This is why investors were awaiting the results of retailer Walmart and The Home Depot today, and are also awaiting US retail figures tomorrow. It allows them to take the pulse of the American consumer, knowing that private consumption represents about 68% of GDP. If the US consumer keeps buying, this is a sign that the economy remains strong enough to sustain the Fed’s hawkish policy.

Walmart’s shares jumped 5% after it said that it expects its annual profit to fall less than previously forecast, as promotions and lower fuel prices helped it beat expectations in the three months to the end of July.

Home Depot posted better-than-expected comparable sales in Q2, thanks to strong demand from construction professionals and individuals. Despite good results, investors didn’t react much to the figures, with the Dow, the S&P and the Nasdaq trading in a tight range at the open. So far, US corporate earnings have been better than expected, with about 77% of the S&P 500 companies beating analysts' estimates so far, according to Refinitiv data. 

Overall, the summer of 2022 seems to have reconciled investors with the stock market. Even bad news cannot dampen their confidence. Yesterday, the Nasdaq gained 0.75% at the close while the S&P500 limited gains to 0.40% due to sell-offs in oil stocks after the downturn in, you guessed it, oil.

This rise came after a series of economic statistics that I would describe as poor, if not rotten. It started on Sunday night in China with the consumption and production figures for July, which were lower than expected. It continued in the afternoon in the United States with an Empire State activity index that looks like it has fallen into a hole, and a gauge of the housing sector that missed a step. But this set of bad news didn't faze investors in a rather counter-intuitive way.

Perhaps the market is hoping that the Fed will return to a more dovish monetary policy, spooked by rapidly deteriorating economic conditions. This is an ideal scenario: the Fed considers that efforts to curb inflation have been successful, there’s no need for aggressive rate hikes, and money is flowing again. It doesn’t hurt to dream…

 

Economic highlights of the day:

On the agenda today, Building permits and industrial production for July. All the macro agenda here. 

The dollar is trading at EUR 0.9839. The ounce of gold is back down to USD 1776. North Sea Brent is trading at USD 94.98 a barrel and US WTI light crude at USD 89.36. The yield on US 10-year debt falls to 2.78%. Bitcoin is trading around USD 24,000.

 

On markets:

* Merck & Co - The pharmaceutical company announced a cooperation agreement with Orna Therapeutics in the field of RNA technologies, which provides for an initial investment of $250 million and conditional subsequent payments of up to $3.5 billion.

* Tencent Music Entertainment - The Chinese online music group reported better-than-expected quarterly revenues. The stock was up 5.9% in after-hours trading on Monday.

* Twitter - Activist fund Elliott Management, which called for management changes two years ago, exited the network in the second quarter, shortly after Elon Musk announced his intention to buy it, a stock exchange filing showed Monday.

* Paramount Global gained 1.2% in premarket trading after announcing a commercial partnership with Walmart to promote its Paramount+ online service.

* American Airlines announced on Monday evening that it would cut several thousand flights from its November schedule in a bid to avoid airport disruptions.

* Faraday Future Intelligent Electric - The electric vehicle developer announced Monday that it plans to raise up to $600 million, among other things, to finance the launch of its FF 91 luxury model, expected by the end of the year.

* Snowflake - The online software company's shares fell 3.9% in pre-market trading after it announced a reduction in its stake in investment fund manager Tiger Global Management.

* Ally Financial - Berkshire Hathaway, the group led by Warren Buffett, more than tripled its stake in the online bank in the second quarter, documents released Monday show. The stock gained 5.4 percent in pre-market trading.

 

Analyst recommendations:

  • Advance Auto Parts: Evercore ISI adjusts price target to $230 from $225. Maintains outperform rating.
  • Alaska Air Group: Melius Research initiated coverage with a recommendation of buy. PT jump 18% to $57.
  • Apollo Global Management: Morgan Stanley keeps equalweight rating. PT down to $61 from $60.
  • BJ's Wholesale Club: Jefferies remains buy with target increases from $85 to $72.
  • Cullen/Frost Bankers: Compass Point Research & Trading raised the target to $152. To buy from neutral.
  • Dillard's: J.P. Morgan upgrades to neutral form underweight. PT set to $298.
  • Equifax: Morgan Stanley cut the recommendation to equal-weight from overweight. PT set to $230.
  • Extra Space Storage: Truist Securities reiterates buy rating. PT up to $225 from $200.
  • Life Storage: Truist Securities reiterates hold rating. PT jumps to $138 from $132.
  • Mastercard: Daiwai Securities downgrades to neutral from outperform. PT set to $375.
  • Pets at Home: Panmure Gordon & Co Limited raised the recommendation to buy from hold. PT up 26% to 460 pence.
  • PotlatchDeltic: Raymond James adjusts price target to $65 from $70. Reiterates strong buy rating.
  • ResMed: Wilsons raised the recommendation to overweight from market-weight. PT up 16%.
  • RH: Exane BNP Paribas starts with a recommendation of outperform. PT set to $350.
  • Visa: Daiwa Securities cut the recommendation to neutral from outperform. PT up 4% to $225.
  • United Airlines: Melius Research initiated coverage with a recommendation of buy. PT up 18% to $47.