Yesterday, US markets had a relatively good performance. The Nasdaq 100 and S&P500 were down by 0.2% and 0.3% respectively, while the Dow Jones increased by 0.2%, mainly due to Caterpillar's impressive 8.9% surge following surprising results despite the challenging economic climate. After the close, Advanced Micro Devices released well-received results, whereas SolarEdge disappointed. Today, we are anticipating reports from Qualcomm, PayPal, Ferrari, and several US oil stocks. The key events of the week, at least in terms of corporate results, are scheduled for tomorrow, with Apple and Amazon announcing their results in the evening.
 
On the other hand, European markets all experienced declines, with Belgium down by 0.4% and Spain down by 1.4%. Switzerland avoided the slide due to a public holiday. The CAC40 in France and Germany's DAX were among the hardest hit, both declining by about 1.2%. Notable companies like LVMH, Kering, TotalEnergies, and L'Oréal saw significant drops. In Frankfurt, BMW, Deutsche Post, and Daimler Truck reported disappointing results, affecting smaller peers as well. Both French and German markets shared a similar depressing trend in their final manufacturing PMI indicators for July.

The recent federal news that caused a stir in the US was that Fitch downgraded the country's sovereign rating from "AAA" to "AA+". This rating is a key indicator of the nation's financial strength over time. The downgrade was a result of worsening fiscal conditions due to political reasons, increased debt, and higher interest rates. While this move was anticipated, it still holds significance. Notably, S&P was the first agency to strip the USA of its "AAA" rating back in 2011. The announcement led to a rise in government bond yields, with the US 10-year yield surpassing 4%.

During the recent night, another significant event was the indictment of Donald Trump for attempting to overturn the 2020 presidential election results. He faces charges, including conspiracy against the U.S. state. The special prosecutor, Jack Smith, nicknamed "Jack Smith-the-crazy" by Trump, aims to expedite the trial. Trump himself revealed his imminent impeachment, believing that the justice system intentionally delayed it to hinder his 2024 election campaign. With a loyal base supporting him, Trump is expected to perform well against his Republican rivals. Tomorrow, he is scheduled to appear in court in Washington. The implications of this impeachment could be significant for the world's leading economy.

The markets are facing pressure, with Japan and South Korea experiencing significant declines of over 2%. Australia and India fared slightly better with declines of 1.3% and 0.8% respectively. Despite Chinese authorities attempting to offer support, their efforts have not translated into concrete actions, leading to profit-taking. As a result, the CSI300 dropped by 0.9% on the mainland, while the Hang Seng fell sharply by 2.3% in Hong Kong, demonstrating increased reactivity. 

Today's economic highlights:

The ADP survey on US employment in July (8:15am). Full agenda here.
 
The dollar is stable at around 0.9119 EUR and 0.7866 GBP. The ounce of gold is down to 1944 USD. Oil is firm, with North Sea Brent at 84.78 USD a barrel and US light crude WTI at 81.18 USD. The yield on 10-year US debt stands at 4.03%. Bitcoin is trading at 29,375 USD.
 
In corporate news:
  • Advanced Micro Devices (AMD), whose sales forecast for the current quarter has been revised downwards, announced on Tuesday its intention to launch specialized artificial intelligence chips this year that could compete with Nvidia's products. AMD shares gained around 3% in after-hours trading.
  • On Tuesday, Starbucks reported quarterly like-for-like sales below market expectations, against a backdrop of falling demand in North America and internationally, despite a rebound in China. The share price was down 2% in pre-market trading.
  • Humana advanced 2.6% in pre-market trading after reporting a quarterly profit ahead of Wall Street expectations, thanks to a smaller-than-expected rise in medical costs.
  • Electronic Arts announced on Tuesday that it expects net bookings for the current quarter to be below expectations, after a quarter below consensus due to strong competition and a moderation in gamer spending. The share price was down 4.2% in pre-market trading. 
  • On Tuesday, Pinterest reported better-than-expected second-quarter results and said it expected its margin to rise for the year as a whole, thanks to a recovery in the advertising market and lower costs. The share, which has gained over 30% in the last three months, was down 2.6% in after-hours trading.
  • Match Group announced on Tuesday that it expects third-quarter revenues to exceed Wall Street expectations on the back of strong growth in the number of users, sending the stock up by around 11% in after-hours trading.
  • CVS Health gained 1.42% in pre-market trading, after reporting better-than-expected quarterly earnings.
  • Wells Fargo announced Tuesday that it plans to pay up to $1.8 billion to replenish a public insurance fund from which $16 billion has been withdrawn this year following the collapse of three banks.
  • Shale producers Pioneer Natural Resources and Devon Energy on Tuesday scaled back their investment plans and warned of a drop in drilling activity in the coming months amid a downturn in oil and gas prices that weighed on their respective second-quarter earnings.
  • Chesapeake Energy reported lower second-quarter earnings on Tuesday, against a backdrop of falling natural gas prices and production.
  • FirstEnergy reported better-than-expected second-quarter earnings on Tuesday, as lower costs and higher rates offset weak demand.
  • Caesars Entertainment - On Tuesday, the casino operator reported an unexpected adjusted loss for the second quarter due to higher costs, sending the stock down 2.2% in after-hours trading.
  • Lumen Technologies - The telecommunications operator fell by more than 8% in after-hours trading following the publication of a quarterly net loss of nearly nine billion dollars linked to impairments.
 
Analyst recommendations:
  • Advanced Micro Devices: Citi raised the recommendation to buy from neutral. PT set to $136
  • Caterpillar: Stifel maintains buy rating. PT up  to $300 from $275
  • Crown Castle: Argus Research Corp initiated coverage with a recommendation of buy. Price target set to $140.
  • Columbia Sportswear: CFRA cut the recommendation to hold from buy. PT set to $88
  • Insperity: Truist Securities maintains hold rating. Price target down to $110 from $128.
  • IPG Photonics: Raymond James upgrades to strong buy from outperform. PT set to $170
  • JetBlue Airways: Cowen cut the target to $5 from $8. Maintains market perform rating.
  • Lear: Argus Research Corp raised the target to $180 from $150. Maintains buy rating.
  • Norwegian Cruise: Macquarie raised the target to $22 from $20. Maintains outperform rating.
  • Oshkosh: Baird raised the recommendation to outperform from neutral. PT set to $137.
  • Skechers: Williams Trading raised the target  to $75 from $65. Maintains buy rating.
  • Stanley Black & Decker: Citi maintains neutral rating. Pt set to $110 from $98.