Indices went in all directions yesterday, with a rather impressive divide between the Nasdaq 100 and the rest. The Dow Jones recorded a 0.1% decline, while the tech index gained 2.46% yesterday. Tech stocks are boosted by a new kind of steroid with the increasing use of artificial intelligence. Nvidia strengthen this momentum, with a massive +24% in yesterday's session alone. This renewed enthusiasm spread to the entire semiconductor industry, as witnessed by the daily gains of Advanced Micro Devices (+11%), Applied Materials (+7%) and ASML Holding (+5%). With the exception of Intel, which lost just under 5%.

While the Nasdaq's boost was welcome, Wall Street failed to finish the day at its highest level. This is despite two rather positive statistics on the US economy. US GDP was revised to 1.3% for the first quarter of 2023, above economists' initial estimate of 1.1% growth, while weekly jobless claims fell to 229,000, compared with 242,000 last week and 264,000 two weeks ago. The trend is clear: the US economy is still holding up, and the job market is resilient. That's pretty good, as it calms fears of recession. However, it does give it more leeway to raise interest rates later this year without risking a hard landing for the US economy.

And today, new data further showed the resilience of the economy. The Personal Consumption Expenditures (PCE) Price Index rose by 4.4% in April in the US, against expectations for a 3.9% increase. Excluding food and energy, core PCE advanced 4.7%, while a 4.6% increase was forecast.

Meanwhile, U.S. household personal income for April was up 0.4% from March, in line with market consensus. Personal spending climbed 0.8%, against expectations of a 0.5% increase.

In this respect, yesterday’s and today’s statistics could lead the Fed to increase rates by a quarter point at its next meeting in June, while not long ago, a pause was widely expected. According to CME's FedWatch tool, this probability rose to 50% yesterday, before dropping back to 38%, and is now up to 58% after the release of the PCE data. This is enough to dampen the appetite of investors, already sufficiently affected by the negotiations on the US debt ceiling, which are said to be down to $70 billion to get everyone to agree. President Joe Biden and Republican House Speaker Kevin McCarthy are getting closer to a deal, with negotiators looking to finalize it in the "coming days", the Financial Times reported. If they fail, the country could default as early as June 1.

US equity futures were slightly up this morning, still boosted by the rally in the technology sector sparked by Nvidia.

 

Today's economic highlights:

Core PCE inflation in the United States and durable goods orders are on the agenda today, as well as US household spending and income and the revision of consumer sentiment. For the full macro agenda, click here.

The dollar is down 0.1% against the euro to EUR 0.9314 and down 0.3% against the pound to GBP 0.8088. The ounce of gold is struggling to raise the bar at USD 1948. Oil is losing ground, with Brent North Sea crude at USD 76.91 a barrel and WTI US light crude at USD 72.66. US debt posted a 10-year yield of 3.806%. Bitcoin is trading at USD 26500.

 

In corporate news:

  • Gap reported a first-quarter profit on Thursday evening, against consensus forecasts of a loss, helping the ready-to-wear group to gain 12% in pre-market trading.
  • Ford gained 1.5% in pre-opening trading after announcing an agreement with TESLA giving owners of its electric vehicles access to more than 12,000 Tesla Superchargers in North America.
  • Lazard has announced the appointment of Peter Orszag, a former White House banker, as Chief Executive Officer from October 1. He will succeed Kenneth Jacobs, who is leaving the investment bank after 14 years at the helm.
  • Moderna Laboratory announced that it was looking for opportunities in China after confirming the registration of a legal entity in the country.
  • Costco's quarterly profit fell short of the average expected by analysts, as the semi-wholesale retailer's customers cut back on non-essential spending due to inflation and economic uncertainties.
  • Marvell Technology expects sales of its artificial intelligence chips business to double this year. Its share price climbed 16% in pre-market trading.
  • Autodesk reported an 8% increase in first-quarter sales. The design software company gained 1.2% in pre-market trading.
  • Exxon Mobil, Chevron - The Norwegian sovereign wealth fund announced on Friday that it would vote against the retention of Darren W. Woods as Chairman of the Board of Directors. Woods as chairman of the board of ExxonMobil and Mike K. Wirth of Chevron, preferring that the functions of chairman and CEO not be exercised by the same person.
  • Pfizer and BioNTech have agreed with Brussels to modify the contract for the COVID-19 vaccine, reducing the number of doses the EU must purchase and extending the delivery deadline to 2026, a source close to the negotiations reported.

 

Analyst recommendations:

  • Analog Devices: Goldman Sachs remains long but lowers its target from US$210 to US$204.
  • Apple: First Shanghai Securities downgrades to hold from buy. PT up 9.8% to $190.
  • Diamond Offshore: Pareto Securities upgrades to buy from hold. PT climbs 47% to $17.
  • FD Technologies: JP Morgan starts coverage with an overweight recommendation and a target of GBp 2,500.
  • Halfords Group: RBC Capital Markets downgrades from outperform to sector performer, with a target of GBp 220.
  • Nvidia: UBS maintains its buy recommendation and raises its target from USD 315 to USD 475.
  • Oxford Instruments: HSBC starts coverage with a hold recommendation and a target of GBp 2900.
  • Physicians Realty: JMP Securities initiated coverage with a recommendation of market outperform. PT set to $15.50.
  • Rio Tinto: Morgan Stanley upgrades from in-line to overweight with a target of GBp 5800.
  • Snowflake: JP Morgan remains long but lowers its target from 165 to 155 USD.