The energy and mining sectors are especially hit, hampered by oil and metal prices.

The euphoria that gripped the markets ten days ago seems to have faded. It is time to stabilize, while waiting for new indicators likely to fuel the dominant theories that are currently opposing each other. Some believe that the Fed is returning to a pro-business monetary policy, while some are more pessimistic and see stagflation coming instead.

Last week, Friday's Wall Street gains were not enough to make up for Wednesday's and Thursday's losses. The S&P500 and the Nasdaq fell back on a weekly basis. But they had soared the week before.

The two opposing theories that I just mentioned can be summed up as a contest between optimistic and pessimistic investors. The first ones believe that monetary policy will become less punitive again next year, with US rates peaking at around 5%, or even a little higher for the more tolerant. This scenario implies cooling inflation and an economic slowdown.

Meanwhile, the pessimists don't believe that surging prices will disappear quickly. They think that the Fed will have to keep rates high over time, which will cause economic turmoil. But this would be less damaging than if the central bank allowed inflation to run away.

Lately, the optimists have been scoring points, thanks to data that goes in their direction, especially on inflation. This is what fueled the recent rebound. But the U.S. central bank's officials quickly quashed their hopes. They stressed that they need to see more than one or two inflation data to see a lasting trend, and that further evidence will be needed before it can pivot to a slower pace of tightening.

The next round of data likely to move the cursor either way is scheduled for Wednesday and Thursday. Especially on Wednesday, which will combine the November PMI activity indicators for manufacturing and services in the major economies, durable goods orders in the United States and the minutes of the last Fed meeting. All this on the eve of Thanksgiving. Wall Street will therefore be closed on Thursday and will only open for half a session on Friday, in accordance with tradition.

Today, San Francisco Fed President Mary Daly is due to speak about inflation at 1 p.m. ET.

 

Economic highlights of the day:

A rather quiet day today, with the main indicators being German producer prices and the Chicago Fed's activity index. All the macro agenda is here. 

The dollar is up 0.8% to EUR 0.9760 and 0.6% to GBP 0.8468. The ounce of gold is losing ground at 1745 dollars. Oil remains under pressure, with North Sea Brent crude at USD 85.89.25 a barrel and US light crude WTI at USD 78.48. The 10-year US debt yield is moving slightly below 3.80%. Bitcoin is back around 16,200 dollars.

 

In corporate news:

* Walt Disney announced on Sunday evening the return with immediate effect of its former CEO, Bob Iger, and the resignation of Bob Chapek, who had succeeded him as head of the group in February 2020. The group was gaining 8% in pre-market trading.

* The British competition authority, the CMA, announced on Monday that it was examining whether Broadcom's $61 billion acquisition of Vmware would significantly reduce competition.

* JD.Com and Alibaba were down 5% and 2%, respectively, in premarket trading, on concerns about rising COVID-19 cases in China.

* Merck & Co announced the purchase of Imago BioSciences, which specializes in the development of cancer treatments, for $1.35 billion.

* Tesla announced Saturday that it is recalling more than 321,000 vehicles in the U.S. due to a rear light malfunction.

* Teva Pharmaceutical announced the appointment of Richard Francis as president and CEO effective Dec. 1.

 

Analyst recommendations:

  • Affiliated Managers: Goldman Sachs reinstated coverage with a recommendation of buy. PT set to $182.
  • Boohoo: Goldman Sachs downgrades from Buy to Neutral targeting GBp 55.
  • Conoco: Societe Generale downgrades to sell from hold. PT down 11% to $114.
  • Intel: Cowen reinstated coverage with a recommendation of market perform. PT set to $31.
  • JD.Com ADRs: Cinda Securities upgrades to buy from hold. PT jumps 69% to $95.
  • Lundin Gold: Canaccord Genuity initiated coverage with a recommendation of buy. PT set to C$15.
  • Next: Panmure Gordon & Co Limited downgrades to hold from buy. PT up 19% to 6,800 pence.
  • Plains All American: J.P. Morgan downgrades to neutral from overweight. PT up 13% to $14.
  • Salesforce.com: Jefferies retains his positive opinion on the stock with a Buy rating. The target price is lowered from USD 250 to USD 240.