Stock markets rarely post three consecutive months in the red, but Wall Street has seen three months of declines for the S&P500. The index has now fallen more than 10% from its high point in July this year, and has thus officially entered correction territory on Friday.

It got hit by geopolitical tensions, inflation and a few disappointing results and guidance, including Google parent Alphabet, which fell more than 9% on Wednesday because investors were disappointed with its performance in AI.

However, the index is still gaining 7.2% in 2023, thanks to its tech stocks, which exploded upwards over January/July.

Half the companies in the S&P 500 have published their quarterly results this season, with an average performance higher than historical (i.e. companies have exceeded expectations more than usual, and in higher proportions than usual). A Bloomberg editorialist wrote this weekend that "eleven trading days have passed since JPMorgan Chase kicked off the quarterly earnings season, and the S&P500 has retreated on nine of them, with four of those sessions posting declines of more than 1%." That's not very exciting.

On Friday, almost all the major stock indices ended lower, with the exception of the Nasdaq 100, which recovered 0.5%. The technology index, however, gave up 2.6% on the week, and owed its surge only to the hype surrounding Amazon (+7% on Friday) and Intel (+9%). For investors, the pile of risks is always much higher than the pile of sources of optimism.

The Fed is back in the spotlight this week, with a monetary policy decision on Wednesday. The market has no faith in a further rate hike on this occasion, or even at the next meeting in December. It does, however, expect Jerome Powell to maintain a slightly threatening stance on the evolution of policy. How threatening? It's also worth noting that the US Treasury is due to make an announcement on Wednesday about the size of its next debt issues. At a time when the federal budget deficit is once again a major source of tension, the Fed + debt cocktail could create volatility in the bond market, and thus in equities as well.

The week ahead is full of events. Along with the UK and the US, we also have central banks decisions from Japan, Brazil, Colombia, the Czech Republic, Malaysia, Egypt, Pakistan and the Dominican Republic. We'll also be treated to inflation figures (starting on Monday with Germany's October CPI) and activity indicators (China's "official" PMI on Tuesday and Caixin on Wednesday). Not to mention the monthly US employment report on Friday.

The corporate calendar is not to be outdone, with quarterly results from McDonald's, HSBC, Anheuser-Busch Inbev, Stellantis, Qualcomm, Airbnb, Shell, AXA, as well as the world's largest capitalization Apple, and the two new healthcare stars, Novo Nordisk and Eli Lilly.

In other news, former U.S. Vice President Mike Pence has dropped his bid for the Republican Party nomination for the November 2024 presidential election. Israel strengthened its forces in the north of the Gaza Strip, in what it described as the second phase of its offensive against Hamas. In China, the agony of developer China Evergrande continues after a liquidation hearing was postponed until December 4.

This morning, Wall Street opened firmly in the green.

Today's economic highlights:

The dollar is down to EUR 0.9429 and GBP 0.8238. The ounce of gold is solid at USD 1997. Oil remains under pressure, with North Sea Brent at USD 88.02 a barrel and US light crude WTI at USD 84.13. The yield on 10-year US debt stands at 4.87%. Bitcoin is trading at around USD 34,500.

In corporate news:

  • McDonald's exceeded Wall Street's expectations for third-quarter earnings and sales on Monday, against a backdrop of new menu launches that boosted demand. The share price rose by around 2% in pre-market trading.
  • Alphabet - Group CEO Sundar Pichai will testify in federal court on Monday in the trial in which the U.S. administration is accusing the group of having circumvented competition rules to secure a quasi-monopolistic situation in Internet search.
  • Ford - Leaders of the United Auto Workers union on Sunday approved a tentative agreement with Ford that includes a wage increase of at least 30% for full-time employees and a more than doubling of pay for others. Negotiations are continuing with General Motors.
  • Blackstone announced on Monday its intention to take a majority stake in the Indian Care Hospitals group for $1 billion, marking its entry into the country's healthcare services sector.
  • Realty Income, looking to expand its real estate portfolio, announced on Monday that it would purchase real estate investment company Spirit in an all-stock transaction valued at $9.3 billion. Spirit Realty shares are up 13% in pre-market trading.
  • Loews reported a third-quarter profit on Monday, compared with a net loss a year earlier, thanks to higher investments and a strong performance by its CNA Financial insurance division.
  • Western Digital gained 10% in pre-market trading, as the memory chip manufacturer announced on Monday that it would split into two companies to focus on the hard disk and flash memory markets, a few days after the failure of merger negotiations with the Japanese group Kioxia.
  • KKR has signed an agreement to invest $400 million in OMS Group, a Malaysian provider of submarine telecom cable services, the two groups announced on Monday.
  • International Flavors & Fragrances is to be acquired by Clariant for $810 million in cash, the Swiss group announced on Monday.
  • Coherus Biosciences jumps 15.2% in pre-market trading, as the U.S. Food and Drug Administration approves its nasopharyngeal cancer treatment.
  • Revvity cut its full-year sales forecast on Monday after missing Wall Street estimates for the third quarter, penalized by weak demand for its life science supplies and diagnostic solutions. The stock lost 8% in pre-market trading.

Analyst recommendations:

  • Abbvie inc: Barclays upgrades to overweight from equalweight with a price target raised from USD 160 to USD 170.
  • Advanced micro device: Susquehanna maintains its positive recommendation and reduces the target price from USD 145 to USD 130.
  • American express: Baptista Research maintains its hold recommendation with a price target reduced from USD 181 to USD 155.
  • Aon plc: Wells Fargo downgrades to underweight from equalweight with a price target reduced from USD 317 to USD 304.
  • Astrazeneca plc: Berenberg maintains its buy recommendation and reduces the target price from GBP 133 to GBP 125.
  • Avalonbay commun: Evercore ISI maintains its outperform recommendation with a price target reduced from USD 192 to USD 179.
  • Booking holdings: Cowen maintains its outperform rating and reduces the target price from USD 3600 to USD 3250.
  • Charter commun: Goldman Sachs maintains its buy recommendation and reduces the target price from USD 510 to USD 450.
  • Cisco systems: Raymond James downgrades to market perform from outperform.
  • Elevance health: Baptista Research upgrades to outperform from hold with a price target reduced from USD 550 to USD 533.40.
  • Enphase energy: Scotiabank maintains its sector perform recommendation with a price target reduced from USD 140 to USD 92.
  • Hershey: Mizuho Securities maintains its neutral recommendation with a price target reduced from USD 195 to USD 180.
  • Hsbc holdings pl: Morgan Stanley maintains its equal weight recommendation with a price target raised from GBX 722 to GBX 769.
  • Hubspot: Cowen maintains its outperform rating and reduces the target price from USD 625 to USD 600.
  • International consolidated airlines: Bernstein maintains its outperform rating and raises the target price from GBX 180 to GBX 190.
  • Invitation homes: Oppenheimer upgrades to outperform from market perform with a target price of USD 35.
  • L3harris technol: Raymond James upgrades to outperform from market perform with a target price of USD 210.
  • Live nation ente: Cowen maintains its outperform rating and reduces the target price from USD 120 to USD 97.
  • Pearson plc: Shore Capital upgrades to buy from hold.
  • T.Rowe price: Jefferies maintains its hold recommendation with a price target reduced from USD 107 to USD 94.