There is a lot of economic news to report today, but let's start with what happened yesterday at the close of Wall Street. What stands out is the big gap between a Dow Jones that finished at a balance (+0.01%) and a Nasdaq 100 that was down a sharp -2.26%. This is due to headwinds faced by two of the largest capitalizations of the index, Microsoft and Alphabet, which lost respectively 7.7% and 9.6%, after the announcement of results and prospects far from what investors expected. The duo took other stocks in its fall.

And to top this up, Meta Platforms fell 21.7% in pre-market trading since Mark Zuckerberg's company has published results far below expectations. For several quarters, Meta has been the sick man of tech giants, with a stock market drop of more than 60% since the beginning of the year. Apple saved the technology index from a total rout by gaining 0.4% yesterday.

Tech giants are not invincible anymore. This is a good lesson in humility for the market and a useful reminder for all investors: nothing lasts forever. Apple and Amazon will have a chance to restore the sector's reputation tonight after the close.

On the other hand, the venerable Dow Jones did better yesterday by relying on the old guard, the Coca-Cola, 3M Company or UnitedHealth. These stocks are benefiting from the change in mood I mentioned at the beginning of the week around the trajectory of monetary policy, which suggests that the Fed's rhetoric will soften again in the coming weeks, to bring the Fed back into a more favorable posture for economic activity and therefore for financial markets. Other central banks have started to take a less extreme stance on inflation, which feeds the self-fulfilling prophecy machine that the market sometimes feeds on: yesterday, the Bank of Canada raised rates by 50 points when the market was expecting 75 points. And last night, the Bank of Brazil maintained the status quo as it had done at the previous meeting. Signs that there is less panic and more pragmatism on the part of central bankers. Bond yields tell an identical but not risk-free story: the yield on 3-month US debt has converged in recent days to that on 10-year debt (around 4%), illustrating both the market sentiment that the end of the monetary tightening cycle is approaching and the arrival of a recession. Well, in theory, since this is still economics, a science that is not entirely accurate.

Today, it was the ECB's turn. Unlike Canada, it remained within expectations and raised its refinancing rate from 1.25 to 2%, or 75 basis points. This might not cause much reaction on markets, since it is not the most advanced in the cycle. That doesn't mean that today's announcements won't have an impact, but it could be limited to certain sectors (banking in particular) or limited in duration.

The United States also just announced the first estimate of its third quarter GDP. It grew by 2.6%, while 2.4% was expected. In premarket trading, after the release, the Dow and the S&P were up by 0.8 and 0.1% respectively, while the Nasdaq was down 0.5%. It's unclear at the time of writing if we are going to be in the good news is bad news pattern, as this better-than-expected growth could dampen investors' belief that the Federal Reserve will have to ease its monetary policy to avoid damaging the US economy too severely…

 

Economic highlights of the day:

The first estimate of Q3 GDP and September durable goods orders are today's main data in the US. All the macro agenda is here. https://www.marketscreener.com/stock-exchange/calendar/economic/

The dollar is up 0.8% to EUR 0.9990 and up 0.6% to GBP 0.8647. The ounce of gold is worth USD 1659. Oil rebounded, with North Sea Brent at USD 94.30 per barrel and US WTI light crude at USD 88.61. The yield on 10-year U.S. debt is back down to 4.02%. Bitcoin is trading at USD 20,700 per unit.

 

In corporate news:

* Meta Platforms, owner of Facebook, Instagram and WhatsApp, was falling 22.7% in pre-market trading after it said it expects lower-than-expected fourth-quarter revenue and continued higher costs in 2023.

* Mastercard reported a profit increase Thursday as rising prices had a limited impact on consumer spending in the third quarter. However, the stock was reported down 2.7% in pre-market trading.

* McDonald's reported better-than-expected third-quarter like-for-like sales, buoyed by higher prices and increased restaurant traffic.

* Caterpillar reported better-than-expected quarterly sales and profit growth, as strong demand and high prices helped the world's largest construction equipment maker mitigate the impact of higher material and freight costs. Its shares were up 4.7% in pre-market trading.

* Comcast was up 7% in premarket trading after reporting slightly better-than-expected quarterly revenue on the back of a turnaround in its movie and amusement park businesses.

* Ford reported a third-quarter net loss due to a $2.7 billion write-down of its investment in autonomous-driving startup Argo AI, which will close. The automaker was down 2.4% in pre-market trading.

* Volkswagen plans to strengthen its collaboration with MOBILEYE, the autonomous driving division of INTEL, two sources close to the matter told Reuters on Thursday.

* Twitter shares were up 1.1 percent in premarket trading at $53.96, closing in on Elon Musk's bid to buy the social network at $54.20.

* Merck was up 2.6% in premarket trading after reporting better-than-expected third-quarter sales and earnings, thanks to strong results from its Keytruda cancer treatment and Gardasil human papillomavirus vaccine. The U.S. drugmaker announced Wednesday that its chief executive, Rob Davis, would succeed Ken Frazier as chairman of the board effective Dec. 1.

* Tesla announced a recall of about 24,000 Model 3s in the U.S. for a seatbelt malfunction.

* Southwest Airlines expects fourth-quarter revenue to rise after posting a better-than-expected profit for the July-September period, buoyed by strong demand from tourist travel. The airline was up 4.3% in pre-market trading.

* Northrop Grumman was down 3.8 percent before the market opened, as the aerospace and defense group said it expects full-year sales and earnings to be near the bottom of its guidance range due to supply chain issues and rising costs.

* HoneyWell International reported third-quarter profit growth of 27%. The industrial conglomerate's stock was up 5.7% in premarket trading.

* VF Corp, owner of the Vans brand, was down about 4% in premarket trading after it lowered its profit target for fiscal 2023, citing negative currency effects. JPMorgan lowered its recommendation to "underweight" from "neutral".

* Hertz reported a 12% increase in quarterly revenue as demand for rental cars remained strong with an increase in leisure travel.

 

Analyst recommendations:

  • Bank of New York Mellon: Odeon Capital Group initiated coverage with a recommendation of buy. PT set to $100.
  • Evercore: Keefe, Bruyette & Woods downgrades to market perform from outperform. PT up 9.4% to $109.
  • HSBC: Deutsche Bank confirms his opinion on the stock and remains Neutral. The target price has been raised from GBp 570 to GBp 650.
  • JD.com ADR: CMB International Capital initiated coverage with a recommendation of buy. PT set to $78.50.
  • Masco: RBC Capital Markets downgrades to sector perform from outperform. PT up 3.1% to $47.
  • Meta Platforms: Morgan Stanley downgrades to equal-weight from overweight. PT down 19% to $105.
  • Microsoft: DA Davidson adjusts price target to $250 from $316, maintains buy rating.
  • Netflix: Pivotal Research upgrades netflix to buy from sell, adjusts price target to $375 from $200
  • Raytheon Technologies: Morgan Stanley lowers price target to $119 from $124, keeps overweight rating
  • Reckitt: Berenberg remains Buy with a price target reduced from 8200 to 7050 GBp.
  • Tenet: Raymond James cut the price target to $80 from $135. Maintains strong buy rating.
  • XP Power: Jefferies remains "Hold" with a price target reduced from 3770 to 1890 GBp.