Investors have been cautious after data showed inflation has not taken the nice downward slope they were expecting. The majority believes that the Fed will raise rates by 75 basis points, but there is a significant probability that the hike will reach 100 points. This suspense, coupled with uncertainty about how high rates will have to go to bend inflation, is keeping selling pressure on stocks.

U.S. equity funds recorded net outflows for a fourth straight week. According to Refinitiv Lipper data, investors offloaded $10.52 billion of U.S. equity funds, after $14.6 billion worth of sales in the previous week.

Stock markets took another dive yesterday. The Nasdaq fell 1.7% to fall below the 12,000-point mark at the close, something that has not happened since mid-July. The fairly sharp declines of Microsoft and Apple, which together account for 23% of the index, did not help. The S&P500 dropped 1.13%, also weighed down by Apple and Microsoft, as well as the decline of oil companies and the plunge of Adobe (-17%) after the announcement of the Figma buyout. Or rather for the price it paid for Figma: $20 billion for a company that will only generate $400 million in revenues this year. The market considers the bet to be a bit audacious and fears that it will join the well-stocked graveyard of expensive digital acquisitions with no future.

And to top it all off, Fedex canceled its annual financial forecast on Thursday, saying its first-quarter results suffered from weak business volumes, which even worsened at the end of the period. JPMorgan also lowered its recommendation to "neutral" on the stock from "overweight". FedEx shares plunged nearly 20% in pre-market trading.

The logistics company is a good indicator of economic health since it is a real-time marker of activity. This time, it is not the rising costs that took investors by surprise: they now have a good idea of the inflationary damage. Rather, it's the slowdown in demand. Fedex's management also warned that economic conditions will deteriorate further in the coming weeks.

We are still in a rather strange period... On the one hand, everyone has been saying that things have gone awry for a while, but on the other hand, the consumer has continued to consume and companies still make a lot of money. The reality shock expected in the first quarter of 2022 did not happen, nor did it really materialize in the second quarter of 2022. Fears are now shifting to the third quarter, which explains why investors are sensitive to Fedex's warning.

So, today should see quite a bit of volatility, even more so because this is the third Friday of the month– which is call Triple Witching Day- and that it is synonymous with stock market clearing. This is the monthly session where derivatives (index futures, equity and index options) are expiring. Professionals unwind positions or roll over their strategies to the next month. Consequently, this is a source of volatility and sometimes upheaval. We saw this very clearly during the August clearing: it marked the end of the rebound because a number of financiers adopted more conservative positions after two months of gains and the approach of new uncertainties in the autumn. This September 16 is also a quarterly deadline, and so is called Quadruple Witching Day - which further increases the stakes of the session.

 

Economic highlights of the day:

The main indicator expected today is the US consumer confidence index of the University of Michigan. All the macro agenda here. 

The dollar is still close to parity with the euro. The ounce of gold remains under pressure at $1,660. Oil is crumbling, with North Sea Brent crude at USD 90.98 a barrel and U.S. light crude WTI at USD 84.90. The yield on 10-year US debt remains high at 3.45%. Bitcoin has fallen to around USD 19,800.

 

In corporate news:

 * Uber Technologies said Thursday it is investigating a cybersecurity incident after reports that its network was hacked and the company had to suspend several internal communications and engineering systems. Uber shares are down 4.7% in pre-market trading.

* General Electric was giving up 5% in after-hours trading as the company said Thursday night it continues to face supply chain bottlenecks.

* Texas Instruments gained 1.2% in after-hours trading after the company raised its quarterly dividend by 8% and announced an additional buyback of its shares for about $8.2 billion.

* The Boeing Company, Raytheon Technologies - China will impose sanctions on Boeing Defense and Raytheon executives Ted Colbert and Gregory Hayes for their roles in the recent sale of U.S. military equipment to Taiwan, a Chinese Foreign Ministry spokesman said Friday. Boeing loses 1.5% in pre-market trading, Raytheon 1%.

* Nordstrom - The department store chain's stock gained 1.7% in premarket trading after it announced a 9.9% stake in Mexico's Liverpool

* Adobe - Oppenheimer lowered its recommendation to "perform in line with the sector" from "outperform" in the wake of the Photoshop maker's announcement that it would buy Figma for $20 billion.

* JetBlue Airways - The airline's stock lost 1.6% in pre-market trading. The group announced that it had raised its average fuel cost estimate for the third quarter.

* NCR falls 14.5% in premarket trading after announcing a plan to split into two independent companies, one dedicated to online commerce and the other to ticketing machines.

 

Analyst recommendations:

  • Adobe: BofA Global Research downgrades to neutral from buy. PT up 13% to $350.
  • Ansys: J.P. Morgan upgrades to overweight from rating suspended. PT up 14% to $275.
  • Arrow Electronics: Wells Fargo Securities downgrades to underweight from equal-weight. PT down 13% to $87.
  • Autodesk: J.P. Morgan moves to neutral from rating suspended. PT up 0.8% to $203.
  • Avnet: Wells Fargo Securities downgrades to underweight from equal-weight. PT down 13% to $35.
  • Big Yellow: J.P. Morgan upgrades from neutral to overweight targeting GBp 1550.
  • CrowdStrike: MKM Partners starts at buy with $240 price target.
  • Discover Financial: Citi raised its recommendation to buy from neutral. PT up 39% to $140.
  • Fedex: J.P. Morgan downgrades to neutral from overweight. PT up 4.5% to $214.
  • Fevertree: Berenberg downgrades from buy to hold targeting GBp 1000.
  • Fortinet: MKM Partners starts at buy with $70 price target.
  • InterContinental Hotels: Citi downgrades from neutral to sell targeting GBp 4450.
  • Investec: Berenberg starts tracking as Buy with a target of GBp 540.
  • ITM Power: Berenberg remains on the sell side with a target reduced from GBp 185 to GBp 100.
  • Netflix: Citigroup adjusts price target to $305 from $275, reiterates buy rating.
  • Snowflake: Needham starts at buy with $240 price target