But let’s start with the main data today, which is about the job market. The US unemployment rate fell to 3.4% vs 3.5% expected, while April payrolls increased by a much bigger-than-expected figure, at 253,000, versus 185,000 forecasts by economists. It shows that the labor market is still resilient, which indicates that a soft landing is still possible for the economy. However, average hourly earnings rose 0.5% for the month, while 0.3% was expected, which also shows that inflation is resilient and this strengthens the case to keep rates high for longer. On an annual basis, wages increased 4.4%, higher than the 4.2% expectation.

In any case, futures on all the main three US indexes remained in the green after the data. I wouldn't say that these figures are less important since the Fed pressed "pause" on its monetary tightening cycle, but let's just say that the impact is a little bit smaller and the focus has shifted to banks.

Wall Street has just had four sessions in the red. Yesterday, the S&P500 fell by 0.7% while the Nasdaq 100 gave up 0.4%. In Europe, the decline has also taken hold, as on the French CAC40 (-0.85%), the German DAX (-0.4%) and the British FTSE 100 (-1.1%). Investors are still struggling to gauge the current situation, because even though Jerome Powell and Christine Lagarde hinted at a pause in rate hikes, they also both sent mixed signals, as they didn’t close the door to further rate hikes if the situation warrants it.

Add to this the current banking crisis, in which the US authorities are in a paradoxical situation. Reversing monetary policy by lowering rates to boost liquidity in the financial system would show a degree of panic about the situation of the country's banks, which would risk further weakening the small players in the short term. It would also run counter to the message of continuing the fight against inflation. On the other hand, the measures announced so far have not provided any lasting reassurance. Western Alliance lost another 40% yesterday. Pacwest was down another 50%. First Horizon fell by 33% after Toronto-Dominion abandoned its bid to buy the US institution.

The situation is of concern to the White House and the administration, which suspect market manipulation and are monitoring, and I quote, "short selling pressures on healthy banks". Part of me understands this, but a more cynical part of me thinks that if Washington is trying to send this kind of message, then the level of trust is not very high. Generally, the US does not like measures that impede market freedom. However, the SEC has already temporarily banned short selling of financial securities a few times, notably in the autumn of 2008, just after the collapse of Lehman Brothers.

The financial markets have been living with this sword of Damocles hanging over their heads for several weeks now. On the plus side, corporate results are, on the whole, quite good. Yesterday, it was Apple that reassured the world by publishing solid figures, supported by a recovery in iPhone sales. The group is still suffering in computers, but smartphones and services are enough to keep it happy and profitable at present.

It is also important to note that despite fears about the banking sector, news and rumors about financial deals are multiplying, a sign that risk appetite is still high. Funds are fighting for German software company Software AG, Spanish testing company Applus is reportedly attracting interest from financial investors and Blackstone is reportedly considering an IPO for Spanish casino operator Cirsa, which is in its portfolio.

 

Economic highlights of the day:

US job data, German factory orders and Eurozone retail sales are on the agenda today. Overnight, the Chinese Caixin PMI for services came out in expansion zone, but less dynamic than expected.

The dollar is up 0.4% against the euro to EUR 0.9114 and up 0.1% against the pound to GBP 0.7959. The ounce of gold is worth USD 2010. Oil remains under pressure, with North Sea Brent at USD 74.51 a barrel and US WTI light crude at USD 70.58. The yield on US 10-year debt is at 3.38%. Bitcoin is trading around USD 28,990.

 

In corporate news:

  • Apple - The largest U.S. company by market capitalization reported better-than-expected quarterly results on Thursday, thanks in part to better-than-expected iPhone sales and strong performance in India and other new markets. The stock rose 2.2% in pre-market trading.
  • Lyft - The ride-hailing company said Thursday it expects its second-quarter margins to be hurt by price cuts aimed at increasing ridership and competing with rival Uber, which has a larger global presence and diversified revenue streams. The stock was down 17% in pre-market trading.
  • Tesla delivered 75,842 electric vehicles manufactured in China in April, down 14.7% from March, according to data from the China Passenger Car Association (CPCA) released Friday.
  • The figure, however, represents a huge jump from a year earlier, when Shanghai - where Tesla has a factory - was subject to COVID-19 restrictions.
  • The White House has pledged to monitor short-selling pressures on healthy banks, while US state and federal authorities are assessing whether "market manipulation" is behind the recent volatility in the sector's shares, a source familiar with the matter said Thursday.
  • The American Bankers Association, a banking industry trade association, on Thursday asked federal regulators to investigate a series of short sales of bank stocks it said were "disconnected from underlying financial realities."
  • Carvana - The used-car retailer said it expects to turn a profit in the current quarter, offering some relief to investors amid concerns about the company's solvency. The stock was up 33% in pre-market trading.
  • Warner Bros said Friday that its streaming business, which includes HBO Max and Discovery+, posted a $50 million profit in the first quarter, a major step in its bid to win subscribers and gain a foothold in the industry's digital future.
  • AMC on Friday reported better-than-expected first-quarter revenue, helped by a string of blockbuster movies, including "Ant-Man," that brought more people into theaters. 
  • Coinbase - The leading U.S. cryptocurrency exchange reported a smaller-than-expected quarterly loss of $0.34 per share on Thursday, benefiting from cost cuts and diversified revenue streams.
  • Bumble - The dating app, which owns Badoo, beat market estimates for its quarterly revenue on Thursday, buoyed by strong user spending and a surge in subscribers despite recession fears.
  • Doordash raised its annual profit forecast on Thursday after beating quarterly revenue expectations on higher food orders despite high inflation.
  • Walt Disney - The Florida Senate passed a bill Thursday that will allow Governor Ron DeSantis' appointed tourism board to cancel theme park development agreements signed by his predecessor, the latest attack on Walt Disney by the Republican leader.
  • Expedia Group - The U.S. travel agency group on Thursday beat estimates for quarterly revenue on record lodging bookings as travel returns to urban areas and international tourism demand approaches pre-pandemic levels.

 

Analyst recommendations:

  • Alnylam:  BMO Capital Markets upgrades to outperform from market perform. PT up 22% to $250.
  • Apple:  Goldman Sachs is keeping its Buy rating. The target price is increased from USD 200 to USD 209.
  • Canadian National: Morgan Stanley upgrades to overweight from equal-weight. PT up 24% to C$200.
  • Cognizant: HSBC upgrades to buy from hold. PT up 19% to $75.
  • Flutter: JP Morgan retains its Neutral opinion on the stock. The target price has been raised to GBp 16800 from GBp 15100.
  • IMI: Stifel upgrades from hold to buy targeting GBp 1900.
  • Kellogg: J.P. Morgan upgrades to neutral from underweight. PT up 2.3% to $72.
  • NetScout: Piper Sandler upgrades to neutral from underweight. PT up 6.3% to $30.
  • NuStar: Raymond James upgrades to outperform from market perform. PT jumps 31% to $20.
  • Sapiens: Barclays downgrades to underweight from equal-weight. PT up 8.4% to $24.
  • Spire Healthcare:  RBC Capital Markets upgrades to outperform from sector perform. PT up 18% to 270 pence.
  • Tesla: Fundamental Research Corp initiated coverage with a recommendation of fully valued. PT set to $157.
  • Wesco: Baird upgrades to outperform from neutral. PT jumps 46% to $180.