Jobless claims came in at 233,000 last week, beating the forecast of 240,000. Investors, who were on the verge of a panic attack, breathed a sigh of relief. Futures turned green, and the Nasdaq even managed to cross the 1.0% threshold. All is well, at least until the next piece of data sends everyone into a tizzy. But wait, JPMorgan has decided to rain on our parade by upping its recession odds for the US from 25% to 35%. For the record, their recession forecasts have been as reliable as a weather app in a hurricane. They haven’t hit the 50% mark yet, so they can still claim to be right even when they’re wrong. How convenient.

Yesterday, US indices tried to keep the good vibes going from Tuesday but failed spectacularly. Volatility is high, and so is investor anxiety. Seasoned investors hate it when the market starts strong and ends in the red. It’s like promising a gourmet meal and serving cold pizza. The Nasdaq 100, which was up 2% in the morning, closed down 1.16%, wiping out the previous day’s gains. The market turmoil that began in mid-July seems far from over. The VIX volatility index is still high, pretending to calm down but fooling no one.

Meanwhile, across the pond, Europe had a much better day. Gains were not only maintained but were impressively high in places like Zurich, where the SMI jumped 2.9%. When one of the world’s most defensive indices behaves like this, it’s either a sign of universal market optimism or a mad dash to safety stocks like Nestlé, Novartis, and Roche. Denmark, however, didn’t get the memo. The OMX Copenhagen hit a record low, dragged down by Novo Nordisk’s 6% drop due to disappointing financial performance.

The surge in volatility is partly due to fears about US growth and consumer spending, exacerbated by major fund movements. The carry trade strategy, which involves exploiting currency and interest-rate differentials, is losing its charm. It’s reminiscent of the 2022 free-money bubble burst that left trendy but unsustainable tech companies in the dust. When market conditions change rapidly, yesterday’s safe bets can become today’s pitfalls.

Speaking of pitfalls, let’s talk about the ARK Innovation fund (ARKK) by Cathie Wood, the queen of risky investing. This ETF was the darling of the market when tech stocks were all the rage. But since the bubble burst, ARK has been wandering in the wilderness. In 2024, the fund is down 24%, while the Nasdaq 100 is up 6%. Over three years, ARK is down 68%, compared to the Nasdaq 100’s 18% gain. Even those who bought in 2019 are in the red. Despite its potential for a tech rebound, ARK has generated over $7 billion in losses for its investors. This year alone, it has seen $2.2 billion in net outflows, and assets under management have plummeted from $28 billion in 2021 to under $5.5 billion. Why bring this up? Because ARKK has recently doubled down on positions in Amazon, AMD, and Roku, and taken new stakes in Meta and Reddit. Given its track record, this could be a red flag for these stocks.

In Asia Pacific this morning, the rebound party is over in Japan, with the Nikkei 225 down 0.7%. China is up, but no one really knows why. South Korea lost 0.4%, and Taiwan dropped 2.2% due to a semiconductor sector pullback. India and Australia also ended in the red. European indices are pointing downwards as well. 

Today's economic highlights:

German industrial production, US jobless claims and wholesale inventories are on the agenda today. 

The dollar is worth EUR 0.966 and GBP 0.7886. The ounce of gold is down to USD 2,412. Oil regained some ground, with North Sea Brent at USD 78.27 a barrel and US light crude WTI at USD 74.65. The yield on 10-year US debt inches up to 3.99%. Bitcoin is trading at USD 57,500.

In corporate news:

  • Eli Lilly raised its annual sales forecast to three billion dollars on Thursday in the face of rising demand and increased production capacity for its anti-obesity treatment Zepbound, sending the stock up more than ten percent in pre-market trading.
  • Merck announced on Thursday that it had discontinued its trial combining an experimental drug with Keytruda in the treatment of a type of lung cancer, an interim analysis having shown that the drug had little efficacy.
  • Novavax lowered its revenue forecast for this year on Thursday, anticipating lower sales of its COVID-19 vaccine. The stock plunged eleven percent in pre-market trading.
  • Warner Bros Discovery announced on Wednesday that it had written down the value of its television assets due to uncertainty over royalties paid by cable and satellite content distributors, and uncertainty surrounding the renewal of sports broadcasting rights. The stock fell by nine point five percent in pre-market trading.
  • Amazon - The UK's competition watchdog announced on Thursday that it had opened an investigation into whether Amazon's partnership with artificial intelligence startup Anthropic was harming competition, a few days after opening a similar inquiry into Alphabet's collaboration with the startup.
  • Intel is being sued by shareholders who accuse the chipmaker of concealing problems that led it to publish weak results, cut jobs, and suspend its dividend. Following the disclosure of Intel's financial statements on August second, the company's market capitalization fell by more than thirty-two billion dollars in a single trading session.
  • Occidental Petroleum announced on Wednesday that it had beaten Wall Street forecasts for second-quarter earnings by thirty-four percent. These are the group's first results since completing its twelve billion dollar takeover of Permian-based producer CrownRock last week. Occidental Petroleum shares gained one point four percent in premarket trading.
  • Boeing - The director of the National Transportation Safety Board (NTSB) said Wednesday that the in-flight accident involving a Boeing-designed 737 MAX 9 operated by Alaska Airlines could have been avoided, as the aircraft manufacturer should have remedied the problem long ago in light of numerous past audits. Meanwhile, NASA officials said on Wednesday that the two astronauts who arrived at the International Space Station (ISS) in June via Boeing's Starliner could return aboard SpaceX's Crew Dragon in February two thousand twenty-five if the Starliner is still not considered safe for a return to Earth.
  • Robinhood exceeded Wall Street expectations on Wednesday with second-quarter earnings against a backdrop of growing interest in "meme stocks" and cryptoactives. The group said it was continuing to gain market share on its trading competitors. Share price up three point five percent in pre-market trading.
  • Bumble - The dating app operator cut its annual sales growth forecast on Wednesday, rekindling investor concerns about its development plans. The share price fell thirty-seven point one percent in pre-market trading.
  • Monster Beverage announced on Wednesday that it had missed market expectations with its second-quarter sales, as consumers opted for tighter management of their spending. The share price lost eight point two percent in pre-market trading.
  • Restaurant Brands International announced on Thursday that it had exceeded Wall Street expectations with its second-quarter sales. The latter benefited from steady demand in Tim Hortons coffee outlets, while the Burger King fast-food chain is in the midst of restructuring.
  • Beyond Meat announced on Wednesday evening that it had exceeded forecasts with its second-quarter sales on Wednesday. The group also raised the lower end of its sales guidance range for the full year, thanks to a price increase.
  • Walgreens Boots Alliance announced on Wednesday that it was studying its options, including a sale, for its Village® business.
  • KKR will launch a takeover bid for Fuji Soft 9749.T, as part of a five hundred fifty-eight point four billion yen (three point eight billion dollar) deal to delist the Japanese software company, Fuji Soft announced on Thursday.
  • Equinix raised its annual adjusted operating profit forecast on Wednesday, anticipating strong demand for its data center operations services amid growing adoption of technologies related to generative artificial intelligence.
  • Howard Hughes Holdings - Billionaire Bill Ackman's Pershing Square Capital Management, the largest shareholder in Howard Hughes Holdings, is considering delisting the three point three billion dollar real estate developer, according to a regulatory filing.
  • Atmos Energy - The natural gas distributor reported a rise in third-quarter earnings on Wednesday evening, boosted by rate increases and customer growth.
  • Zillow - The online real estate broker appointed Jeremy Wacksman as CEO on Wednesday, succeeding co-founder Rich Barton, who becomes co-executive chairman.

Analyst recommendations:

  • Ashland Inc.: JP Morgan downgrades to neutral from underweight with a target price reduced from USD 90 to USD 89.
  • Axon Enterprise, Inc.: William O'Neil & Co Incorporated upgrades to buy from dropped coverage.
  • Charles River Laboratories International, Inc.: Baird downgrades to neutral from outperform with a price target reduced from USD 239 to USD 191.
  • Chevron Corporation: Gerdes Energy Research LLC downgrades to buy from neutral with a target price reduced from USD 177 to USD 175.
  • Corning Incorporated: Baptista Research upgrades to outperform from hold with a price target raised from USD 37 to USD 43.60.
  • Envista Holdings Corporation: JP Morgan downgrades to neutral from overweight with a target price reduced from USD 23 to USD 16.
  • First Solar, Inc.: Baptista Research upgrades to buy from outperform with a price target raised from USD 224.70 to USD 280.70.
  • Fortinet, Inc.: DZ Bank AG Research downgrades to hold from sell with a price target raised from USD 54 to USD 65.
  • Hilton Worldwide Holdings Inc.: Mizuho Securities downgrades to outperform from buy with a price target reduced from USD 242 to USD 237.
  • Hubspot, Inc.: KeyBanc Capital Markets upgrades to sector weight from underweight.
  • Illinois Tool Works Inc.: Baptista Research downgrades to underperform from hold with a price target reduced from USD 280 to USD 245.50.
  • Intel Corporation: Mizuho Securities downgrades to neutral from outperform with a price target reduced from USD 36 to USD 22.
  • Klaviyo, Inc.: KeyBanc Capital Markets upgrades to overweight from sector weight with a target price of USD 33.
  • Lattice Semiconductor Corporation: Raymond James upgrades to outperform from market perform with a target price of USD 50.
  • Paypal Holdings, Inc.: Baptista Research upgrades to buy from outperform with a price target raised from USD 74.30 to USD 77.20.
  • R1 Rcm Inc.: Morgan Stanley downgrades to equal weight from overweight with a price target reduced from USD 17 to USD 14.30.
  • Skyworks Solutions, Inc.: Baptista Research downgrades to hold from outperform with a price target raised from USD 111 to USD 113.90.
  • Textron Inc.: Morgan Stanley downgrades to equal weight from overweight with a target price of USD 95.
  • Vornado Realty Trust: BMO Capital Markets upgrades to outperform from market perform and raises the target price from USD 29 to USD 40.
  • Walt Disney Company (The): Seaport Global downgrades to neutral from buy.
  • BP Plc: HSBC downgrades to hold from buy with a price target reduced from GBP 5.30 to GBP 4.90.
  • Hiscox Ltd: Panmure Liberum maintains its hold recommendation with a price target raised from GBX 970 to GBX 1203.
  • Ibstock Plc: Berenberg maintains its hold recommendation and raises the target price from GBX 150 to GBX 200.
  • John Wood Group: Berenberg maintains its hold recommendation with a price target reduced from GBX 200 to GBX 150.
  • Travis Perkins Plc: Redburn Atlantic maintains a neutral recommendation with a price target raised from GBX 760 to GBX 940.