It seems that demand for labor is starting to slow and U.S. private payrolls rose less than expected in May. They increased by 128,000 jobs last month, according to the ADP National Employment Report. Economists polled by Reuters had forecast private payrolls increasing by 300,000 jobs.

However, the job market is still strong, as the number of Americans filing new claims for unemployment benefits unexpectedly fell last week by 11,000 to a seasonally adjusted 200,000. Economists polled by Reuters had forecast 210,000 applications.

Financial markets have been on pause for the past two days, following a strong rally that began in late May. Investors are still unsure whether the Fed will succeed in its bid to bend the back of inflation without breaking the US growth machine.

Yesterday, the U.S., indexes started higher but closed in the red after a higher-than-expected manufacturing statistic... This is the famous paradox I mentioned at the beginning of the week: if the economy continues to turn strong, the Fed will have to be aggressive on its rate hikes, which will reduce the amount of liquidity available, which investors do not like. The Nasdaq and S&P 500 lost a little more than 0.7% and the Dow Jones closed down 0.54%.

Several forces are pushing markets in various directions. They are still the same: the red team is made up of the economic slowdown, inflation, shortages, geopolitical tensions, China, the risk of a major blunder by central banks and, more generally, the anxiety-inducing climate. The blue team is counting on high corporate profits, a soft landing, less insane valuations, the inability of central banks to stay mean for very long, China and more generally on a miracle that would recreate the blessed stock market conditions of 2011/2021.

In other news, Russia is reportedly having some difficulties in honoring its debts, according to the consortium of creditors that monitors the country's payments. Meanwhile, in China, Beijing is urging banks to come to the aid of depleted developers to stabilize the property market. Microsoft fell after the company lowered its profit forecast. Finally, OPEC+ is expected to decide whether to compensate for Russia's production cut, an opportunity for Saudi Arabia to position itself against the pressure exerted by the Western bloc to bring prices down.

 

Economic highlights of the day:

The Challenger survey on layoffs, the ADP employment survey, new weekly jobless claims, industrial orders and weekly oil inventories are on the agenda today.

The dollar is down to EUR 0.9343. The ounce of gold is regaining some ground at USD 1866. Oil has calmed down with North Sea Brent at USD 116.83 per barrel and US WTI light crude at USD 116.16 The yield on 10-year U.S. debt rallied to 2.91%. Bitcoin has fallen back below the USD 30,000 mark.

 

On markets:

* Amazon announced on Thursday that it would stop shipping its Kindle e-reader to distributors in China, saying it would stop selling e-books in the Chinese market next year.

* Moderna - The pharmaceutical company's shares lost 2.7% in premarket trading after announcing an amendment to the COVID-19 vaccine contract with the European Commission to allow for the postponement of deliveries originally scheduled for the second quarter of this year.

* Hewlett-Packard Enterprise lost about 6% in premarket trading on the heels of lower-than-expected quarterly results.

* Gamestop - The video game distributor reported better-than-expected quarterly sales on Wednesday. The stock gained 1.2% in pre-market trading.

 

Analyst recommendations:

  • Alphabet: Piper Sandler adjusts price target to $2,775 from $2,900, reiterates overweight rating.
  • Comcast: Wolfe Research downgrades to peerperform from outperform. PT up 14% to $50.
  • Crown Castle: Wells Fargo Securities downgrades to underweight from equal-weight. PT down 4.3% to $180.
  • Lions Gate: Wolfe Research initiated coverage with a recommendation of outperform. PT up 35% to $14.
  • McKesson: Argus raises price target to $370 from $310, maintains buy rating.
  • Meta: Piper Sandler adjusts price target to $220 from $230, maintains neutral rating.
  • Monday.com: Tigress Financial slashes pt to $240 from $432, maintains buy rating.
  • Paramount: Wolfe Research cut its recommendation on Paramount Global Class B to underperform from outperform. PT down 26% to $24.
  • Reinsurance Group: Credit Suisse upgrades to neutral from underperform. PT down 2% to $122.
  • Roku: Wolfe Research initiated coverage with a recommendation of peerperform. PT up 11% to $101.
  • Rivian Automotive: DA Davidson starts at underperform with $24 price target.
  • Snap: Piper Sandler downgrades to neutral from overweight. PT up 29% to $18.
  • T-Mobile US: Wolfe Research initiated coverage of T-Mobile US Inc. with a recommendation of outperform. PT up 18% to $159.