Apple, Meta and even Nvidia are down in premarket trading as the yield on 10-year US debt rises to 4.57%. Big tech often struggles when yields rise on long-term bonds because it lowers the present value of their expected future cash flows and reduces their P/E ratios.

This selling pressure comes from a member of the US central bank, Neel Kashkari. The Minneapolis Fed head is not one of the voters for the next monetary policy decisions, but his opinion counts, since he is classified as a moderate hawk. But he sounded like a more extreme hawk yesterday, when he declared that the Fed would not rule out further rate hikes if necessary. His words weighed heavily in the ten-point rise in the yield on US ten-year debt, and in the drop in investor sentiment.

The Nasdaq 100 and S&P500 still ended into positive territory yesterday, thanks to Nvidia, while the rest of the stock market, with the exception of oil stocks, once again struggled due to fears about the trajectory of monetary policy.

Yesterday’s session could have ended in the red without Nvidia. The stock is so out of control that it cannot be ignored. It gained 7% yesterday, taking its market capitalization to $2.8 trillion. It's a hundred billion dollars closer to Apple's market weight. It sounds enormous, but Nvidia increased its own capitalization by $190 billion in yesterday's session alone.

Thanks to this exceptional contribution, which inspired a number of other semiconductor stocks, the Nasdaq 100 gained 0.3% to hit a new record high, while the S&P500 managed to stay afloat (+0.02%). The Dow Jones, which does not include the star of artificial intelligence chips in its ranks, fell back (-0.55%).

Yesterday, Europe's stock market indices suffered a major setback. The CAC, SMI and Bel20 lost 0.9%. Other markets posted more modest losses thanks to their local specialties: the UK's FTSE 100 thanks to its large commodities and oil contingent, the Dutch AEX thanks to its star ASML and the DAX via a suspicious surge of confidence in Volkswagen, which hasn't achieved much in electrics but confirmed, post-close, rumors of a EUR 20,000 EV in the years to come.

Markets always find it difficult to operate in a world where inflationary expectations are not well anchored. Between the 2008 financial crisis and the Covid crisis, the central banks' forward guidance strategies had created a somewhat artificial cosy nest. In the current context, they can no longer afford the luxury of providing investors with visibility, since they don't really have a good grasp of macroeconomic trends themselves. The market is therefore finding new anchors. The promise of artificial intelligence, for example, through its messiah, Nvidia.

Among the sectors that held up well yesterday was the oil sector. It makes sense, since the price of black gold has once again risen, in tune with the situation in the Middle East. A barrel of Brent crude returned to the USD 84 zone. OPEC+ is also expected to announce on Sunday that it will continue to limit its supply. It's not as exciting as AI, but it still works.

The Asia-Pacific region is in the red, with the exception of mainland China, which is often driven by obscure dynamics. Japan limited its losses to 0.5%, but declines exceeded 1% in South Korea, Hong Kong and Australia. India held up a little better, dropping 0.6%, but this did not prevent the SENSEX from recording a fourth session in the red. European indices are well in the red and so are futures on the main three Wall Street indexes.

Economic highlights of the day:

Germany’s first estimate of May inflation and the Richmond Fed manufacturing index are on the agenda today. 

The dollar is worth EUR 0.9217 and GBP 0.7845. The ounce of gold stabilizes at USD 2343. Oil continues to climb, with North Sea Brent at USD 84.45 a barrel and US light crude WTI at USD 80.21. The yield on 10-year US debt rises to 4.57%. Bitcoin is trading at USD 67,900.

In corporate news:

  • Nvidia, Apple - The market valuation gap between these two tech titans has narrowed to around $100 billion, with Nvidia shares climbing 6.98% on Tuesday amid excitement for generative artificial intelligence (AI). A continued significant rise on Wednesday could see the semiconductor maker surpass Apple as the second-largest market capitalization on Wall Street, trailing only Microsoft.
  • ConocoPhillips, Marathon Oil - The two companies are reportedly in advanced talks regarding a potential all-stock merger, with ConocoPhillips aiming to acquire Marathon Oil for an enterprise value of $15 billion, as per the Financial Times. In pre-market trading, Marathon Oil shares jumped 6.1%, while ConocoPhillips shares dipped by 0.7%.
  • Merck & Co is on the verge of securing a $1.3 billion deal to acquire the ophthalmology biotech firm Eyebiotech, with the agreement including additional staged payments of up to $1.7 billion, according to the Wall Street Journal.
  • American Airlines saw its shares fall by 7.8% in pre-market trading after the airline revised its profit forecast downward for the current quarter on Tuesday. Additionally, Jefferies downgraded its rating on the stock to “hold” from “buy”.
  • Robinhood Markets - The online brokerage platform rose 3.2% in premarket trading following the announcement of a $1 billion share repurchase program on Tuesday.
  • KKR - A consortium that includes the US investment fund and Singapore Telecommunications is reportedly in the lead to purchase a $1 billion minority stake in one of Asia's largest data center operators, according to sources.
  • Box - The cloud content management company saw its shares advance 1.8% in pre-market trading after it reported first-quarter sales and earnings that exceeded analysts' expectations, based on LSEG data.
  • Faraday Future Intelligent Electric - The electric vehicle maker's shares dropped 5.3% in premarket trading after the company withdrew its production forecast for the year, citing market conditions and financing challenges.
  • Advance Auto Parts gains 3.1% in pre-market trading as the company's forecast for net sales for the full fiscal year is between $11.30 billion and $11.50 billion, which is in line with or slightly higher than the $11.35 billion analysts expected, per LSEG data.

Analyst recommendations:

  • Booking Holdings Inc.: Zacks downgrades to neutral from outperform with a price target reduced from USD 4295 to USD 3985.
  • First Solar, Inc.: DZ Bank AG Research downgrades to hold from buy with a price target raised from USD 220 to USD 270.
  • United Airlines Holdings, Inc.: Jefferies upgrades to buy from hold with a price target raised from USD 54 to USD 65.
  • W.W. Grainger, Inc.: Baird downgrades to neutral from outperform with a price target reduced from USD 1000 to USD 975.
  • Workday Inc.: Daiwa Securities maintains its outperform rating and reduces the target price from USD 325 to USD 250.
  • Fresnillo Plc: RBC Capital upgrades to outperform from sector perform with a price target raised from GBX 490 to GBX 700.
  • Mobico Group Plc: Berenberg downgrades to hold from buy with a price target reduced from GBX 100 to GBX 66.
  • RS Group Plc: Liberum downgrades to hold from buy with a price target reduced from GBX 860 to GBX 800.