This week, investors will be focused on Nvidia's figures, to be released on Wednesday, in the midst of a huge investor fever for artificial intelligence stocks. Nvidia today became the most traded stock on the New York Stock Exchange, dethroning Tesla. Should Nvidia disappoint, we might be in for a rough ride.
Usually, when Wall Street is closed for a bank holiday, things remain quiet in other markets. This was the case yesterday, with slight falls in Italy, the Netherlands and Germany, and modest rises in the UK and Sweden. Special mention goes to France, which decided to tread water almost perfectly, and to Switzerland, which ended the day up 0.8% because the healthcare sector was buoyant in Europe and Zurich was able to count on Novartis and Roche to pull the SMI along.
China is at the center of news today, after it returned from its Lunar New Year break. Chinese markets have had a life of their own compared to the rest of the stock market world for the past five years. And today's session should prove no different. At the time of writing, Hong Kong and Shanghai were still open and down slightly. The session got off to a positive start with the central bank announcing a 25 basis point cut in its 5-year rate and a standstill on its 1-year rate. Economists were surprised by the easing, and those whose comments I have read are even dubious about the usefulness of the measure. As I understand it, the reduction in the 5-year rate is clearly intended to support the real estate market, but it will erode banks' margins, which are already razor thin since they had to come to the rescue of developers. As a result, they may be tempted to lend less. It's a bit like the Chinese dragon biting its own tail, and no doubt explains the hesitation of local indices. In other words, financiers still think that Beijing, by announcing bits and pieces of measures at irregular intervals, will have trouble reassuring investors. They even continue to see this as a sign of a flagrant lack of ideas (possibilities? desire? delete as appropriate) to improve the situation.
As I mentioned earlier, tomorrow’s session will be far more interesting with the publication of the minutes of the latest Fed meeting and Nvidia's results. The king of graphics cards has a quasi-messianic mission for investors: to keep the flame of the artificial intelligence revolution burning. This makes Nvidia one of the main repositories of market optimism, and therefore of its rise. In the meantime, and despite the bank holiday, a major transaction was announced yesterday: Capital One and Discover Financial are to merge in a deal worth $35 billion in securities. The two financial services companies specializing in consumer credit are joining forces at a time when there is much talk of rising loan default rates as a result of high interest rates.
On the corporate earnings agenda, there are a few big names today such as Walmart and The Home Depot. The US grocery stores giant announced on Tuesday that it was buying electronics manufacturer Vizio for $2.3 billion, on the occasion of the publication of its quarterly results. Vizio shares were up 15% in pre-market trading. Walmart shares gained 3%, while the group also announced a better-than-expected consolidated net sales forecast for 2025 and raised its annual dividend by 9%, the biggest increase in more than ten years.
Home Depot reported a lower-than-expected full-year earnings forecast on Tuesday, reflecting the downturn in consumer demand. The stock was down 2.3% in pre-market trading.
In the Asia-Pacific region excluding China, performance was mixed. Japan and Australia were down by around 0.1%, while India gained 0.2%. South Korea confirms its rollercoaster start to the year, with KOSPI down 0.85%. European leading indicators are mixed and futures on Wall Street indexes are slightly in the red.
Today's economic highlights:
On the agenda today, the leading indicators index of January in the United States.
The dollar is down today to EUR 0.9245 and GBP 0.7919. The ounce of gold is up to USD 2030. Oil is slightly down, with North Sea Brent at USD 82.49 a barrel and US light crude WTI at USD 77.88. The yield on 10-year US debt is stable at 4.29%. Bitcoin trades at USD 52,817.
In corporate news:
- U.S. bank Capital One announced late Monday a plan to acquire credit card company Discover Financial Services in an all-stock deal valued at $35.3 billion. Capital One shares were up 4.6% in pre-market trading, while Discover shares were up 14.5%.
- Discover Financial's competitors were down in pre-market trading after the announcement of the proposed merger with Capital One to create a payments giant. Visa was down 0.9% and Mastercard 1.3%.
- The European Union is preparing to fine Apple around 500 million euros ($539 million) for alleged violations of European competition law, the Financial Times reported on Sunday, citing unnamed sources. The fine is expected to be announced early next month, the newspaper said.
- Irish airline Ryanair expects to miss at least seven Boeing deliveries this summer, CEO Michael O'Leary told Reuters on Tuesday. The Federal Aviation Administration (FAA) launched an audit of Boeing 737 production after an accident on an Alaska Airlines flight in early January, and has prohibited Boeing from increasing production without its approval.
- Mondelez - The Oreo cookie maker has put in place new management for its profitable Russian business, according to two internal company memos seen by Reuters, which reveal new details of the company's overhaul in Europe, which has faced months of boycotts and pressure from shareholders and activists to leave Russia.
- Intel- The U.S. government is in talks to grant Intel more than $10 billion in subsidies, Bloomberg reported Friday, citing people familiar with the matter.
- Eli Lilly - The European Medicines Agency (EMA) will this week review the use of Eli Lilly's Mounjaro for diabetes and obesity as an injectable solution in a pre-filled pen, according to the meeting agenda published Monday on the agency's website.
- Pfizer- Velsipity, the group's drug to treat patients suffering from ulcerative colitis, an inflammatory bowel disease, has been approved by the European Commission, the laboratory announced on Monday.
- Microsoft-backed OpenAI has struck a deal that values the artificial intelligence company at $80 billion or more, the New York Times reported Friday, citing people with knowledge of the deal. According to the report, the company would sell existing shares in a tender offer led by venture capital firm Thrive Capital.
- JPMorgan will pay about $350 million in penalties to regulators for disclosing incomplete trading data to surveillance platforms, the bank said Friday in a regulatory filing.
- Ford - The National Highway Traffic Safety Administration (NHTSA), the U.S. federal agency in charge of highway safety, announced Monday that it was ending an investigation into Ford's recall of some 710,000 Explorer model vehicles, following reports of power loss.
- The U.S. government will provide GlobalFoundries with $1.5 billion to expand semiconductor production in order to strengthen domestic supply chains, the Biden administration announced Monday.
- Medtronic reported better-than-expected quarterly results on Tuesday, boosted by strong demand for its heart and diabetes medical devices.
Analyst recommendations:
- Airbnb, Inc.: Phillip Securities downgrades to neutral from buy with a price target reduced from USD 157 to USD 150.
- Avalonbay Communities, Inc.: Barclays upgrades to overweight from equalweight with a price target raised from USD 194 to USD 204.
- Ball Corporation: RBC Capital upgrades to outperform from sector perform with a price target raised from USD 61 to USD 74.
- Caterpillar Inc.: Evercore ISI downgrades to in-line from outperform with a price target raised from USD 321 to USD 338.
- Ingersoll Rand Inc.: Evercore ISI downgrades to in-line from outperform with a price target raised from USD 81 to USD 89.
- Msci, Inc.: Redburn Atlantic downgrades to sell from neutral with a price target reduced from USD 620 to USD 470.
- Nvidia Corporation: Stifel maintains its buy recommendation and raises the target price from USD 665 to USD 865.
- Southwest Airlines Co.: Deutsche Bank upgrades to buy from hold with a price target raised from USD 28 to USD 42. Bernstein upgrades to market perform from underperform with a price target raised from USD 26 to USD 32.
- Udr Inc.: Barclays downgrades to equalweight from overweight with a price target reduced from USD 46 to USD 37.
- W.w. Grainger, Inc.: Loop Capital Markets downgrades to hold from buy with a price target raised from USD 925 to USD 1000.
- Westinghouse Air Brake Technologies Corporation: Zacks downgrades to neutral from outperform with a price target reduced from USD 152 to USD 151.
- AO World Plc: Shore Capital downgrades to sell from hold.
- Domino's Pizza Group Plc: Jefferies upgrades to buy from hold with a price target raised from GBX 410 to GBX 430.
- Intercontinental Hotels Group Plc: Peel Hunt downgrades to reduce from hold with a price target raised from GBX 6000 to GBX 7000.
- Coinbase Global, Inc.: Redburn Atlantic maintains a neutral recommendation with a price target raised from USD 77 to USD 131.