Today on Wall Street: Biden takes a hard line

09/10/2021 | 08:21am

The broad S&P500 index posted a fourth session of moderate decline yesterday, hampered by doubts over the strength of economic growth in the United States. Until now, investors seemed to fear above all else the end of the Fed's generous monetary support, in a context of strong growth and high inflation. They are now realizing that having faltering growth in an inflationary environment may be the worst-case scenario.

Perhaps Joe Biden felt he needed to occupy the field and shake things up a bit. The U.S. president didn't exactly take a backseat when he called out his unvaccinated compatriots. " “We've been patient, but our patience is wearing thin, and your refusal has cost all of us”, he said yesterday, alongside the announcement of stricter measures to contain the pandemic and boost economic activity. Biden also had a call with his Chinese counterpart Xi Jinping. The actual content of the discussions is of course unknown, but statements issued by both sides afterwards seek to show that the dialogue was frank and "deep". Chinese state television reported that Xi called for a return to normal relations between the two countries.

Meanwhile, the Fed remains on investor’s radar. Criticism has been rife lately on the stock market investments of Eric Rosengren and Robert Kaplan. Both men are rather active investors, if only by the amount of money they invest. The problem is that the former is the president of the Boston Fed and the latter of the Dallas Fed, and one would think that they would have some information before everyone else. In reality, these investments do not contravene central bank ethics rules and are made public. But they still create unease. So much so that Kaplan and Rosengren have announced that they will sell their individual stock positions by the end of the month. Their respective press releases explain that their investments have complied with the Fed's code of ethics, but that they feel it is best to sell the positions “to avoid even the appearance of any conflict of interest”. Both men used this exact same somewhat convoluted sentence, which shows that they are not really comfortable. A historian quoted by the New York Times points out that it is probably the Fed's system of ethics that is in need of revision, as it is built on a very narrow conception of the role of a central bank. Now that they have so much power over markets, it might be time to dust off the rules. In any case, this affair is not likely to lessen criticism against these institutions.

Christine Lagarde did not have to mention her stock market holdings yesterday, but she did endorse a lower rate of asset purchases for the European Central Bank. "This announcement is already observed in practice because the ECB has reduced from 80 to 65 billion euros its asset purchases PEPP since early August," notes Oddo BHF strategist Arthur Jurus. Therefore, it did not really confuse investors. The bank also raised its growth and inflation forecasts. While there was some movement on markets around the announcement yesterday, no major imbalance ultimately persisted. The market reaction was quite positive.


Today's Economic Highlights:

A new estimate of German inflation for August and French industrial production for July are published today, as well as August producer prices and July wholesale inventories in the US.

The ECB's announcements yesterday had only a brief influence on the dollar/euro pair, which is trading at 0.8451 this morning. The gold ounce is just under USD 1800. Oil is regaining ground, at USD 72.7 per barrel of Brent and USD 69.37 per barrel of WTI. In the sovereign debt market, yields are easing, with a French OAT falling back to -0.04% on 10 years, a Bund moving at -0.36% and a T-Bond paying 1.31%. Bitcoin is trading between $46,000 and $47,000.


On markets:

* Apple, in a U.S. lawsuit with Epic Games over the terms of use of the App Store app store, on Thursday rejected the "Fortnite" publisher's request to restore its developer account in South Korea by including an alternative payment method. South Korea's parliament approved a law last week requiring major app store operators to allow third-party payment systems.

* Wells Fargo - The U.S. bank was fined $250 million on Thursday and hit with new restrictions for failing to implement measures ordered in 2018 by the OCC, the banking regulator, after a scandal over its fictitious accounts.

* Ford Motor and General Motors - China's car sales plunged 17.8% in August, falling for the fourth straight month, plagued by the global semiconductor shortage, according to data released Friday by the China Association of Automobile Manufacturers (CAAM).

* Take-Two fell 1.2 percent in pre-market trading after the company announced that it would delay the release of its "Grand Theft Auto V" and "Grand Theft Auto Online" games for the Playstation 5 until March 2022, instead of November 11, 2021.

* Alphabet - A shortage of computer components has prompted Google and Indian conglomerate Reliance Industries to postpone the launch of the low-cost smartphone the two groups are developing together, which was due to be released this Friday in India.

* Affirm Holdings gained 23.4% in premarket trading as the deferred payment service group reported fourth-quarter revenue Thursday that beat Wall Street expectations.


Analyst recommendations:

  • Alignment Healthcare : Cowen initiates coverage with outperform rating, $24 price target
  • Amedisys : Cowen initiates with market perform rating, $195 price target
  • Bright Health : Cowen starts coverage with outperform rating, $14 price target
  • Cigna : Cowen downgrades to market perform from outperform, sets $235 price target
  • Colfax: Goldman Sachs downgrades to neutral from buy. PT up 8.7% to $51
  • Dada Nexus : Goldman Sachs adjusts price target for dada nexus to $42 from $46, maintains buy rating
  • Devon Energy : Goldman Sachs removes Devon Energy from Conviction-Buy List, maintains Buy rating
  • EasyJet: Barclays remains Neutral. The target price is now set at GBp 685 as compared to GBp 940 previously.
  • Facebook : HSBC adjusts price target to $300 from $275, maintains reduce rating
  • Global Payments : Morgan Stanley adjusts price target to $185 from $219, maintains equal-weight rating
  • Humana : Cowen upgrades to outperform from market perform, sets $479 price target
  • Intapp : Credit Suisse adjusts price target to $45 from $38, keeps outperform rating
  • International Consolidated Airlines Group: Credit Suisse is positive on the stock with a Buy rating. The target price is reduced from GBp 256 to GBp 195.
  • Iveric bio: Stifel initiated coverage of Iveric bio Inc. with a recommendation of buy. PT set to $22
  • LHC : Cowen starts coverage with Outperform rating, $209 Price Target
  • LifeStance Health : Cowen initiates coverage with Outperform rating, $18 Price Target
  • Lululemon Athletica : Wedbush hikes price target to $340 from $300 
  • Sunrun : Needham initiates coverage with buy rating
  • Walt Disney : Wolfe Research adjusts pt to $209 from $212, maintains outperform rating
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