COVID-19 vaccine in the fall.

* Spirit Airlines gained 2.1% in premarket trading after postponing to July 8 the shareholder vote originally scheduled for Thursday on the Frontier Group takeover bid.

* Xerox Holdings announced Wednesday that its chief executive officer, John Visentin, has died at age 59 after an illness and that president and chief operating officer Steve Bandrowczak is acting as interim CEO.

* McDonald's - The Italian antitrust authority said Thursday it had closed an investigation launched last year into the fast-food group after it committed to removing clauses in contracts with its franchisees that could raise competition concerns.

* Google - Thales announced on Thursday the creation of a new company, called S3NS, in partnership with the U.S. giant to offer French public and private companies cloud computing services approved by the state.

* Coinbase Global - The U.S. cryptocurrency trading platform, which is looking to expand in Europe, is registering in markets including Italy, Spain, France and the Netherlands, Bloomberg reported Wednesday.

* The Estee Lauder Co announced Wednesday night that it expects to take about $154 million in pre-tax charges in connection with its two-year restructuring plan. In pre-market trading, the stock was down 3.8%.

* Intercontinental Exchange announced Thursday that it will stop clearing credit default swaps in London next year and move the business to Chicago.


Analyst recommendations:

  • Bath & Body Works: Piper Sandler initiated coverage with a recommendation of overweight. PT up 120% to $58.
  • Blackrock: Goldman Sachs lowers price target to $710 from $830, maintains buy rating.
  • Comcast: TD Securities adjusts price target to $60 from $65, maintains buy rating.
  • Crown Castle: Jefferies upgrades to buy from hold. PT up 20% to $200.
  • EasyJet: Citigroup remains on the sell side with a target cut from GBp 475 to GBp 360.
  • Etsy: Raymond James starts etsy at outperform with $100 price target.
  • Intertek: J.P. Morgan downgrades from overweight to neutral with a target of GBp 5,300.
  • KKR: Goldman Sachs adjusts price target to $63 from $73, maintains buy rating.
  • Nasdaq: Goldman Sachs adjusts price target to $145 from $149, maintains sell rating
  • National Grid: Jefferies downgrades from buy to hold, targeting GBp 1070.
  • Plug Power: KeyBanc Capital Markets reinstated coverage with a recommendation of overweight. PT set to $30.
  • Texas Instruments: Benchmark Company LLC initiated coverage with a recommendation of buy. PT up 34% to $205.
  • Take-Two: UBS adjusts price target to $143 from $185, maintains neutral rating.
  • Warner Bros. Discovery: Benchmark Company LLC initiated coverage with a recommendation of buy. PT set to $26.
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