Earnings season is picking up pace, and the results are still pretty mixed. For example, today, Bank of America's said profit fell as it earned less from customer interest payments. UnitedHealth Group expects to take a hit of $1.15 to $1.35 per share this year from the disruptions caused by the February cyberattack at its Change Healthcare unit. However, Morgan Stanley posted results that exceeded analysts’ estimates for profit and revenue, boosted by wealth management, trading and investment banking.

Back to yesterday’s session. You have to go back six months, to October 2023, to find two consecutive sessions in which the S&P500 fell by more than 1%. On Friday, the broad US index lost 1.46%. Yesterday, it lost a further 1.2%. This 2.6% fall in two sessions takes it back two months, to a time when investors were still debating whether the US central bank would cut rates four or five times this year. Now, the million-dollar question is whether rates will fall in 2024. It's a slightly pessimistic view, admittedly, but it's gaining ground. Hence the despondency that has gripped the equity markets, which seem to be resigned to a less favorable scenario, or at least one where money is less plentiful, since high rates mean that there is less liquidity in circulation. So, they have to be more selective in their investments, and the riskiest assets tend to be neglected.

The yield on two-year US debt flirted with 5% yesterday, before a relative lull. The 10-year is at 4.63%, which means the bond market understands that US key rates are going to stay higher for longer than expected. Yes, I know, central bankers have been saying it for months. But until now, that hasn't stopped equities from rising. It’s less clear whether this rise will continue in the next few weeks.

Geopolitical tensions are perhaps the last straw in investor tolerance. Financiers are aware that US inflation has been on a knife-edge for some weeks, with the possibility of continuing to fall, with a few acceptable jolts, or on the contrary showing signs of recovery. This fragile balance is now being tested by the situation in the Middle East, which is keeping oil prices high and making the transit of goods more expensive. Or, more recently, by the restrictions on Russian metals, which will reduce supply and therefore, mechanically, influence prices.

Yesterday on Wall Street, the indices first gave the impression that they were going to erase their losses of the previous session. But then the session went into a tailspin. Market veterans are wary of days that start high and end low: it's a sign of unhealthy nervousness. At this point, I am obliged to talk about the VIX, the index of fear. Even though it is supposed to be less relevant than before, it has climbed to 19 points, the first time this has happened since last October.

Investors could have been reassured by the publication of a stronger than expected Chinese GDP for the first quarter. Beijing reported annual growth of 5.3%, compared with the 4.8% forecast by economists. This was a miraculous improvement, given that the components for retail sales and industrial production were lower than expected. It was due in part to public investment, which far outstripped sluggish private investment. So, there isn’t much to be excited about.

On the Eastern markets, everyone is falling this morning, and we can see the same thing in Europe. However, futures on Wall Street are in the green, for now…

Today's economic highlights:

Investors will be keeping an eye on the ZEW survey of German investor confidence, US building permits and housing starts, as well as capacity utilization and industrial production. The full agenda is here. 

The dollar is worth EUR 0.9395 and GBP 0.8027. The ounce of gold is worth USD 2,372. Oil is slightly down, with North Sea Brent at USD 89.16 a barrel and US light crude WTI at USD 84.49. The yield on 10-year US debt stands at 4.63%. Bitcoin is trading at USD 63,000.

In corporate news:

  • Bank of America - The group's profit fell in the first quarter as interest payments declined over the period. Bank of America made a profit of 6.7 billion dollars, or 76 cents per share, last quarter, compared with 8.2 billion dollars, or 94 cents per share, a year ago.
  • Morgan Stanley reported a rise in first-quarter profit on Tuesday, boosted by a recovery in its investment banking business.
  • Bank of New York Mellon reported better-than-consensus results on Tuesday, with profit up 5% on higher investment banking fees.
  • Johnson & Johnson reported quarterly sales below analysts' estimates as sales of its blockbuster psoriasis drug Stelara fell short of expectations. The group lost 2% before the opening.
  • UnitedHealth suffered an impact of $872 million on its first-quarter profit due to disruptions caused by the cyber attack in February, a cost that could reach up to $1.6 billion over the year. The disruption is expected to impact earnings by $1.35 per share this year, the company said in a statement. The group nevertheless reported better-than-expected results for the first quarter.
  • PNC Financial Services reported a 21% fall in first-quarter profit on Tuesday, hit by lower interest income as the lender paid more to hold on to customer deposits amid high interest rates.
  • United Airlines is due to publish its results before the stock market opens.
  • Lockheed Martin has won a $17 billion contract to develop the next generation of interceptors to defend the United States against an intercontinental ballistic missile attack, the US agency responsible for designing and developing the ballistic missile defence (BMD) system said on Monday.
  • Intel will commercialize two artificial intelligence chips with reduced capabilities for the Chinese market, in order to comply with US export controls and sanctions. The two chips should be launched in June and September respectively, according to a white paper published on the group's website on 12 April.
  • Tesla - Tesla's global job cuts include reducing staff in the US and China, the carmaker's two biggest markets, in sales, technology and engineering, five sources said on the matter. Tesla shed 5.59% on Monday after news that more than 10% of its global workforce would be made redundant, according to an internal memo seen by Reuters.
  • Boeing, which is facing quality problems after an incident on one of its planes in January, said on Monday it had found no fatigue cracks on 787s in service, while a whistleblower is due to testify at a Senate hearing on Wednesday about the company's safety culture.
  • Eli Lilly - A settlement between Eli Lilly and buyers of its insulin drugs, which would have capped prices and provided $13.5 million to address allegations that the company inflated the cost of the drugs, failed after an unfavorable ruling by the judge in the case.
  • Model N - ClearBridge Investments, the global equity manager, announced on Monday that it had asked the board of healthcare IT company Model N to reconsider its proposed acquisition by Vista Equity Partners for approximately $1.25 billion.
  • Apple wants to increase its investment in Vietnam, Tim Cook, the chief executive of the American technology giant, said in Hanoi on Tuesday, quoted by the state media, a day after the group said it wanted to increase its spending on suppliers in this South-East Asian country.
  • Meta - Mark Zuckerberg, the chief executive of Meta, on Monday won the dismissal of certain claims in a dozen lawsuits accusing him of concealing the fact that Facebook and Instagram were causing addiction in children.
  • Microsoft is to invest $1.5 billion in UAE-based artificial intelligence (AI) company G42, giving the US giant a minority stake and a seat on the board. As part of the deal, G42 will use Microsoft's cloud services to run its AI applications.
  • International Paper reached an agreement on Tuesday for all the shares in DS Smith, valuing the British packaging company at £5.8 billion ($7.2 billion) and ruling out Mondi's bid.
  • Live Nation Entertainment - The US Department of Justice is expected to file an antitrust complaint against the group, which owns Ticketmaster, as early as next month, the Wall Street Journal reported on Monday, citing people familiar with the case.

Analyst recommendations:

  • Amd (Advanced Micro Devices): HSBC upgrades to buy from hold with a price target raised from USD 180 to USD 225.
  • Colgate-Palmolive Company: Baptista Research downgrades to underperform from hold with a price target raised from USD 81.20 to USD 91.
  • Edwards Lifesciences Corporation: Baptista Research downgrades to hold from buy with a price target raised from USD 85.10 to USD 99.10.
  • Equifax Inc.: Baptista Research downgrades to hold from buy with a price target raised from USD 223.20 to USD 289.
  • Honeywell International Inc.: Deutsche Bank downgrades to hold from buy with a price target reduced from USD 227 to USD 215.
  • Kroger Co. (The): Wells Fargo upgrades to overweight from equalweight with a price target raised from USD 58 to USD 65.
  • Tyson Foods, Inc.: Barclays upgrades to overweight from underweight with a price target raised from USD 53 to USD 69.
  • Ge Aerospace: Baptista Research maintains a hold recommendation with a price target raised from USD 120 to USD 172.
  • Lam Research Corporation: Stifel maintains its buy recommendation and raises the target price from USD 850 to USD 1050.
  • Cheniere Energy, Inc.: Redburn Atlantic initiates a neutral recommendation with a target price of 162.USD 442.
  • Ge Vernova Inc.: Goldman Sachs initiates a Buy recommendation with a target price of USD 154.
  • Globalfoundries, Inc.: Evercore ISI initiates an Outperform recommendation with a target price of USD 71.
  • Fair Isaac Corporation: Redburn Atlantic initiates a neutral recommendation with a target price of USD 1113.
  • Microchip Technology, Inc.: Evercore ISI initiates an Outperform recommendation with a target price of USD 106.
  • On Semiconductor Corporation: Goldman Sachs maintains its buy recommendation and reduces the target price from USD 91 to USD 81.
  • Admiral Group Plc: RBC Capital upgrades to outperform from sector perform with a price target raised from GBX 2600 to GBX 3400.
  • Astrazeneca Plc: Deutsche Bank upgrades to hold from sell with a price target raised from GBX 9500 to GBX 10500.
  • Moneysupermarket.com Group Plc: Peel Hunt upgrades to buy from add with a target price of GBX 280.
  • Phoenix Group Holdings Plc: Barclays downgrades to underweight from overweight with a price target reduced from GBP 6 to GBP 5.
  • Savills Plc: HSBC upgrades to buy from hold with a price target raised from GBP 8.25 to GBP 12.60.