After a few sessions in the green, Wall Street is heading to a red opening today, weighed down by megacap stocks after disappointing results from Meta Platforms, which tumbled 15% in premarket trading after it issued a disappointing forecast with higher expenses and lower-than-expected revenue. AI isn’t the magic word it used to be, as investors now fear that costs associated with the technology might outweigh its benefits.

High bond yields are also dampening the mood as well as GDP data, which came in today way below expectations. The US economy grew by 1.6% in the first quarter on an annual basis, while 2.5% was expected in the Bloomberg consensus. This is much lower than the growth recorded in the fourth quarter, which was revised up from 3.4% to 3.9%. Futures tumbled after the announcement.

While a slower economy could strengthen the case for rate cuts, investors are also fearing a stagflation scenario, when the economy struggles but inflation keeps rising.  This is because in its GDP release, the The Bureau of Labor Statistics said “the price index for gross domestic purchases increased 3.1 percent in the first quarter, compared with an increase of 1.9 percent in the fourth quarter. The personal consumption expenditures price index increased 3.4 percent, compared with an increase of 1.8 percent. Excluding food and energy prices, the PCE price index increased 3.7 percent, compared with an increase of 2.0 percent.” All eyes will be on Friday’s Core PCE update to get more clues about the economic situation. Now markets are pricing a first rate cut in December. June was the likely scenario just a few weeks ago...

Back to earnings season, Tesla gained 12% at the end of yesterday's trading day, although its results collapsed. The market bought Elon Musk’s promises of better days ahead. We also saw +11% for ASM International, +36% for Nordic Semiconductor, -32% for Evotec and -11% for Old Dominion... The Q1 2024 earnings season is colorful and a little carefree. It's a sign that investors are disoriented in a context where landmarks are tending to blur. The degree of uncertainty has increased in the field of international relations (Ukraine, Middle East...). It has increased at the political level (US presidential election, European elections, etc.). Monetary policy (Fed waltz-hesitation). It has increased at the technological level (what impact will the AI craze have?). The list goes on. As a good market sociologist, the Morgan Housel would no doubt reply that it is not uncertainty that has increased, since it is by its very nature permanent, but the degree of investor complacency. They have become more sensitive to risk factors, which reinforces violent reactions and volatility.

Wall Street ended around equilibrium after two strong rebound sessions yesterday. The Nasdaq 100 even gleaned an additional 0.3%, boosted by a move as brutal as it was excessive in the semiconductor sector. In Europe, red dominated. Light red in Paris and Amsterdam, deeper red in Frankfurt and on the STOXX Europe 600 (-0.4%), and slightly brighter red in Zurich, where Roche's more than 3% decline following its results weighed heavily.

The next growth driver for technology will be Microsoft and Alphabet after the bell today. These results will determine whether the Meta case is a bump in the road or whether there’s a broader problem with the market's locomotives. There are plenty of other sector barometer results to sink your teeth into today.

In other news, BHP has proposed buying Anglo American, which would be the biggest mining deal of the decade. Anglo American is considering this unsolicited offer. In Japan, the yen continues to slide against the dollar, but the Japanese authorities have not yet drawn their cement mixer to cobble together a screed and prevent the decline from continuing. Perhaps this is because the Bank of Japan will be meeting tomorrow to make a monetary policy decision?

In Tokyo, the Nikkei 225 fell by 2.1%. South Korea and Taiwan, weighed down by their technology stocks, lost more than 1%. Hong Kong and Mainland China are up. Finally, India gained 0.6% and Australia fell by the smallest of margins. European leading indicators are bearish, with the Stoxx EU 600 losing 0.4%.

Economic highlights of the day:

The French business confidence index, Q1 USD GDP, new jobless claims, wholesale inventories and monthly housing figures are on the agenda. 

The dollar is worth EUR 0.9350 and GBP 0.8013. The ounce of gold is trading at USD 2,325. Oil remains firm, with North Sea Brent at USD 87.13 a barrel and US light crude WTI at USD 83.00. The yield on 10-year US debt rises to 4.65%. Bitcoin is trading at USD 63,380.

In corporate news:

  • Apple ceased to be China's leading smartphone vendor in the first quarter, according to preliminary data published Thursday by analyst firm IDC.
  • IBM will buy HashiCorp in a $6.4 billion deal to expand its cloud computing product offering, the companies said Wednesday.
  • Ford Motor reported a decline in first-quarter adjusted profit on Wednesday, as labor and electric vehicle costs remained high.
  • Bristol-Myers Squibb on Thursday reported a first-quarter loss related to its acquisition of Karuna Therapeutics, RayzeBio, and Mirati Therapeutics.
  • Dow exceeded first-quarter earnings estimates on Thursday, as sales volumes rose amid signs of recovery in global manufacturing activity.
  • Micron Technology - U.S. President Joe Biden will announce on Thursday a preliminary agreement for up to $6.14 billion in subsidies to the chipmaker, the White House announced.
  • Merck raised its annual profit and sales forecasts on Thursday on the back of strong sales of its cancer drug Keytruda and its HPV vaccine Gardasil.
  • American Airlines on Thursday forecast a profit for the current quarter well ahead of analysts' expectations, amid a rebound in business travel.
  • Southwest Airlines said on Thursday it expected deliveries of new Boeing aircraft to be half as high as forecast.
  • Lazard reported higher first-quarter earnings on Thursday, supported by growth in its assets.
  • Valero Energy exceeded first-quarter earnings estimates on Thursday, as the US refiner benefited from sustained demand despite limited crude supplies.
  • Newmont exceeded Wall Street estimates for first-quarter earnings on Thursday, as gold production was buoyant.
  • Royal Caribbean raised its annual profit forecast on Thursday for the second time this year, benefiting from record demand for cruises.
  • Caterpillar said on Thursday it expected second-quarter sales to fall, due to a decline in demand for its equipment after last year's surge.
  • Dover - The industrial equipment manufacturer's quarterly profit exceeded the Wall Street consensus on Thursday, thanks to stronger manufacturing activity.
  • Honeywell - The group's earnings published on Thursday beat Wall Street estimates, as the strength of its aeronautics business offset a slowdown in the company's industrial and building automation divisions.
  • Carrier Global - The air-conditioning manufacturer lowered its full-year revenue forecast on Thursday, anticipating continued pressure on consumer spending amid persistent inflation.
  • Comcast exceeded quarterly sales estimates on Thursday, thanks to higher-than-expected growth in the number of subscribers to its Peacock streaming service and strong attendance at its theme parks.
  • Northrop Grumman reported a 12% rise in first-quarter earnings on Thursday, buoyed by higher global defense spending and a strong order book.
  • Lam Research reported quarterly sales above Wall Street consensus on Wednesday, as chipmakers ordered more of its equipment to produce AI semiconductors.
  • Teradyne expects second-quarter revenues to beat Wall Street expectations, thanks to robust demand for its chip testing equipment. The stock gains 7.9% before the opening.
  • Raymond James on Wednesday reported an 11% rise in second-quarter adjusted revenues, thanks to a strong performance in its capital markets and investment banking businesses.
  • Tyler Technologies exceeded Wall Street expectations for first-quarter sales, thanks to robust demand for its digital solutions. The stock gained 2.6% before the opening.
  • Rubrik, a cybersecurity startup, priced its IPO shares at $32. The stock will be listed on the New York Stock Exchange on Thursday under the ticker "RBRK."
  • Cisco Systems announced that hackers had infiltrated some of its systems to gain access to government networks.
  • Chipotle Mexican Grill raised its sales forecast for the year on Wednesday, expecting robust demand for its products despite higher prices.
  • ServiceNow said Wednesday that its first-quarter revenues more than doubled, with many customers using its generative AI tools.
  • Whirlpool is cutting 1,000 jobs, the Wall Street Journal revealed on Wednesday.

Analyst recommendations:

  • Meta Platforms, Inc.: Punto Research downgrades to hold from buy with a price target raised from USD 393.66 to USD 514.43.
  • Monster Beverage Corporation: JP Morgan downgrades to neutral from overweight with a target price reduced from USD 66 to USD 59.
  • The Sherwin-Williams Company: KeyBanc Capital Markets upgrades to overweight from sector weight with a target price of USD 400.
  • The Tjx Companies: Goldman Sachs upgrades to buy from neutral with a price target raised from USD 100 to USD 110.
  • United Parcel Service Inc.: HSBC upgrades to buy from hold with a price target raised from USD 150 to USD 170.
  • Boeing: President Capital Management Corp maintains a neutral recommendation with a price target reduced from USD 237 to USD 171.
  • Chipotle Mexican Grill, Inc.: Piper Sandler & Co maintains a neutral recommendation with a price target raised from USD 2442 to USD 3070.
  • Ge Aerospace: Citigroup maintains its buy recommendation and raises the target price from USD 120.43 to USD 186.
  • Old Dominion Freight Line, Inc.: Jefferies maintains its hold recommendation with a price target reduced from USD 400 to USD 200.
  • Spotify Technology S.a.: DZ Bank AG Research maintains its hold recommendation with a price target raised from USD 240 to USD 300.
  • Vertiv Holdings Co: TD Cowen maintains its buy recommendation and raises the target price from USD 69 to USD 89.
  • Dell Technologies Inc.: CITIC Securities Co Ltd initiates a buy recommendation with a target price of USD 145.
  • General Motors Company: Nomura maintains its neutral recommendation with a price target raised from USD 43 to USD 45. Bernstein initiates an Outperform recommendation with a target price of USD 55.
  • Uber Technologies, Inc.: Fubon Securities initiates a buy recommendation with a target price of USD 93.
  • Astrazeneca Plc: AlphaValue/Baader Europe upgrades to add from buy with a price target raised from GBX 14031 to GBX 14194.
  • Centamin Plc: Liberum downgrades to sell from hold with a price target reduced from GBX 110 to GBX 107.
  • Molten Ventures Vct Plc: Liberum downgrades to hold from buy with a target price reduced from GBX 1675 to GBX 1619.