The stock markets are coming out of yet another curious session, one of those where the signals seem clear enough but end up with a result that makes no sense. Let me remind you that the basic financier, let's call him Bill. He doesn't give a damn about what's going on around him as long as the price of money is falling. Bill has put the Fed’s interest rate cuts at the top of his wishlist. It needs a few ingredients like a worsening economic situation, the kind that would force a central banker, let's call him Jerome, to lower rates even if Jerome is a little afraid of inflation getting out of hand. I try to tell the same story in a different way every day, to avoid fatigue, but it's not easy, believe me.

In short, Jerome and Bill could have found common cause yesterday, when the latest US activity data (ISM) showed that the economy was slowing down, confirming the statistics published in recent days. That's right, because a slowdown would prompt the Fed to lower rates to avoid an economic crash. Moreover, bond markets correctly interpreted the data: yields plunged, a sign that this market anticipates a lower-than-expected rate environment down the road.

The catch is that Bill didn't send equities higher. The S&P500 did rise by 0.11% at the bell yesterday, but this was due to a late-day surge and the rise of Nvidia, which gained 4.9% on a new closing high of 1150 dollars. The company is so fashionable that it is now only 5.3% behind Apple and 8.7% behind Microsoft to become the world's leading capitalization. That still seems a long way off, except when a stock worth almost 3,000 billion dollars is capable of making +4%. The S&P500 gained 0.11%, but the equally-weighted S&P500 fell by 0.57%. This means that the large caps, mainly Nvidia and Meta, pulled the market along while the rest of the market suffered. Given the improved outlook for rate cuts, we would have expected the market to rally more broadly. Not so.

However, the bet on monetary easing in the United States as early as September is back on track. Not so long ago, the financial community had all but given up on any rate cuts in 2024. So it's an improvement, but one that's based on a worsening economic situation. And therein lies the rub. The risk is that investors will become more concerned about the risk of an economic crash than anything else. They’re never satisfied, it seems.

To avoid these conflicting reactions, it’s best to take a step back from the data bombarding the markets. But that seems mission impossible. Yesterday, the US market took note of an improving manufacturing PMI indicator in the expansion zone and a declining ISM manufacturing indicator in the contraction zone. The two statistics are supposed to measure roughly the same thing. They also learned from a sub-index of one of the two surveys that the labor market was improving, from which they extrapolated that May's employment figures, due on Friday, are likely to be more robust than expected. On top of this, the New York Fed's in-house inflation index showed a slight easing... Partly contradicted by an ISM component! Are you still following?

This turmoil will continue today with the release of durable goods orders and the JOLTS survey on US employment. Fed members won't be adding to the cacophony: they must remain silent until the monetary policy decision due to be announced on June 12 (the Fed imposes a period of silence some ten days before FOMC meetings and one day afterwards).

The markets don't have many corporate results to get their teeth into, which also explains the return of macroeconomics. The news is also dominated by electoral events, with elections completed in Mexico and India, and those looming in Europe next weekend and in the UK in July. On Wall Street yesterday, there was also much talk of the return of speculation in theme stocks, led by GameStop, and the major technical glitch encountered by the NYSE. Some sixty stocks experienced episodes of undue volatility. Such was the case with Berkshire Hathaway, Warren Buffett's holding company, whose share price lost over 99% at one point during the session. The lucky few who thought they'd got the rebate of the century on the world's most famous investment company are in for a disappointment: erroneous trades of this kind are almost certain to be reversed.

In Asia Pacific this morning, Wall Street's doubts seem to have spread. Japan, South Korea, Taiwan and Australia are down 0 to 1%. In India, after the previous day's sharp rebound, indices fell by a spectacular 4.5%. Modi's predicted electoral triumph is turning into a more contested victory, apparently. China fared better this morning, with gains of 0.3% in Shanghai and Hong Kong. European indices are bearish, futures on the main Wall Street indices are all down by 0.3%.

Today's economic highlights:

US, durable goods orders, industrial orders and JOLTS job offers are on the agenda

The dollar is up to EUR 0.9201 and GBP 0.7836. The ounce of gold is worth USD 2333. Oil continues to fall, with North Sea Brent at USD 77.18 a barrel and US light crude WTI at USD 72.97. The yield on 10-year US debt falls sharply to 4.41%. Bitcoin is trading at USD 68,800.

In corporate news:
  • Intel gained 1.7% in pre-market trading following the launch of its new generation of Xeon processors for servers, the group also announcing that the price of its artificial intelligence chips would be significantly lower than those of its competitors.
  • Meta and Snap were down around 1% in after-hours trading, as the Wall Street Journal reported that New York State plans to ban the use of algorithms by social networking groups to expose children to content without their parents' consent.
  • Microsoft - The privacy group NOYB accuses the American technology giant of wanting to transfer responsibility for children's data processing to schools, even though they lack the necessary expertise.
  • Tesla - Sales of electric vehicles manufactured in China by the American group fell by 6.6% year-on-year to 72,573 units in May, the second consecutive month of year-on-year declines, data from the industry federation, the China Passenger Car Association (CPCA), showed on Tuesday.
  • Illumina - The board of directors of the genetic sequencing machine manufacturer approved on Monday the spin-off of GRAIL, the group's cancer screening test manufacturing division. Illumina advanced by around 4% in after-hours trading.
  • Gamestop was down 1.5% in pre-market trading, after having gained 21% on Monday on the strength of a new publication by influencer Keith Gill, nicknamed “Roaring Kitty”, showing that he holds a $116 million position in the video game distributor.
  • Gitlab gives up 3.5% in pre-market trading, as the coding software platform announces that it expects sales for its fiscal second quarter to be between $176 million and $177 million, against an LSEG forecast of $176.7 million.
  • VF Corp - The parent company of the Vans and The North Face brands appointed two new independent directors to its board on Monday, under pressure from activist investor Engaged Capital, which is calling for a reshuffle of the board and a review of the group's strategy in the face of fluctuating demand. 

Analyst recommendations:

  • Heico Corporation: Morgan Stanley upgrades to equal weight from underweight with a price target raised from USD 178 to USD 225.
  • Autodesk, Inc.: Mizuho Securities maintains a neutral recommendation with a price target reduced from USD 270 to USD 230.
  • Kinder Morgan, Inc.: Wells Fargo upgrades to overweight from equalweight with a target price raised from USD 18 to USD 22.
  • Marathon Petroleum Corporation: Zacks downgrades to neutral from outperform with a price target reduced from USD 207 to USD 187.
  • Cloudflare, Inc.: Goldman Sachs maintains its sell recommendation and reduces the target price from USD 77 to USD 68.
  • Ptc Inc.: Mizuho Securities downgrades to neutral from buy with a price target reduced from USD 200 to USD 190.
  • Stanley Black & Decker, Inc.: Barclays downgrades to equalweight from overweight with a price target reduced from USD 100 to USD 86.
  • Okta, Inc.: Daiwa Securities maintains its outperform recommendation and reduces the target price from USD 123 to USD 105.
  • First Solar, Inc.: Morgan Stanley maintains its overweight recommendation and raises the target price from USD 248 to USD 331.
  • Zebra Technologies Corporation: Freedom Capital Markets initiates a Hold recommendation with a target price of USD 307.
  • Airtel Africa Plc: ARM Securities downgrades to neutral from sell with a target price raised from NGN 1052.58 to NGN 2300.03.
  • Carnival Corporation: Peel Hunt upgrades to buy from add with a price target raised from GBX 1100 to GBX 1300.
  • Currys Plc: AlphaValue/Baader Europe downgrades to reduce from add with a price target raised from GBX 81.40 to GBX 82.20.
  • Future Plc: Berenberg upgrades to buy from hold with a price target raised from GBX 850 to GBX 1310.
  • Gsk Plc: Intron Health downgrades to hold from buy with a price target reduced from GBP 19 to GBP 17.50.
  • Wise Plc: Peel Hunt upgrades to buy from hold with a price target raised from GBX 950 to GBX 1000.