There are wars, the devastating earthquake in Turkey and Syria, trade tensions, strikes, balloons or recession fears, but it is probably a discussion scheduled for tonight in Washington that will seal part of the fate of the financial markets in the weeks to come. This discussion should take place at 12:40 pm in the American capital between David Rubenstein and Jerome Powell. The first is the former head of Carlyle and the president of the Economic Club of Washington, D.C. and will play the role of the interviewer. The second is the head of the U.S. central bank. The duo could chat about fishing, the weather or the recipe for four-cheese pizza, but it's still a safe bet that they'll mostly be discussing monetary policy. The question for investors is whether the Fed boss will try to dampen the enthusiasm or whether he will let it go, as he seemed to do last week.

The market has its own idea. It has tensed up since Friday, vaguely aware that it may have gone a little too far in its optimism. Stock market indexes have fallen, the dollar has risen and the yield on 10-year US debt has recovered quite a bit of ground. But it doesn't look like it will take much for stocks and bonds to catch fire again. In my opinion, it will take a very aggressive Powell to convince the financial community that they should be more cautious. If they perceive some hesitation or a flaw in the phrasing, optimism is likely to take over quite quickly. Powell received a boost last night from Atlanta Fed boss Raphael Bostic, who believes that the current rate hike cycle could be revised upward because of the overheated job market. Bostic is usually a moderate within the Federal Reserve, more dove-like (those who favor a loose monetary policy) than hawk-like (those who favor an orthodox monetary policy).

Company results are going to pile up again in the United States with Linde, Vertex and KKR are also on the agenda. Overall, we expect mixed results but big share buybacks, because it looks good, we have money and it avoids saying that we pay dividends, because dividends are evil.

In the rest of the macroeconomy, the civilian balloon launchers have announced a new guideline for the medium term, in addition to the economic growth objectives. It revolves around "quality" and consists of upgrading Chinese society on many standards. It's a bit of a catch-all at this point, but it does reflect a desire to accompany economic expansion with a variety of civil advances. The markets have noted that this could lead to additional investment, which is not to their displeasure. In the United States, Joe Biden is scheduled to deliver his 2023 State of the Union address today. The financial press understands that he will use the occasion to relaunch his plan to tax billionaires and to mention a quadrupling of the tax on share buybacks (read in the Financial Times this morning). He looks good, Joe.

 

Economic highlights of the day:

On the agenda, the US trade balance for December (8:30am). All the agenda here. This morning, the Australian central bank raised rates by a quarter point, as expected, while warning that further rate hikes will be necessary in the coming months.
 
The dollar continues to rise to 0.9340EUR. The ounce of gold remains under pressure at 1869 USD. Oil is recovering slightly, with North Sea Brent crude at 82.10 USD per barrel and U.S. light crude WTI at 75.52 USD. The yield on 10-year US debt is back up to 3.62%. Bitcoin is trading around 23,000 USD.


In corporate news:

* Apollo Global Management is among several financial companies in discussions with Credit Suisse to acquire a stake in the investment bank that the Swiss group intends to spin off.

* Boeing expects to cut about 2,000 financial and human resources jobs this year through a layoff plan and natural attrition.

* Chevron - Italy's Eni may take over the U.S. oil company's stake in the Indonesia Deepwater Development (IDD) gas project and operate it by mid-2023.

* CVS is close to a deal to acquire healthcare group OAK STREET HEALTH for about $10.5 billion including debt.

* Activision Blizzard reported better-than-expected adjusted fourth-quarter revenue Monday night, helped by the success of its "Call of Duty" video game franchise.

* Pinterest - The image-sharing platform reported weaker-than-expected quarterly revenue Monday night, sending its stock down nearly 4% in pre-market trading.

* Take-Two Interactive Software on Monday night lowered its annual adjusted revenue forecast after lower-than-expected sales for its third quarter off-year. The video game publisher's stock was down 1% in after-hours trading.

* Baidu - The New York-listed Chinese group's stock soared 15% in pre-opening trading as the search engine giant said it would complete internal testing of its ChatGPT-like project dubbed "Ernie Bot" in March.

 

Analyst recommendations:
  • Akamai Technologies: Loop Capital Markets initiated coverage with a recommendation of hold. Price target set to $91.
  • Illinois Tool Works: Morgan Stanley raised price target to $223 from $174.
  • On Semiconductor: KeyBanc Capital Markets raised the target to $100 from $80. Maintains overweight rating.
  • Neurocrine Biosciences:  RBC Capital Markets cut the target to $110 from $122. Maintains sector perform rating.
  • Parker-Hannifin: Argus Research maintains buy rating. Price target up to $390 from $335
  • Pfizer: Daiwa Securities raised the recommendation to outperform from neutral. PT up 17% to $51.
  • Saia: Susquehanna Financial maintains neutral rating. PT up to $280 from $220.
  • Skyworks Solutions: Needham & Co raised the target to $140 from $110. Maintains buy rating.
  • Timken: Stifel maintains buy rating to $100 from $85.
  • Tyson Foods: Goldman Sachs cut the recommendation to neutral from buy. PT set to $66.