Signals of a slowdown in the US economy strengthened and equities reacted timidly. The Nasdaq, Dow Jones and S&P500 gained between 0.1% and 0.4% yesterday at the bell. It took a late surge to bring everyone back into the green. The JOLTS employment survey for April confirmed that the overheated labor market is cooling, with the number of job offers down sharply on the previous month. Futures edged higher today as a result, and were further boosted by another employment report this morning, the ADP National employment report, which confirmed that the job market is losing steam. Private employers added 152,000 jobs in May, below forecasts of 173,000. In addition, April's gain was revised down to 188,000 from the initially reported 192,000.

Bonds jumped at the prospect of lower US interest rates. The yield on 10-year debt lost further ground to return to its lowest level since early April.

Traders’ expectations for a September rate cut now stand around 65%, versus below 50% last week, according to the CME's FedWatch tool.

In Europe yesterday, France's CAC40 and Germany's DAX took a beating, while Switzerland's placid SMI ended up 2 points. Declines in industrial and financial stocks slashed the major indices. Paris was further penalized by the sharp fall of TotalEnergies, which was badly affected by the plunge in oil prices. In Zurich, as is often the case, the defensive trio of Roche, Nestlé and Novartis largely cushioned the blow. The downside is that the SMI remains stuck in the starting-blocks in the event of a market rebound.

On Wall Street, AI stocks continue to sweep all before them. Bitcoin is also having a field day. This is unsettling for those in the world of traditional finance, who advocate for diversification, caution and all manner of rules that have been enshrined in the tables of stock market law since the dawn of time. Why subscribe to all kinds of theories to investing when you can just bet on what works at the touch of a button on an app? Jump on the Nvidia bandwagon. Try meme-shares when they're buzzing, and run away from them when they fall. Take bitcoin when it's down to 60,000 and sell it when it's up to 70,000.

Of course, I've got plenty of answers in store to counter these brainless youngsters, but they're all boring: risk management, not putting all your eggs in one basket, investment horizon, tax treatment, compound interest, rational reactions, you name it. In short, nothing that would convince a 19-year-old, especially when he realizes that Wall Street's financial elite preaches caution on the facade but frantically buys AI and risky assets. Warren Buffett’s famous quote is that it’s when the sea recedes that you see those who swim naked, or something like that. In the event of a crisis or major glitch, those who have taken too many risks will get their asses blown off. The thing is, it's been 16 years since the last time this happened, which is a long time. The last two big market scares (Covid 2019 and rate hikes 2022) were painful, but so short-lived and followed by such a quick rebound that they didn't really have enough of a pedagogical effect.

In other news, Modi's Indian triumph has taken a turn for the worse. Contrary to initial indications, the outgoing prime minister will have to work with allies to secure a majority in parliament. This upset the Bombay Stock Exchange yesterday, with the SENSEX index falling by 5.7%. I read somewhere this morning that the various listed shares of the Adani conglomerate lost 45 billion in market capitalization yesterday, which reduced the fortune of the Adani family, close to Modi, by 25 billion dollars in one day. The SENSEX is still up 1% this morning, as the Prime Minister will probably be able to govern with some leeway... but not all. Staying in Asia, there are rumors that the EU will impose tariffs on Chinese electric vehicles as early as July 4. An announcement could be made next week. The rumors speak of an increase in the surtax to 50%, from the current 10%. An intermediate percentage could be a signal of openness sent by Brussels to Beijing, according to experts in the field.

In the Asia-Pacific region, Japan is in the doldrums (-1%), while China is unsure of its footing, with Hong Kong up slightly and Shanghai down moderately. South Korea (+1.3%) and India (+1%) are up, as is Australia (+0.3%). European indices are in the green, and so are futures on Wall Street.

Today's economic highlights:

The second reading of the major economies' services PMIs for May are being be unveiled throughout the day. The ADP employment change and the ISM services index are also on the agenda. 

The dollar is worth EUR 0.9188 and GBP 0.7817. The ounce of gold is stable at USD 2342. Oil remains under pressure, with North Sea Brent at USD 77.95 a barrel and US light crude WTI at USD 73.53. The yield on 10-year US debt fell to 4.32%. Bitcoin just pass the USD 70,000 mark.

In corporate news:

  • Hewlett Packard Enterprise on Tuesday forecasted third-quarter sales that exceeded expectations, driven by strong demand for its artificial intelligence (AI) servers. The share price surged 15.3% in pre-market trading.
  • Intel sees a 1.3% gain in pre-market trading following the announcement that Apollo Global Management will acquire a 49% stake for $11 billion in a joint venture related to the semiconductor manufacturer's new production facility in Ireland.
  • Nxp Semiconductors and Vanguard, supported by Tsmc, announced a $7.8 billion joint venture in Singapore on Wednesday to produce silicon wafers, joining other chipmakers in establishing plants in the Asian country to diversify their production locations.
  • Deere & Co announced job cuts on Wednesday, although the number of positions affected was not disclosed, as a measure to address the decreasing demand for agricultural machinery.
  • Campbell Soup shares are down 0.9% ahead of its earnings release. Analysts are anticipating a return to sales growth after two consecutive quarters of declines.
  • Crowdstrike shares climbed 6.8% in pre-market trading after the cybersecurity firm increased its sales forecast for the second quarter.
  • Dollar Tree is reportedly exploring various strategic alternatives, which may include a sale or spin-off of its Family Dollar subsidiary, according to the Wall Street Journal, citing sources familiar with the matter.
  • AbbVie and UnitedHealth Group have both received an upgraded recommendation from HSBC, moving from “hold” to “buy.”

Analyst recommendations:

  • Abbvie Inc.: HSBC upgrades to buy from hold with a price target raised from USD 161 to USD 185.
  • Air Products: Morgan Stanley analyst Vincent Andrews raised the target on Air Products & Chemicals Inc. to $280 from $240. Maintains equal-weight rating. New PT implies a 3.6% increase from last price. 
  • Applied Materials, Inc.: Barclays upgrades to equalweight from underweight with a price target raised from USD 165 to USD 225.
  • Kla Corporation: Barclays upgrades to equalweight from underweight with a price target raised from USD 630 to USD 765.
  • UnitedHealth Group Inc.: HSBC upgrades to buy from hold with a price target raised from USD 460 to USD 580.
  • Hewlett Packard Enterprise Company: Raymond James maintains its outperform rating and raises the target price from USD 19 to USD 23. 
  • Kla Corporation: Barclays upgrades to equalweight from underweight with a price target raised from USD 630 to USD 765.
  • Nvidia Corporation: Itau BBA Securities maintains its outperform rating and raises the target price from USD 1000 to USD 1300.
  • Qualcomm, Inc.: Guotai Junan Securities Co., Ltd. maintains its overweight recommendation and raises the target price from USD 191 to USD 246.
  • Old Dominion Freight Line, Inc.: BMO Capital Markets initiates an Outperform recommendation with a target price of USD 210.
  • Mondi Plc: Morgan Stanley downgrades to equalwt from overwt with a target price of GBX 1700.
  • Gap: Daiwa Securities raised the recommendation on Gap Inc. to neutral from underperform. PT set to $29, implies a 8% increase from last price.