The stock market is kind of unreal right now. It almost feels like 2000 all over again. Or 2007… But the overall feeling is that this time, it's different. Investors are flocking to the tech sector like moths to a flame. The investment world is less and less interested in financial ratios and more and more in how stories are told. Why has Nvidia gained 33% since January 1, while Tesla lost 24%? Because the story of Nvidia's rise to the top is still alive. Tesla's narrative, on the other hand, is broken, or at least the best pages have already been written.

Despite setbacks for tech giants Apple and Alphabet, US indices continued their ascent last week, boosted by data pointing a strong economy and the strong results of Meta and Amazon. The S&P500 and the Nasdaq 100 gained over 1% for the week, with Friday's session seeing a 1.7% gain in the Nasdaq 100, which is flying from record to record even as the Fed's rate-cutting prospects have dimmed.

The week kicked off with an interview of Fed boss Jerome Powell on CBS's "60 Minutes". The world's most influential central banker continued to poke fun at investors, telling them that they are too optimistic about the trajectory of rates. Until recently, the market had been aiming for four rate cuts this year, the first in March. Powell made it clear that it will be three cuts and the first at an undetermined date, but certainly not in March. The assumption of a first easing in May fell from over 90% to around 70% between the beginning and end of the interview. Caution was therefore raised a notch, especially as the interview was recorded on February 1, before the release of January's US employment figures. This data, published on Friday, sent the market into a frenzy, since US employment remains stubbornly resilient, making rate cuts an even more distant prospect.

This week, we'll see how much credence investors give to Jerome’s words. Bank of America, in its latest commentary, says that Powell is seen as a paper tiger, and that markets don't care too much whether the Fed cuts rates in March or May, as they see the Fed as supportive of asset prices. Meanwhile, earnings releases continue to drive the stock market. We saw last week that investors considered the Amazon-Meta glass half-full rather than the Alphabet-Apple glass half-empty. There will be less technology this week, but just as many big names, as we await the results of stocks linked to consumer goods (McDonald’s, Costco, Walt Disney, L'Oréal, Hermès, Kering...), industry (Caterpillar, Linde...), healthcare (Eli Lilly), finance (UBS, Crédit Agricole, Adyen) or oil (ConocoPhillips, BP Plc, TotalEnergies...).

In China, there was some panic among Chinese small caps, which largely subsided by the end of the day. The CSI1000, the broad index of Shanghai and Shenzhen, lost almost 9% during the session, before reducing its losses to less than 3%. A Hong Kong manager interviewed by Bloomberg explained that mid-caps and small caps are under heavy selling pressure as some investors have bet on increased support for large caps from the authorities. Being long large caps and short small caps is a popular bet in China. The stock market is simple. The turmoil comes despite the fact that the China Securities Regulatory Commission has indicated that it will take measures to prevent abnormal fluctuations and channel fresh money into the markets.

In other news, Donald Trump has threatened tariffs of over 60% on Chinese products if elected. He also promised to replace Jerome Powell, whom he considers too "political". Powell, who retorted on CBS that "integrity is priceless" and that the Fed doesn't play politics.

In Asia Pacific this morning, the Nikkei 225 ended the session up 0.5%. South Korea lost 0.9%, Australia gave up 0.9% and the Sensex 30 fell 0.4%. In China, the indices went through all the colors. The CSI300 close up 0.6% and the Hang Seng down 0.1%. European leading indicators were hesitant, with the Stoxx Europe 600 down 0.4%, while futures on Wall Street are slightly in the red.

Today’s economic highlights:

January services PMI indicators across advanced economies and the US ISM services index are on the agenda. 

The dollar is up 0.3% against the euro and 0.5% against the pound to EUR 0.9310 and GBP 0.7965. The ounce of gold lost ground to USD 2015. Oil continues to fall, with North Sea Brent at USD 77.50 a barrel and US light crude WTI at USD 72.42. The yield on 10-year US debt rebounds to 4.18%. Bitcoin trades at around USD 43,000.

Things to read today:

  • Caterpillar, considered a good barometer of the US economy, reported a rise in quarterly earnings on Monday, buoyed by strong demand for its construction equipment amid rising infrastructure spending and a rebound in the US housing market. The share price climbs 7% in pre-market trading.
  • McDonald’s announced on Monday its first quarterly sales decline in almost four years, due to weak growth in international sales, particularly in the Middle East, China and India. The share price is down 2% in pre-market trading.
  • Estee Lauder on Monday revised its annual profit forecast downwards and announced a restructuring program aimed at reducing its workforce by 3% to 5% in order to control costs. The share price jumped 11% in pre-market trading.
  • Boeing is down 1.6% in pre-market trading after Spirit Aerosystems discovered two poorly drilled holes in the fuselages of certain 737 MAX aircraft, which should delay the delivery of some 50 aircraft to the airline, while the manufacturer addresses this new quality problem. Spirit AeroSystems drops 2% before the Wall Street opening.
  • Tesla lost 1.3% in premarket trading after Piper Sandler lowered its price target from $295 to $225, after the intermediary cut the automaker's deliveries for this year to 1.93 million units from 2.18 million.
  • Amgen - The laboratory announced on Monday that preliminary data from its experimental obesity treatment, published in a medical journal, had shown that it promoted significant weight loss with an acceptable safety profile. The stock gained 1.21% in pre-market trading.
  • Apple - On Friday, a U.S. federal judge authorized tens of millions of Apple customers, who accuse the company of maintaining a monopoly with its App Store applications, to file a class action. Meanwhile, Apple's main subcontractor, the Taiwanese Foxconn Group, announced on Sunday that it was anticipating a "slightly better" year than 2023, but warned of a shortage of server chips for artificial intelligence.
  • Yandex - The Nasdaq-listed Russian technology group, incorporated under Dutch law, announced that it had reached an agreement worth 475 billion rubles ($5.21 billion or 4.84 billion euros) to sell all its assets in Russia to a consortium of Russian investors, including a fund owned by the oil company Lukoil.
  • Cano Health announced on Sunday that it had filed for bankruptcy protection and reached an agreement to restructure in order to reduce its debt and invite bids, including a buyout. Shares plunge 51.7% in pre-market trading.
  • Zscaler is down 3% in pre-market trading following the announcement of the departure of its Chief Operating Officer, Dali Rajic.

Analyst recommendations:

  • 3M Company: Baptista Research downgrades to hold from buy with a price target reduced from USD 114.40 to USD 108.90.
  • Abbvie Inc.: Morningstar upgrades to hold from sell with a price target raised from USD 137 to USD 168.
  • Advanced Micro Devices, Inc.: Phillip Securities upgrades to accumulate from neutral with a price target raised from USD 110 to USD 195.
  • Aptiv Plc: Benchmark Co., LLC drops coverage on the stock.
  • At&T Inc.: Baptista Research downgrades to hold from outperform with a price target raised from USD 18.10 to USD 19.80.
  • Baker Hughes Company: Baptista Research upgrades to buy from underperform with a price target raised from USD 36.60 to USD 39.60.
  • Citizens Financial Group, Inc.: Citi upgrades to buy from neutral with a target price of USD 36.
  • Csx Corporation: Baptista Research downgrades to underperform from outperform with a price target raised from USD 33.70 to USD 37.60.
  • Ford Motor Company: Benchmark Co., LLC drops coverage on the stock.
  • Freeport-Mcmoran Inc.: Baptista Research downgrades to hold from outperform with a price target reduced from USD 45.90 to USD 45.50.
  • General Motors Company: Benchmark Co., LLC drops coverage on the stock.
  • Globalfoundries, Inc.: JP Morgan downgrades to neutral from overweight with a target price reduced from USD 65 to USD 56.
  • Halliburton Company: Baptista Research upgrades to buy from hold with a price target reduced from USD 49 to USD 47.50.
  • Ibm: Baptista Research downgrades to underperform from hold with a price target raised from USD 154 to USD 180.10.
  • Kimberly-Clark Corporation: Baptista Research downgrades to underperform from hold with a price target reduced from USD 129.70 to USD 125.70.
  • Lyondellbasell Industries N.v.: JP Morgan upgrades to overweight from neutral with a price target raised from USD 95 to USD 100.
  • Markel Group Inc.: Jefferies downgrades to hold from buy with a price target reduced from USD 1680 to USD 1500.
  • Microsoft Corporation: Punto Research downgrades to hold from buy with a price target raised from USD 381.60 to USD 416.48.
  • Paccar, Inc.: Baptista Research downgrades to underperform from hold with a price target raised from USD 91 to USD 99.
  • Procter & Gamble Company: Baptista Research downgrades to hold from underperform with a price target raised from USD 155.40 to USD 168.30.
  • Resmed, Inc.: Baptista Research downgrades to underperform from outperform with a price target raised from USD 174 to USD 195.90.
  • Texas Instruments: Baptista Research downgrades to underperform from buy with a price target reduced from USD 178.20 to USD 165.80.
  • The Cigna Group: RBC Capital upgrades to outperform from sector perform with a price target raised from USD 327 to USD 354. Cantor Fitzgerald upgrades to overweight from neutral with a price target raised from USD 334 to USD 372.
  • The Tjx Companies: Redburn Atlantic downgrades to neutral from buy with a target price of USD 100.
  • United Rentals, Inc.: Baptista Research upgrades to hold from underperform with a price target raised from USD 550 to USD 712.
  • Verizon Communications: Baptista Research downgrades to hold from buy with a price target raised from USD 43.60 to USD 44.80.
  • Warner Music Group Corp.: Redburn Atlantic upgrades to neutral from sell with a price target raised from USD 15.40 to USD 21.
  • Alphabet Inc.: Guotai Junan Securities Co., Ltd. maintains its overweight recommendation and raises the target price from USD 133 to USD 177.
  • Amazon.com, Inc.: CICC maintains its outperform recommendation and raises the target price from USD 151 to USD 193.
  • Amphenol Corporation: Baptista Research maintains its hold recommendation with a price target raised from USD 91 to USD 110.40.
  • Arista Networks, Inc.: JMP Securities maintains its market outperform recommendation and raises the target price from USD 215 to USD 325.
  • Booking Holdings Inc.: Oppenheimer maintains its outperform recommendation and raises the target price from USD 3450 to USD 4200.
  • Charter Communications, Inc.: Wolfe Research maintains its outperform rating and reduces the target price from USD 502 to USD 400.
  • Hilton Worldwide Holdings Inc.: Baird maintains its outperform rating and raises the target price from USD 166 to USD 200.
  • Insulet Corporation: Stifel maintains its hold recommendation with a price target raised from USD 163 to USD 208.
  • Intuitive Surgical, Inc.: Baptista Research maintains its hold recommendation with a price target raised from USD 275.20 to USD 417.80.
  • Lam Research Corporation: Baptista Research maintains a hold recommendation with a price target raised from USD 660.90 to USD 881.90.
  • Meta Platforms, Inc.: Societe Generale maintains its sell recommendation with a price target raised from 175 to USD 245. KGI Securities Co Ltd maintains its outperform rating and raises the target price from USD 385 to USD 565. China Renaissance Research maintains its buy recommendation and raises the target price from USD 380 to USD 505. Guotai Junan Securities Co., Ltd. maintains its overweight recommendation and raises the target price from USD 447.76 to USD 563. CICC maintains its outperform recommendation and raises the target price from USD 332 to USD 507.
  • Netflix, Inc.: Baptista Research maintains its hold recommendation with a price target raised from 442.90 to USD 631.
  • Nvidia Corporation: Goldman Sachs maintains its buy recommendation and raises the target price from USD 625 to USD 800.
  • Pinterest, Inc.: KeyBanc Capital Markets maintains its overweight recommendation and raises the target price from USD 37 to USD 48.
  • Servicenow, Inc.: Baptista Research maintains its hold recommendation with a price target raised from 640 to USD 829.60. Bernstein maintains its outperform rating and raises the target price from USD 665 to USD 809.
  • Tesla, Inc.: Piper Sandler & Co maintains its overweight recommendation and reduces the target price from USD 295 to USD 225.
  • United Rentals, Inc.: Baptista Research upgrades to hold from underperform with a price target raised from USD 550 to USD 712.
  • Warner Music Group Corp.: Redburn Atlantic upgrades to neutral from sell with a price target raised from USD 15.40 to USD 21.
  • Land Securities Group Plc: Morgan Stanley upgrades to overweight from equal weight with a price target raised from GBX 650 to GBX 730.