But we start this morning with an anniversary, that of American presidents. January 20th is indeed the day when the presidents of the United States of America start their term of office, according to the XXth amendment of the American constitution, dating from 1937. Based on this measure, Joe Biden's term has two years left, with some worries about the debt ceiling. To put it simply, the US debt is large and constantly growing, the maximum amount of which has been set for more than a century by Congress. As a result, Congressmen have to vote regularly to raise it. This is not really a concern when the houses are controlled by the party that occupies the White House, but it becomes a concern in the event of power sharing, as is currently the case. Raising the ceiling is then the subject of intense negotiations, since it is a powerful political lever: if the United States can no longer borrow, it can no longer honor some of its obligations. In the past, there have been some memorable standoffs. They have been a source of volatility on markets, even though they have always led to compromise...

This comes after the publication of statistics on Wednesday that have raised fears of a harder-than-expected economic landing. The Nasdaq lost 1% after having already given up 1.3% the day before and the S&P500 fell -0.8%, for a third session in the red. The US broad index, at the doorstep of 3900 points, is now down only 1.5% in 2023. For your information, the average of the expectations of 23 big names in finance is 4079 points for the S&P500 next December 31 (according to forecasts compiled by François Trahan). That's 4.6% of potential growth from the 3900 points touched last night. Projections range from 3,400 points for those big pessimists at BNP, to 4,750 points for the unicorns and rainbows at Fundstrat. However, there is little point in fiddling with strategies based on these, since the stars of the market are just as complacent as the average equity fan. In other words, this kind of forecasting doesn't work very well, except when markets are only going up. At the end of 2021, Goldman Sachs was telling its clients that the S&P500 would hit 5100 points by the end of 2022. JPMorgan Chase, in a prudent move, was content with 5050 points. As a result, instead of the 6 to 7% increase predicted by these two major Wall Street institutions, the S&P500 fell 19.4% last year.

What else happened in the world yesterday? Central bankers continued to make tough speeches about monetary policy, trying to convince investors who do not believe them that they have not changed course. This was the case with Fed Vice Chair Lael Brainard. As for Japan, it recorded inflation in December at 4%, the highest level since 1981. A level in line with expectations but which continues to question the BoJ's ultra-accommodating policy. Faced with these cautious signals, investors are focusing on the return of growth in China. This has allowed oil to move forward again and Hong Kong to wake up for the last session of the week. They will have time to meditate on the Chinese dynamics in a calm environment, since the country's markets will be closed for the Lunar New Year from Monday. Hong Kong will be closed on Monday, Tuesday and Wednesday, while Shanghai and Shenzhen will be closed all next week.

 

Economic highlights of the day:

US housing data for December is today's main indicator. All the agenda is here. Last night, Japan announced a 4% inflation in December, the highest recorded since 1981.

The dollar is up to EUR 0.9251 and GBP 0.8099. The ounce of gold is worth USD 1925. Oil rallied, with North Sea Brent crude at USD 86.54 a barrel and U.S. light crude WTI at USD 80.95. The yield on 10-year U.S. debt rebounded to 3.41%. Bitcoin is back below USD 21,000.

 

In corporate news:

* Netflix - The co-founder of the online video service, Reed Hastings, announced Thursday that he was stepping down as chief executive, handing the reins to a duo of his deputy and chief operating officer, following the release of the group's results that showed a better-than-expected quarterly subscriber gain. The share price climbed 6.2% in pre-market trading.

* Alphabet will cut 12,000 jobs, its chief executive said in a note to employees seen by Reuters. The stock rose 1.7% in premarket trading.

* Nordstrom lowered its annual profit forecast on Thursday after reporting weak sales during the Christmas season at its Rack discount stores despite heavy promotions and discounts. The stock is down 3.7% in pre-market trading.

* Schlumberger is up 1.5% in premarket trading after fourth-quarter earnings beat Wall Street expectations, driven by strong demand for drilling services and equipment.

* Amazon announced Thursday that it plans to raise prices on some of its music subscription plans starting in February.

* T-Mobile US - The third-largest wireless carrier by subscribers in the U.S. said Thursday it is investigating a flaw in its systems involving 37 million postpaid and prepaid accounts that could expose it to significant charges. The stock is down 2.4% in pre-market trading.

* Intel - Italy is just one of several possible destinations for Intel's new chip plant, and a decision is expected by the end of the year, the company's chief executive, Pat Gelsinger, told Italian daily Corriere della Sera on Friday.

* Texas Instruments announced on Thursday that its CEO Rich Templeton will leave the company in April and be replaced by current deputy CEO Haviv Ilan in a difficult context for the chipmaker amid declining demand in the sector.

* Eli Lilly announced Thursday that the U.S. Food and Drug Administration (FDA) had rejected an accelerated approval for its experimental Alzheimer's treatment due to insufficient clinical trial data. In pre-market trading, Eli Lilly's stock is down 1.1% while its rival BIOGEN is up 1.02%.

* Ally Financial jumped 9.9% after better-than-expected fourth-quarter adjusted operating income and revenue.

* JPMorgan on Thursday got the green light from Chinese authorities to expand its operations in the country as Beijing seeks to boost foreign business confidence after the lifting of the "zero COVID" policy.

 

Analyst recommendations:

  • 3i Infrastructure: Jefferies upgrades from hold to buy targeting GBp 333.
  • AIG: BMO Capital Markets initiated coverage with a recommendation of market perform. PT set to $64.
  • American Financial: BMO Capital Markets initiated coverage with a recommendation of market perform. PT set to $155.
  • Chubb: BMO Capital Markets initiated coverage with a recommendation of market perform. PT set to $225.
  • LCI Industries: Jefferies cut its recommendation to hold from buy. PT down 11% to $95.
  • Marsh & McLennan: BMO Capital Markets initiated coverage with a recommendation of market perform. PT set to $168.
  • Netflix: Jefferies has maintained its recommendation on the stock with a Buy rating. Previously set at USD 385, the target price has been raised to USD 400.
  • Regeneron: J.P. Morgan upgrades to overweight from neutral. PT up 19% to $850.
  • Virgin Money UK: Deutsche Bank downgrades from buy to hold, targeting GBp 220.
  • Wizz Air: Oddo BHF downgrades from Outperform to Neutral, targeting GBp 3140.