Trouble continues for the US manufacturing sector

11/24/2021 | 09:57am

Financial markets are in turmoil, with the return of coronavirus and the looming reduction of central bank support well underway. Increased inflationary expectations have led to a mini-purge in technology stocks, especially the best valued. The session is marked by a battery of US economic statistics before the Thanksgiving break.

Wall Street was mixed yesterday, with declines concentrated on technology stocks, particularly those with the highest valuations. Stock markets are entering a new phase, with the arrival of several forces. The first one has been evident for some time now. It is the coming reduction in available liquidity, due to the unraveling of monetary support. Central banks have done everything they can not to rush things. A bit like when you threaten to punish a child. And like a child, the market has decided to take advantage of this leniency to the extreme. The other force of the moment, which we could have done without, is the resurgence of coronavirus in its Christmas 2021 version. The rise of cases in Europe is worrying, which explains the difference in stock market performance compared to the United States, despite the good macroeconomic figures published yesterday on the old continent. Today, on the eve of the Thanksgiving holiday, a flurry of "macro" indicators is expected.

New weekly jobless claims, second reading of Q3 GDP, wholesale inventories and October durable goods orders, November's University of Michigan consumer confidence index, October's new housing figures and October's household consumption, weekly oil inventories and the minutes from the last Fed meeting are all due today.

Orders for durable goods in the United States have been released, and the unexpectedly fell in October, down for the second consecutive month. The U.S. Commerce Department unveiled a 0.5% drop in orders last month, while economists were expecting a 0.3% bounce, after a decline of 0.4% in September. These figures highlight headwinds in the U.S. manufacturing sector, due to labor and material shortages.

Today's session will be the last one of the week with a normal level of activity in the US. Wall Street will be closed tomorrow for Thanksgiving and will only open on Friday for a half session, which is usually very quiet. In addition to the avalanche of statistics today, it should be noted that Joe Biden has decided, along with other world leaders, to make part of the national strategic oil reserves available to ease the market. For now, it has not had much effect, since investors expect Opec+ to adjust production in a way that cancels the move.

 

Economic highlights of the day:

The list of indicators is long today: German Ifo index, New weekly jobless claims, second reading of Q3 GDP, wholesale inventories and October durable goods orders, November's University of Michigan consumer confidence index, October's new housing figures and October's household consumption, Weekly oil inventories, and the minutes from the last Fed meeting.

The dollar/euro pair is trading at EUR 0.8932. Gold remains under pressure at USD 182. Oil is trading at $81.8 for Brent and $78.0 for WTI. After rising to 1.67% yesterday, the US 10-year T-Bond rate is down to 1.64%. Bitcoin is down 2% to USD 56,000.

 

On markets:

* Gap on Tuesday lowered its full-year revenue and profit forecasts due to supply chain strains. The stock plunged 19% in after-hours trading.

* Apple announced Tuesday that it has filed a lawsuit in California against Israeli firm NSO, creator of the Pegasus spyware, which it accuses of monitoring and targeting users of its products in the United States. The research institute China Academy of Information and Communications also reported Tuesday evening that smartphone shipments in China jumped 30.6% year-on-year in October. Apple's stock is down 0.2% in premarket trading.

* Tesla CEO Elon Musk has sold additional shares of the car company for $1.05 billion (€936 million), a stock advisory shows. Since his November 6 consultation on Twitter about whether or not to sell 10% of his shares in Tesla, Elon Musk has sold a total of about $ 9.9 billion worth of shares. The stock is losing 0.6% in pre-market trading.

* Dell Technologies - The computer maker said Tuesday it expects to report better-than-expected sales for the current quarter, helped by strong demand for PCs and servers. The stock is up 3% in pre-market trading.

* Hewlett Packard on Tuesday reported a more than fourfold increase in quarterly profit and a 13% jump in revenue from its personal computer division. The stock gained 7.2% in pre-market trading.

* Nordstrom fell 23% in after-hours trading as the retailer said Tuesday it expects shortages during the holiday season.

* Blackrock, Ford- The world's No. 1 asset manager has invested €700 million in Ionity, an electric vehicle charging station company founded by several automakers, including Ford, in a round of financing.

* Contextlogic - France has asked for the dereferencing of the American e-commerce site Wish because it does not respect consumer protection rules and will ban it if it persists in this way, warned Wednesday Bruno Le Maire, Minister of Economy and Finance.

* Alibaba - U.S. private equity firm Warburg Pincus, a shareholder in Alibaba subsidiary Ant Group, has cut its estimate of the Chinese fintech's value by 15 percent to less than $200 billion, according to a source with direct knowledge of the matter. At the time of its aborted IPO attempt a year ago, Ant was valued at $315 billion.

 

Analyst recommendations:

  • Avery Dennison: Raymond James initiated coverage with a recommendation of outperform. PT up 8.4% to $240
  • Berry Global Group: Raymond James initiates coverage on berry global group with market perform rating
  • Burlington Stores: Cowen raises price target to $330 from $314, maintains outperform rating
  • Chevron: RBC Capital Markets raised the recommendation to outperform from sector perform. PT up 25% to $145
  • Cisco Systems: Independent Research adjusts cisco systems pt to $57 from $60, maintains hold rating
  • Dollar Tree: Telsey Advisory Group upgrades to outperform from market perform. PT up 21% to $175
  • Gap: KGI Securities  cut the recommendation to hold from outperform. PT up 7.6% to $25.30
  • ITM Power: Liberum starts tracking as Buy, targeting GBp 641.
  • Jack in the Box: Stifel cut the recommendation to hold from buy. PT up 7.5% to $100.
  • Just Eat Takeaway: J.P. Morgan upgrades from neutral to overweight targeting GBp 8632.
  • Lam Research: UBS adjusts price target on lam research to $765 from $700, maintains buy rating
  • Marcus: J.P. Morgan initiated coverage with a recommendation of neutral. PT set to $25, implies a 30% increase from last price. Marcus Corp average PT is $26.50.
  • Marvell Technology: UBS adjusts price target to $87 from $72, maintains buy rating
  • National Bank of Canada: Scotiabank downgrades to Sector Perform
  • Newmont Corporation: National Bank adjusts pt to CA$92 from CA$95, maintains outperform rating
  • Nordstrom: Jefferies cut the recommendation to hold from buy. PT down 6% to $30
  • Salesforce.com: BofA Securities adjusts pt to $360 from $330, maintains buy rating
  • Silgan: Raymond James initiated coverage with a recommendation of outperform. PT set to $47, implies a 11% increase from last price. Silgan average PT is $48.50.
  • Wynn Resorts: UBS adjusts price target to $105 from $101, maintains neutral rating
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