You get used to anything, even higher interest rates. This has been the message sent by the financial markets since the beginning of the year. We are currently witnessing what lawyers would probably call a form of reversal of the burden of proof. Until the end of last year, everything was going badly, until proven otherwise. Well, now everything is better, until proven otherwise. The change is important because it means looking at the positive side of a mixed indicator, instead of the dark side. This week illustrates this very well. In 2022, the combination of slightly less favorable than expected inflation numbers (that was Tuesday) with a healthy consumer sentiment and an improving housing market (that was yesterday) would have probably led investors to consider further rate hikes. This would have made them deeply depressed. Remember, there is little that financiers hate more than restrictive monetary policies.

But in 2023, no one cares. In January, stocks had ridden the wave of a sharper-than-expected slowdown in inflation, which confirmed that the U.S. central bank's rate-raising cycle would soon end. This was quite logical. All that was missing was a slightly more adverse context to test the strength of the recovery. This more adverse context materialized in February, with less unambiguous statistics and an unresolved dilemma at this stage: is it better to have strong growth and some fears about a Fed that might be even more punitive, or faltering growth that would push the Fed to return to a more flexible monetary policy? But what is important here is that the market is saying: the dilemma is not clear-cut, but both situations are ultimately acceptable if the published data remain within reasonable limits, they do not require a radical response such as a forceful rate hike as was the case a year ago. This feeling is reinforced by the non-materialization of the extreme scenarios that had been envisaged, in particular an energy cataclysm in Europe and an out-of-control coronavirus in China after the end of the zero-covid policy.

Coming back to concrete things, the US macroeconomic statistics published yesterday show that strategic parts of the economy are still strong, even if industrial production was a bit weak. Initially, this affected the indexes in the aforementioned pattern. But like the day before, they ended fairly close to their highs. In the United States, the Nasdaq 100 continued to rise, gaining 0.8%, well ahead of the S&P 500 (+0.3%). In Europe, green dominated everywhere, especially on the French CAC40, which recovered 1.2%, boosted by its large caps in luxury and industry. An American media (Bloomberg I think, I forgot where I read it) pointed out that the index compiled by Goldman Sachs to gauge investors' risk appetite based on the track record of unprofitable technology companies is at +30% since January 1st. The Nasdaq 100 is up nearly 16%.

Meanwhile, the bond market is once again looking at higher rates and/or longer, but without dampening sentiment. The US 10-year touched 3.8% yesterday, its highest level of the year. The yield curve is still inverted, which is historically a signal of recession. But one can sense that investors seem ready to put this gloomy prediction in the curiosity cupboard, along with the aforementioned energy cataclysm in Europe and the out-of-control coronavirus in China. Today, a new set of statistics from the US to test the strength of the mood I have just tried to paint. With the necessary caution, since we know that the pendulum effect is powerful on the equity markets.

Economic highlights of the day:

At 8:30 am in the United States, the market will mainly follow the producer prices and to a lesser extent the Philly Fed index, the weekly unemployment figures and the data on housing starts and building permits. All the agenda here. This morning, Japan reported an acceleration in exports in January, while economists had feared a contraction.

The dollar is trading at 0.9342 EUR and 0.8299 GBP. The ounce of gold remains positioned around 1836 USD. Oil is rebounding, with North Sea Brent crude at USD 85.57 a barrel and U.S. light crude WTI at USD 78.81. The yield on 10-year US debt tightens to 3.78%. Bitcoin jumps to USD 24,550.

In corporate news:

* Cisco Systems jumped 6% in after-hours trading as the networking equipment specialist raised its full-year profit growth forecast on Wednesday after strong quarterly results.

* Tesla has sold all of its Model Y inventory scheduled for this quarter in the U.S. market and nothing is expected until April. The company will also open part of its U.S. charging network to competitors' vehicles as part of a $7.5 billion government program to boost electric car use and lower carbon emissions.

* Ford Motor is down 0.7% in premarket trading after announcing an extension at least until the end of next week of the production suspension of its F-150 electric vehicle, which is facing battery problems.

* Roku jumped 10.2% in premarket trading after announcing a first-quarter revenue forecast that beat Wall Street expectations and a commitment to reduce its costs.

* Lockheed Martin and Raytheon Technologies - China's Ministry of Commerce announced Thursday that it had placed the two U.S. groups on a "list of unreliable entities" after arms sales to Taiwan.

* Baker Hughes - Piper Sandler raised its recommendation to "overweight" from "neutral". 

Analyst recommendations:
  • Activision Blizzard: Deutsche Bank raised the recommendation to buy from hold. PT up 16% to $90.
  • Eli Lilly: Societe Generale cut the recommendation to sell from hold. Price target decreases 19% to $278.
  • Idexx Laboratories: Piper Sandler maintains overweight rating. Price target up to $600 from $500.
  • Inchcape: Citi initiated coverage with a recommendation of buy. PT set to 1,131 pence
  • Marathon Oil: Benchmark Company moved to buy from hold. Price target set to $32.
  • Nvidia: DZ Bank cut the recommendation to sell from buy. Price target downgrades to $195.
  • Pegasystems: Truist Securities maintains hold rating. PT up to $45 from $40.
  • Roku: Benchmark Company raised the target to $89 from $65. Maintains buy rating.
  • Seagen: Raymond James raised the recommendation to strong buy from outperform. PT up 23% to $175.
  • Smith & Nephew: Liberum initiated coverage with a recommendation of hold. PT set to 1,120 pence.
  • Upstart Holdings: Loop Capital Markets raised the recommendation to buy from hold. PT up 42% to $24.
  • Zillow Group: Benchmark Company upgrades price target to $60 from $52.