After posting a loss in the previous quarter, the benchmark S&P 500 index has gained 5.7% until Tuesday at the close, as yields fell for two straight sessions on softer U.S. economic data, UK's tax turnaround and Australia's smaller-than-expected rate hike. However, the yields on the 10-year Treasury note rose again sharply today, as investors realized that the Fed may not ease its aggressive monetary policy as long as the US job market remains strong. ADP data showed U.S. private employers increased hiring in September.

Yesterday, Wall Street recorded a good session, for almost every sector. It wasn't Energy versus Technology or Cyclicals versus Defensives, but a fairly generalized rise. The Nasdaq and the S&P 500 have recovered more than 3%.

Stock market planets had aligned again, as they sometimes do without really knowing why. The pillars of the rally are a pre-existing phase of deep depression (i.e. the markets had fallen heavily), the beginning of a quarter, some kind of background noise suggesting that the Fed was going to ease its stance. And to top it all off, the Australian central bank just unveiled a smaller-than-expected rate hike.

But there has been no strong macroeconomic signal to cement the big turnaround that all equity investors are waiting for. The context is still fragile. As proof, all three Wall Street indexes opened in the red today after the ADP report.

The direction of markets for the foreseeable future could be set by two indicators to watch closely: the ISM services index for September, to be released later today, and the US employment figures for August, unveiled on Friday. If the data shows that a sufficiently sharp economic slowdown is at work, the narrative about the Fed easing of its stance will once again gain weight.

The news today is dominated by Elon Musk. When he's not launching robots and giving his opinion on how to cut up Ukraine, the Tesla boss is buying stuff. In this case Twitter. After months of drama, he will finally break his piggy bank to buy the social network under the conditions initially announced in April, a bill of about 44 billion dollars. Apparently, Musk sensed that the lawsuit against Twitter over the reliability of the number of real users was unlikely to work in his favor. There are probably other reasons for this. This morning, the Intelligencer developed a tasty theory according to which the unveiling of private exchanges between rich Silicon Valley bosses, made possible by the lawsuit, was starting to bother a lot of people close to Musk. It must be said that some big names did not appear under the best light, between servility towards the richest man in the world, the vacuity of the discussions and the general feeling that he manipulates even people with a strong character.

 

Economic highlights of the day:

S&P will publish throughout the day the second reading of the September PMI indices of the major economies, there is also the ADP employment report for September and the ISM services. All the macro agenda is here.  Today, the Australian central bank raised rates by a quarter point to 2.60%, while the market was expecting 50 basis points.

The dollar rose to EUR 1.0119 and GBP 0.8850. The ounce of gold is trading at USD 1711. Oil is also recovering, with North Sea Brent crude at USD 92.56 a barrel and U.S. light crude WTI at USD 87.12. The yield on 10-year US debt is easing to 3.63%. Bitcoin is trading around USD 19,500.

 

In corporate news:

* Twitter - Twitter shares, which jumped 22% on Tuesday after the announcement that Elon Musk () has revived plans to buy the social network, are losing 0.5% in pre-market trading on Wednesday. TESLA, a company founded and run by Musk, is down 1.22%, with Wedbush Secutiries saying there is a risk that the billionaire will give up new shares to finance his project. The Wall Street Journal also reports that activist investor Carl Icahn held more than $500 million in Twitter shares before the announcement.

* Technology companies Nvidia, Amazon and Alphabet fell 0.7% to 0.9% in premarket trading as bond yields rose.

* Blackstone is discussing the purchase of part of Emerson Electric's assets for up to $10 billion, Bloomberg reported Tuesday, citing sources close to the matter. Emerson is up 2.2 percent in premarket trading.

* Exxon Mobil, which is scheduled to formally report results on Oct. 28, reported strong third-quarter operating profit on Tuesday, close to the group's all-time record of $17.9 billion in the previous quarter, helped by a strong performance in natural gas, a stock-market advisory showed.

* Apple has asked its suppliers to move production of some of its Airpods and Beats headphones to India, a first for the U.S. group for such products, the Nikkei daily reported Wednesday.

* Philip Morris, the maker of Marlboro cigarettes, has offered the European Commission concessions to get a green light for its proposed $16 billion takeover of Swedish Match, a European executive document shows.

* A federation representing the major U.S. airlines rejected a request by 70 U.S. lawmakers to extend a voluntary buyback ban program put in place during the COVID-19 pandemic in exchange for government aid.

* Pfizer - An expert committee of Japan's Ministry of Health recommended Wednesday that the U.S. company's COVID-19 vaccine be approved for use in children at least six months old.

 

Analyst recommendations:

  • Azenta: Evercore ISI downgrades to underperform from outperform. PT up 31% to $60.
  • Dechra Pharma: Berenberg starts tracking as a hold with a target of GBp 2850.
  • Domino's Pizza: UBS upgrades to buy from neutral, adjusts price target to $385 from $430.
  • Etsy: Guggenheim assumes at buy with $105 price target.
  • GB Group: Jefferies resumes tracking to Hold, targeting GBp 500.
  • Goldman Sachs: Atlantic Equities downgrades to underweight from neutral. PT down 7.9% to $290.
  • Intel: Goldman Sachs adjusts price target to $24 from $30, maintains sell rating.
  • Lumen Technologies: Wells Fargo Securities downgrades to equal-weight from overweight. PT down 0.5% to $8.
  • Morgan Stanley: Atlantic Equities downgrades to neutral from overweight. PT up 1.2% to $85.
  • Procter & Gamble: Morgan Stanley adjusts price target to $160 from $177, maintains overweight rating
  • SSP Group: Jefferies remains Buy with a price target reduced from GBp 350 to GBp 325.
  • SVB Financial: Morgan Stanley downgrades to equal-weight from overweight. PT down 6.8% to $351.