Yesterday's surge in bond yields didn't stop Wall Street from ending in the green, which I must admit, I’m not sure why! The most dynamic sector of the day was energy, even though oil is in the process of recapturing some of its recent surge. Semiconductors rallied in the absence of news. And 10-year bond yields soared to well over 4.5% in the US, hardly a sign of a clear and massive rally in equities. But we'll come back to that in a moment. As usual, when commentators like me aren’t sure what’s happening, we talk about a "technical rebound". Sometimes, we also use "cheap buybacks" to keep it from being too obvious, or even with "recovery hopes", when we're really out of ideas. The same tricks are used when things are going down but we don't have too many explanations. In these cases, it's more a case of "risk aversion returning" or "profit taking", but "technical adjustments" also work in this direction. In short, the Nasdaq and S&P500 rallied by 0.4%, while the Dow Jones contented itself with a huge (technical) rebound of 0.1%.

The modest U.S. recovery came despite the 10-point surge in the yield on the 10-year U.S. government bond, which reached a 16-year high of 4.55% this morning. What's going on? Investors are taking note of the fact that the US economy is so resilient that the Fed may have to adopt a tougher high interest rate policy to counter inflation on a long-term basis. On this subject, the head of JPMorgan Chase gave us a little outing between common sense and horror in the Indian press. Jamie Dimon stressed that the world is not at all ready for Fed rates at 7%. More to the point, he didn't say that the central bank would have to reach such levels, but he did point out that this scenario was no longer unthinkable, whereas not so long ago it was ruled out. To quote him: "Going from 0 to 2% was virtually no increase at all. Going from 0 to 5% caught some people off guard, but no one would have excluded 5% from the realm of possibility... I'm not sure the world is ready for 7%". This is not Dimon's preferred scenario, but its probability is not zero.

Fed officials also fueled worries yesterday. Chicago Fed President Austan Goolsbee said that inflation above the 2% target is a greater risk than what the restrictive monetary policy could do to the economy.

Also on Monday, Minneapolis Fed President Neel Kashkari said that further rate hikes will probably be necessary, due to the resilience of the US economy.

A large part of the market thinks that rates are already at the ceiling, and another significant fraction sees them, at worst, a little higher. The Fed's dot plot shows that only one of the eighteen FOMC members envisages rates being slightly above 6% next year.

Caution and mistrust are the watchwords of this difficult September for equity markets. Today's session will be marked by a series of macroeconomic statistics from the United States. I imagine that the signals of strength in the US economy will be taken rather badly by investors, for whom the moderation of key rates is still the major determinant. This will be an opportunity to reiterate the "good news is bad news" mantra, which has been the guiding principle of recent months.

Economic highlights of the day:

Durable goods orders, the FHFA house price index, the consumer confidence index, new home sales and the Richmond Fed manufacturing index are on the agenda today, as well as the DOE crude stocks. The full agenda is here. 

The dollar is worth EUR 0.9428 and GBP 0.8204. The ounce of gold is trading at USD 1910. Oil continues to consolidate, with North Sea Brent at USD 91.42 a barrel and US light crude WTI at USD 89.27. The yield on 10-year US debt soars to 4.55%. Bitcoin trades at USD 26,195.

In corporate news:

  • Video Game and motion capture actors have voted in favor of strike action if negotiations on a new labor contract fail. The union is due to start contract negotiations with video game companies on Tuesday.
  • Tesla and European carmakers exporting from China to the European Union (EU) will be part of the bloc's investigation into whether China's electric vehicle industry is receiving illegal subsidies, the Financial Times reported on Tuesday.
  • The production stoppage at Apple supplier Pegatron's Indian iPhone factory is expected to last until Wednesday, if not longer, as authorities investigate a fire at the plant. Meanwhile, European industry chief Thierry Breton on Tuesday called on Apple CEO Tim Cook to open up his software ecosystem to rivals.
  • Coty launched a 33 million share offering on Monday and said it had applied for a dual listing on the Paris Bourse. The cosmetics group was down more than 4% in after-hours trading. The company said it planned to use the additional capital to reduce debt and invest.
  • Envestnet - The wealth management fintech was down 1.5% after the close following the replacement of its CFO.
  • Madrigal Pharmaceuticals - The pharmaceutical manufacturer falls 5.27% in after-hours trading as its Chief Commercial Officer, Remy Sukhija, who has held the position since April 2020, leaves the group, according to a regulatory filing.
  • The Food and Drug Administration (FDA) expressed concerns on Monday about the safety and efficacy of BrainStorm Cell Therapeutics' treatment for amyotrophic lateral sclerosis. The group lost 40.4% before the opening.

Analyst recommendations:

  • Air products & chem: Sadif Investment Analytics upgrades to strong buy from hold with a price target raised from USD 302.678 to USD 337.765.
  • American water: Sadif Investment Analytics downgrades to hold from buy with a price target reduced from USD 160.217 to USD 127.442.
  • Archer-daniels: Sadif Investment Analytics downgrades to buy from strong buy with a price target reduced from USD 89.589 to USD 82.511.
  • Danaher corp: Zacks upgrades to neutral from underperform with a price target raised from USD 225 to USD 265.
  • Draftkings: The online sports and gaming company gained 3.80% before the opening, as J.P. Morgan raised its recommendation from "neutral" to "overweight".
  • Entain plc: CBRE Research maintains its buy recommendation and reduces the target price from GBP 17 to GBP 15.
  • Foot Locker:  Piper Sandler initiates coverage of the stock and recommends "neutral".
  • Home depot: Zacks maintains its neutral recommendation and reduces the target price from USD 346 to USD 325.
  • Learning technol: Sadif Investment Analytics downgrades to strong sell from hold.
  • Teradyne inc: Northland Securities upgrades to outperform from market perform with a price target raised from USD 87 to USD 126.
  • Tesla inc: TPH&Co. maintains its sell recommendation with a price target reduced from USD 131 to USD 128.