The Bureau of Labor Statistics said the consumer price index rose 5.4 % in June from a year ago, after 5% recorded in May, which may fuel worries that this inflation surge may not be as transitory as the Fed hopes. This tops the 4.9% expected by economists. On a monthly basis, price advanced by 0.9 per cent, well above the 0.6 per cent recorded in May.

The financial markets got their heads back on straight yesterday, posting a second rebound session after last Thursday's air pocket. Obviously, the three main Wall Street indices, which rose again, reached new highs, since they had already broken their records the day before. Europe was not left behind, with stock markets also returning to their best levels. The broad STOXX Europe 600 index and the German DAX are breaking new ground, and the Swiss SMI and the Euro STOXX 50 are not far behind. In Europe, only the FTSE 100 is still lagging among major indices, but Brexit is now mostly behind.

On a sectoral level, however, the situation is much more mixed. Leisure and events stocks have been slashed by the spread of the Delta variant. The day will be animated by the first earnings releases of the second quarter. A few midsize companies have already done so, but the real action begins with sector barometers like JPMorgan Chase and Goldman Sachs in banking and PepsiCo in consumer products.

While stocks are rising, some asset prices are falling. Lumber, for example, which caused a stir a few weeks ago, has just fallen below its January 1 level. On the Chicago benchmark market, lumber for September delivery fell to USD 712.90 per thousand board feet, after exceeding USD 1,700 last May. Excesses are being erased but lumber prices remain high relative to historical levels. This is a good illustration of one of the reasons why the US central bank is still arguing for a transitional inflation peak. However, the prospect of a federal infrastructure investment plan in some producing regions have industry experts saying that prices could remain high in the coming months.

 

Economic highlights of the day:

It's inflation day on the stock market, with the June consumer price index for Germany, France and the United States. This morning, Chinese foreign trade figures came out better than expected for the month of June.

The euro/dollar pair is trading at EUR 0.8470. Gold is firm at around $1812. Oil is relatively stable at USD 75.64 per barrel of Brent and USD 74.35 per barrel of WTI. US debt yields are up slightly to 1.37% on 10-year. Bitcoin is falling back to USD 32,550.

 

On markets:

* J.P Morgan Chase Co saw its profit jump 155% in the second quarter, a performance that exceeded expectations, thanks to its mergers and acquisitions activities and to reversals of provisions for bad debts. However, the stock is down 1.3% in premarket trading due to a 32% drop in revenues in the division that houses the trading business.

* Goldman Sachs reported better-than-expected quarterly earnings on Tuesday, boosted by strong growth in its M&A advisory business.

* Pepsico - The food company raised its full-year profit forecast Tuesday, saying it now expects 11% growth instead of a single-digit increase, helped by accelerating demand as health restrictions are eased. The stock is up 2% in premarket trading.

* Conagra Brands - The owner of the Hunt ketchup brand and Marie Callender's prepared foods lowered its annual profit forecast Tuesday, saying it was due to higher raw material prices. The stock is down 4% in pre-market trading.

* The Boeing Company announced Tuesday that it will reduce the production rate of its 787 model while it resolves a structural defect related to the industrial process. The stock lost nearly 2% in premarket trading.

* Alphabet - The French competition authority on Tuesday fined Google 500 million euros in the case of neighboring rights, saying that the digital giant had not negotiated in good faith with publishers and news agencies.

* Johnson & Johnson is studying a modification of its COVID-19 vaccine that could eradicate the rare side effects (blood clots) reported, the Wall Street Journal reported, citing sources close to the case.

* Tesla - The automaker's stock, which finished up 4.38% on Monday, rose another 1% in premarket trading Tuesday, the fourth consecutive session of gains, in response to new statements by founder Elon Musk about control of the company.

* Didi Global - China's Ministry of Industry and Information Technology on Tuesday issued a new rule on the management of computer flaws, which prohibits their collection, sale and publication if they harm China's cybersecurity. The rule could target the Chinese VTC giant and other Chinese groups listed on Wall Street.

* Alibaba - The Chinese e-commerce giant and other Chinese state-owned companies are considering a bid for a stake in Unisplendour, a cloud specialist, in a deal that would be worth up to $7.7 billion, according to sources close to the matter.

 

Analyst recommendations:

  • AGCO : JPMorgan upgrades to overweight from neutral; price target is $164
  • Allegiant Travel: Susquehanna Financial initiated coverage of Allegiant Travel Co. with a recommendation of positive. PT up by 27% set to $245
  • Ambrx Biopharma : Goldman Sachs starts coverage at buy with $53 price target
  • Bakkavor: HSBC upgrades its buy rating to hold from buy with a target of GBp 140.
  • Boohoo: RBC upgrades from sector perform to outperform.
  • Century Therapeutics: Piper Sandler starts at overweight with $38 price target
  • Codex DNA : KeyBanc starts stock at overweight with $30 price target
  • Electronic Arts: BMO Capital Markets raised the recommendation on Electronic Arts Inc. to outperform from market perform. PT up by 19% to $168
  • EnQuest: Barclays upgraded from Equal-weight to Overweight with a 3-year target of GBp 3.
  • Entain: Berenberg remains Buy with a price target raised from GBp 1730 to GBp 2080.
  • First Solar : Citigroup downgrades First Solar to Neutral from Buy; Price Target is $100
  • Molecular Partners : Cowen starts coverage at outperform with $50 price target
  • M&C Saatchi: Peel Hunt upgraded from accumulate to buy, targeting GBP 200.
  • Radware: Needham & Co upgrades Radware to buy from hold. PT up by 29% to $40
  • Okta : Goldman Sachs starts coverage at buy with $312 price target
  • Paccar : JPMorgan upgrades stock to overweight from neutral; price target is $112
  • Poshmark : Stifel upgrades to buy from hold; price target is $50
  • Royal Dutch Shell: Barclays upgrades from Equal-weight to Overweight with a target of GBp 1950. 
  • Southwestern Energy: Stock raised from Neutral to Buy at Mizuho Securities; PT up 31% $7
  • Terex : JPMorgan upgrades to overweight from neutral; price target is $61
  • Virgin Galactic : Canaccord Genuity adjusts price target to $48 from $35, maintains buy rating