The Personal Consumption Expenditures price index – the Fed’s preferred price gauge – remained steady last month at 2.6%. That’s getting very close to the central bank’s goal of 2%.

Excluding volatile components such as energy and food, the core PCE price index rose 2.9% annually, which is below the Bloomberg consensus of 3% and the 3.2% rate seen in November. Consumer spending rose 0.7% from November 2023.

In the United States, the state of the economy doesn't seem to be a problem. After howling recession and soft landing, the hawks may have to face the facts: the US economy is currently draped in a cloak of invincibility. Yesterday's Q4 2023 GDP figure far exceeded expectations. Has the US found the magic configuration in which growth remains solid, inflation falls and the Fed can cut rates?

Today comes on the heels of the sixth consecutive session of gains for the S&P500 and Nasdaq 100 on Wall Street. Wall Street indices are now evolving at unprecedented levels. A big drag was Tesla, which collapsed by 12% yesterday. The market is afraid that the carmaker will become just a regular EV maker as a result of increased competition. Tesla can't become commonplace by maintaining a valuation of 66 times expected earnings this year, while none of the incumbent automakers exceeds 10 times. So it's a bit of a tricky situation.

The S&P500 still gained 0.5% on Thursday, while the Nasdaq 100 held on to 0.1% gains. In Europe, it was more mixed: +0.1% in Paris, Frankfurt and Zurich, and a little less in Brussels and London.

The French luxury goods giant LVMH is in the spotlight after it published very strong results for the final quarter of 2023. However, the luxury sector is not in uniformly good shape, as demonstrated by Salvatore Ferragamo's figures, also announced yesterday. Like Burberry, the Italian label is a disappointment. We're in a similar situation in the semiconductor sector: everything looks rosy, but there are actually winners and losers. We talked about ASML's good fortune earlier, and everything to do with AI also seems to be blessed by the market at the moment. On the other hand, some players are suffering. STMicroelectronics showed this yesterday, even though the stock finished the session better than it started. Yesterday, it was Intel that cast a pall over the market, with its cautious forecasts. The stock fell by 10% after the close of the session after it said that its first-quarter revenue could miss estimates by over $2 billion. Intel lost 11.3% in premarket trading this morning.

The ECB kept its rate unchanged on Thursday, and is suggesting that there won't be a rate cut before the summer, but traders think that the first rate cut will come in April. Economists, on the other hand, are betting on June. So, someone will probably end up being right. Teasingly, ING's chief economist points out in his comment of the day that "past experience has shown that the ECB President is not necessarily the best forecaster of rates". The state of the eurozone economy probably calls for a reaction.

In the Asia-Pacific region this morning, Australia and India are already on closed for the weekend. The other markets are down, with the exception of South Korea. European indices are in the green, while futures on Wall Street were slightly in the red this morning, hampered by Intel, but they are rising as I write these lines after the PCE data.

Today's economic highlights:

PCE inflation figures and housing data are on the agenda today. 

The dollar is slightly down to EUR 0.9205 and GBP 0.7855. The ounce of gold is little changed at USD 2021. Oil consolidates after its gains, with North Sea Brent at USD 81.33 a barrel and US light crude WTI at USD 76.55. The yield on 10-year US debt stands at 4.10%. Bitcoin trades at USD 40,100.

In corporate news:

  • Intel reported below-consensus quarterly sales on Thursday, in the face of uncertain demand for its chips used in servers and personal computers. The stock fell by 12.1% before the opening.
  • Tesla will have to recall nearly 200,000 Model S, X and Y vehicles in the US due to a software malfunction that could obstruct drivers' visibility when reversing, the US highway safety authority said on Friday.
  • Apple faces tough measures if changes to its App Store do not comply with new European Union regulations, EU Internal Market Commissioner Thierry Breton said on Friday.
  • KLA - The chipmaker reported quarterly earnings below Wall Street estimates on Thursday, citing sluggish demand in the electronics segment. The stock fell by more than 5% after the close. The stock lost 6.2% after the close.
  • Visa reported an 8% rise in first-quarter profit on Thursday, as the world's largest payment processor benefited from higher spending during the holiday season. The stock lost 0.6% after the close.
  • Salesforce will lay off around 700 employees, the latest round of layoffs to hit the tech sector, the Wall Street Journal reported on Friday.
  • Capital One Financial reported a 43% drop in fourth-quarter earnings on Thursday, as the lender set aside more funds to cover non-performing loans and recorded a one-time charge related to government deposit insurance. The stock lost 1.4% after the close.
  • American Express announced on Friday that it expects higher-than-expected annual profits for 2024. The stock gained nearly 3% in pre-market trading.
  • T-Mobile US on Thursday forecast higher-than-expected monthly subscriber growth in 2024, as the company counted on its extensive 5G coverage and promotional offers to attract consumers. The stock lost 2.3% after the close.
  • Western Digital - The manufacturer of data storage products posted a larger-than-expected adjusted quarterly loss on Thursday, due to the impact of restructuring measures implemented by the company in its flash and HDD activities. The stock lost 4% after the close.
  • Levi Strauss forecast annual sales and earnings below Wall Street expectations on Thursday, and said it would cut 10% to 15% of its global workforce as the jeans manufacturer seeks to control costs amid a slowdown in its wholesale business. The stock lost 3.6% after the close.
  • Valero Energy - The refiner's fourth-quarter results beat Wall Street estimates thanks to better-than-expected results in refining and ethanol production, the company said Thursday.
  • L3Harris beat fourth-quarter earnings expectations on Thursday, benefiting from rising demand for weapons and increased global defense spending. The stock lost 3.2% after the close.
  • Amazon.com - The AWS subsidiary said Thursday it plans to invest $10 billion to build two data centers in Mississippi, amid growing demand for cloud computing.
  • PTC Therapeutics said Thursday that the European health regulator's advisory committee reaffirmed its negative opinion for its drug used to treat a rare muscle disease, sending the group down more than 11% in extended trading.
  • Brightspring Health Services, backed by KKR, priced its IPO below its target range on Thursday and will raise $633 million. The IPO values BrightSpring at $2.2 billion.

Analyst recommendations:

  • Chewy: Gordon Haskett drops coverage on the stock.
  • Coinbase Global: Oppenheimer upgrades to outperform from market perform with a target price of USD 160.
  • Fair Isaac: Barclays maintains its overweight recommendation and raises the target price from USD 1234 to USD 1500.
  • Humana: Nephron Research maintains its buy recommendation and reduces the target price from USD 648 to USD 400. Oppenheimer maintains its outperform rating and reduces the target price from USD 630 to USD 415. Stephens maintains its overweight rating and reduces the target price from USD 550 to USD 430.
  • IBM: President Capital Management upgrades to buy from neutral with a price target raised from USD 160 to USD 215.
  • Intel Corporation: Summit Insights Group downgrades to hold from buy. Fubon Securities maintains a neutral recommendation with a price target raised from USD 38 to USD 50.
  • Intercontinental Hotels Group: Deutsche Bank downgrades to sell from hold with a target price raised from GBX 5800 to GBX 6360.
  • Kla Corporation: JP Morgan maintains its overweight recommendation and raises the target price from USD 565 to USD 725. Citigroup maintains its buy recommendation with a target price raised from USD 570 to USD 700. Morgan Stanley maintains its market weight recommendation and raises the target price from USD 500 to USD 635. Cowen maintains its market perform recommendation and raises the target price from USD 525 to USD 650. Wolfe Research maintains its outperform rating and raises the target price from USD 600 to USD 750.
  • Molten Ventures: Barclays downgrades to equalweight from overweight with a target price reduced from GBP 4.30 to GBP 3.30.
  • Northrop Grumman: RBC Capital downgrades to sector perform from outperform with a target price reduced from USD 515 to USD 450.
  • Palo Alto Networks: Evercore ISI maintains its outperform rating and raises the target price from USD 315 to USD 405.
  • Rightmove: Morgan Stanley upgrades to overweight from equal weight with a target price raised from GBX 530 to GBX 600.
  • Royal Caribbean Group: Stifel maintains its buy recommendation and raises the target price from USD 135 to USD 165.
  • Servicenow: HSBC maintains its buy recommendation and raises the target price from USD 706 to USD 874.
  • Shopify: National Bank Financial maintains its outperform rating and raises the target price from USD 80 to USD 100.
  • Snap: ROTH MKM maintains a neutral recommendation with a target price raised from USD 10 to USD 14.
  • Southwest Airlines: JP Morgan maintains its neutral recommendation with a target price raised from USD 24 to USD 29.
  • Tesla: Fubon Securities maintains a neutral recommendation with a target price raised from USD 220 to USD 275.
  • United Rentals: Barclays maintains its underweight recommendation and raises the target price from USD 325 to USD 400. Bernstein maintains its underperform recommendation and raises the target price from USD 350 to USD 495. Jefferies maintains its hold recommendation and raises the target price from USD 515 to USD 630. Goldman Sachs maintains its buy recommendation and raises the target price from USD 510 to USD 718. Baird maintains its underperform recommendation and raises the target price from USD 322 to USD 559.
  • Us Bancorp: Piper Sandler downgrades to neutral from overweight with a target price reduced from USD 47 to USD 46.
  • Western Digital Corporation: Baird maintains its outperform rating and raises the target price from USD 50 to USD 65.