Investors, it seems, have a peculiar way of finding joy in misery. Wall Street's 3% drop was almost a cause for celebration, especially when compared to Tokyo's dramatic 12% plunge. The specter of recession still looms, but a hastily constructed lifeline from the Fed and some soothing words have provided a temporary reprieve.

The recent market rollercoaster has everyone begging the U.S. Federal Reserve for a rate cut. The odds of a 50 basis point cut at the Fed's September meeting have skyrocketed to 77%, up from a mere 13% a week ago. Fed Chair Jerome Powell, in his best cryptic fortune-teller impression, hinted that the first rate cut could come as soon as September. However, some analysts are clutching their pearls, worried that this might be too little, too late to avoid a recession. Meanwhile, the earnings parade continues with major companies like Amgen, Caterpillar, Uber Technologies, and Airbnb.

Optimists, ever the wordsmiths, called yesterday’s session a "healthy correction" (think chia seeds and kale), while pessimists are busy drafting their "end of the world" speeches. Financial markets love their animal metaphors. Bulls and bears, sharks, and even the occasional unicorn. But lately, our spirit animal has been the headless chicken, running around in a panic. When things go south, investors often ditch their principles and act on pure instinct. The recent market turmoil is a testament to this. Tokyo's 12% nosedive was a shocker, and Wall Street could have followed suit in a "Black Monday 1987" sequel. But the American indices managed to hold the line, with the S&P500 only losing around 3%. Europe fared a bit better.

These panic-selling episodes usually happen when overconfident investors get spooked by a series of unfortunate events. I won't bore you with the details (yen carry trade unwinding, US labor market jitters, consumer fatigue, AI hype deflation, and a dash of recession panic), but let's focus on the current state of play. With volatility on the rise, symbolized by a VIX index hitting crisis levels, the Fed sent out its calming envoys. Mary Daly from the San Francisco Fed and Austan Goolsbee from Chicago reassured everyone that the data doesn't scream recession. They also hinted that conditions might soon be ripe for rate cuts to avoid a mess. The ISM services index showed continued positive momentum, which doesn't quite match the panic-induced air pocket we're in. Not the strongest argument, but enough to stabilize things for now.

The bond market, ever the stoic, reacted with a bit more grace. Yields adjusted downwards but found their footing. Financiers are now clamoring for four Fed rate cuts this year, including a double whammy in September. A bold assumption, reflecting their recent anxiety. The Fed will need to finesse its messaging, having had a free hand just ten days ago. This pullback, combined with calls for calm and central banker comments, led to a rebound in some Asian markets this morning and set Western indicators on an upward path. However, the high VIX level means investors are still on edge, and reactions will likely remain exaggerated.

On the macro front, there's not much to report, except for the Australian central bank's decision to hold interest rates steady. This was expected, though some investors were hoping for a bearish surprise.

In the Asia-Pacific region, the Nikkei bounced back by 10% after its 12% dive. South Korea (+3.3%) and Taiwan (+5.3%) also saw gains. Australia, India and China ended in the red. European indices are mixed.

Today's economic highlights:

German factory orders, European retail sales and the US trade balance are on the agenda today.

The dollar is bouncing back to EUR 0.9163 and GBP 0.7879. The ounce of gold is down to USD 2,411. Oil still struggles, with North Sea Brent at USD 76.13 a barrel and US light crude WTI at USD 72.44. The yield on 10-year US debt inches up to 3.83%. Bitcoin is trading at USD 55,400.

In corporate news:

  • Nvidia rebounds by 1.7% in pre-market trading following Monday's sharp correction in equity markets.
  • Alphabet - A U.S. judge ruled on Monday that Google, a subsidiary of Alphabet, had violated competition rules by spending billions of dollars to create an illegal monopoly and become the default search engine worldwide.
  • Palantir Technologies raised its sales and profit forecasts for the second time this year, suggesting that the boom in generative AI is boosting demand for its software services. The stock gained 8.8% in pre-market trading.
  • Boeing - The U.S. National Transportation Safety Board is organizing two days of hearings of key witnesses on the in-flight incident involving a Boeing-designed 737 MAX 9 aircraft belonging to Alaska Airlines.
  • Spirit AeroSystems reported higher quarterly cash burn due to lower deliveries of 737 fuselages to its main customer Boeing.
  • Diamondback Energy reported higher-than-consensus second-quarter earnings thanks to strong production and high oil prices.
  • Lucid announced that its main shareholder, the Saudi Arabian Public Investment Fund, plans to inject $1.5 billion in cash as the electric vehicle manufacturer looks to add models to its product range. Lucid shares jumped 16% in pre-market trading.
  • Lumen Technologies signed new contracts worth $5 billion with cloud and technology companies for its network and cybersecurity solutions, sending shares up 44% in pre-market trading.
  • BioMarin reported adjusted earnings well above consensus, rising 5.6% after the close.
  • ZoomInfo Technologies cut its annual sales forecast to between $1.19 and $1.21 billion, down from its previous projection of $1.26 to $1.27 billion. The stock lost 15.2% before the opening.
  • Williams Companies beat second-quarter earnings estimates on Monday, helped by gains from acquisitions and expansion projects.
  • Realty Income reported better-than-consensus funds from operations on Monday, benefiting from higher rental income in its properties.

Analyst recommendations:

  • Amazon.com, Inc.: Punto Research upgrades to buy from hold with a target price of USD 192.16.
  • Cadence Design Systems, Inc.: Piper Sandler & Co upgrades to overweight from neutral with a target price of USD 318.
  • Crowdstrike Holdings, Inc.: Piper Sandler & Co downgrades to overweight from neutral with a price target reduced from USD 310 to USD 290.
  • Teradata Corporation: JMP Securities downgrades to market perform from market outperform.
  • Tesla, Inc.: Punto Research upgrades to buy from hold with a target price raised from USD 192.88 to USD 270.05.
  • The Carlyle Group Inc.: JP Morgan downgrades to neutral from overweight with a target price reduced from USD 46 to USD 44.
  • Zoominfo Technologies Inc.: Raymond James downgrades to market perform from outperform.
  • Amd (Advanced Micro Devices): CITIC Securities Co Ltd maintains its buy recommendation with a price target raised from USD 125 to USD 184.
  • Chart Industries, Inc.: Barclays maintains its equalweight recommendation and reduces the target price from USD 193 to USD 147.
  • Cnh Industrial N.v.: Morgan Stanley maintains its market weight recommendation and reduces the target price from USD 13.80 to USD 11.
  • Kellanova: Wells Fargo maintains its equalweight recommendation and raises the target price from USD 62 to USD 76.
  • Marriott Vacations Worldwide Corporation: Deutsche Bank maintains its buy recommendation and reduces the target price from USD 121 to USD 95.
  • Nvidia Corporation: Haitong International Research Ltd maintains its outperform recommendation and reduces the target price from USD 1230 to USD 131.
  • Solaredge Technologies, Inc.: Truist Securities maintains its hold recommendation and reduces the target price from USD 60 to USD 28.
  • Sotera Health Company: Barclays maintains its overweight recommendation and raises the target price from USD 14 to USD 17.
  • Teladoc Health, Inc.: Piper Sandler & Co maintains its overweight recommendation and reduces the target price from USD 25 to USD 10.
  • V.f. Corporation: TD Cowen maintains its hold recommendation with a price target raised from USD 9 to USD 16.
  • Zoominfo Technologies Inc.: RBC Capital maintains its underperform recommendation and reduces the target price from USD 9 to USD 7.
  • Haleon Plc: Goldman Sachs downgrades to neutral from buy with a price target raised from GBX 360 to GBX 380.
  • Molten Ventures Vct Plc: RBC Capital downgrades to sector perform from outperform with a price target reduced from CAD 48 to CAD 40.
  • Wizz Air Holdings Plc: Trigon Dom Maklerski SA downgrades to hold from buy with a price target reduced from GBP 26.80 to GBP 15.70.