U.S. investors continue to favor traditional stocks over technology stocks. The Nasdaq lost 1% yesterday and reduced its 2021 gains to 5%, while the S&P500, slightly less weighted in digital stocks, gained 11.6%. Several US investment banks continue to recommend to their clients to bet on cyclical and discounted stocks to account for the acceleration of growth, even if it is approaching its peak.

But let's not exaggerate either: the disgrace of the technology segment should be put into perspective on three fronts. First, we know the rebound capacity of stocks in the sector, which can very quickly erase their underperformance. Secondly, we should not be content with the small end of the scale and put price trends into perspective with the colossal gains posted in recent years for a long-term investor. Lastly, while crazy valuations pollute the debate a little, there are a large number of companies with very robust fundamentals. I would like to take this opportunity to underline the paradox of a market that chases exuberance, but is capable of producing situations like that of AMC, the best valued movie chain in the galaxy.

Yesterday, it was macroeconomic news that led Wall Street during the session. In particular, rumors that Joe Biden would be willing to compromise on a lower-than-expected tax rate for businesses, as part of the ongoing reform. The White House's goal would be to reach a compromise with the Republican opposition. I can already hear a few American economists snickering that they didn't believe in the possibility of raising the tax rate to 28% at all, saying that Biden would just be playing to his base, like "see, I tried that and it didn't work".

Another important information relates the job market in the United States, much more dynamic than expected according to the data of the ADP report. Investors are waiting for confirmation with the official statistics, for what will be the highlight of the day. But ING's economist thinks the deal is already done: the numbers will be good. To quote Robert Carnell: "The ADP is still messed about a bit by statisticians, but it is the actual payrolls managing firm for about 70% of private sector employment in the US, and as such might more reasonably be regarded as the real payrolls number."

Yesterday's announcement, coupled with data showing the upward momentum of wages across the country, helped lift bond yields and bring the dollar out of its lethargy. The verdict on the official U.S. job market figures for May is expected at 08:30 am ET. It will of course feed into the ongoing debate about inflation and whether or not the Fed should abruptly change its monetary policy timetable. As markets have a high capacity to adapt when things are explained to them for a long time, they may gradually become more tolerant if the US central bank has to hasten the pace.

 

Economic highlights of the day

Retail sales in Europe and two highly anticipated indicators in the United States, the May employment figures and April durable goods orders.

The dollar is trading at EUR 0.8253. Gold also corrected sharply yesterday to USD 1,872 an ounce. Oil stabilized at USD 71.50 a barrel of Brent and USD 69.10 a barrel of WTI. US debt yields are rising back up to 1.62% on 10 years. Bitcoin loses some of its previous day's gains at USD 36,500.

 

On markets:

Washington will bar U.S. investors from 59 Chinese defense and technology companies.

The boss of The Boeing Company is worried about the fallout from the trade dispute with China.

Logitech is making quiet acquisitions, its CEO reveals to Agefi.

General Motors expects to deliver better-than-expected results in the first half of 2021.

S Immo rejects Immofinanz's takeover offer.

Lululemon Athletica without reaction after its quarterly results.

Another crazy session for AMC Entertainment, which closes down -18% after doubling the previous day.

Novartis gets positive results with an experimental radiotherapy in a deadly form of prostate cancer.

 

Analyst recommendations:

  • 3M Company : Wolfe Research adjusts price target for 3M Company to $218 from $219, maintains Peer Perform rating
  • Burford Capital : Wedbush initiates coverage with Outperform rating, $15 Price Target
  • EasyJet: AlphaValue remains accumulate with a price target reduced from 1175 to 1042 GBp.
  • Eaton : Wolfe Research Adjusts Price Target for Eaton to $162 from $158, maintains Outperform rating
  • Emerson Electric : Wolfe Research changes PT to $107 from $104, maintains Peer Perform rating
  • JD Sports Fashion: Morgan Stanley starts tracking at Overweight with a target of GBp 1000.
  • Johnson Matthey: Berenberg remains Buy with a price target raised from GBp 3,700 to GBp 3,800.
  • Kingfisher: Morgan Stanley starts tracking with an in-line weighting, targeting 400 GBp.
  • Stanley Black & Decker : Wolfe Research lowers PT to $237 From $243, maintains Outperform rating
  • Vistra : Credit Suisse lowers price target to $23 from $26, keeps Outperform rating
  • Vodafone: Goldman Sachs retains his positive opinion on the stock with a Buy rating. The target price is still set at GBp180.