Nvidia recovered 7% on Tuesday after having lost 16% since its highs. We shouldn't be looking for logic here, it’s an emotional reaction. When the stock price reaches a psychological barrier, as investors feel that they won’t make a profit since the price is too high, a sell movement is triggered. But as soon as there's a small buying opportunity on a pullback, those who were reluctant to get in rush in, caught up by greed and envy.

Conversely, real estate-related sectors suffered greatly yesterday. Swimming pool specialist Pool Corporation issued a major warning about the slowdown in consumer spending. As a result, its share price fell by 8% and the rest of the sector went down with the bathwater (Pentair -7%). Companies linked to construction and home equipment (Masco, Whirlpool, Lowe's...) also suffered.

Monetary policy takes center stage this week across the globe, in a confusing way. May's PCE inflation in the US, to be announced on Friday, is on everyone's mind. Yesterday, the Fed's central bankers, who had the opportunity to get their messages across, continued to excel in the science of saying everything and nothing. The award went to Lisa Cook, a member of the US central bank's Board of Governors, who explained that it will be appropriate to cut rates "at somepoint". Thank you, Lisa. However, Fed hawk Michelle Bowman was a little bit more explicit, saying that U.S. policy rates will remain steady "for some time".

In Europe, the head of the Finnish central bank, Olli Rehn, was more committed in an interview published this morning by Bloomberg. He said that the two additional rate cuts expected by the market for the ECB this year appear to be a reasonable assumption. Rehn is a moderate with a tiny conservative bias on the European Governing Council. What the ECB and Fed would like to avoid is the headache looming in Australia's central bank. They learned this morning that inflation in May had accelerated from 3.6% to 4%. Australia saw prices decline sharply between December 2022 and December 2023, but they have since started to rise again. After today's statistic, the probability of a rate hike in August or September was just over 50%. The RBA's main rate is currently set at 4.35%, after a hike last November followed by five sessions of status quo. Australian rates may be a harbinger of the kind of dilemma US and European central bankers may face later in the year.

Canada also had a surprising inflation update on Tuesday. Consumer price growth picked up pace to 2.9% in May, which was unexpected after a steady disinflation process since start of the year. In addition, an unexpected revision to Japan's first-quarter gross domestic product (GDP) could impact the central bank's growth forecasts and the timing of the next interest rate hike, according to some analysts quoted by Reuters.

In other news, two important events took place after the close yesterday. Fedex shares rebounded by 14% after reporting better-than-expected results, announcing a share buyback program and forecasting a recovery in business over the coming months. This seems a little at odds with the depressed consumer sector I mentioned earlier, but then, this economy is no stranger to paradoxes. In any case, the announcement was very appealing. Perhaps also because Fedex has lost 10% in three months, and investors are looking for cheap stocks with a slightly new story to tell: Fedex is currently paying less than 13 times expected earnings in 2025, or roughly half the average P/E of the S&P500.

The other post-close star is electric vehicle manufacturer Rivian, which is up a whopping +50%. Volkswagen has announced a huge partnership that will see the German group invest $5 billion in the American carmaker, to create a joint venture for next-generation EVs. "The tie-up between Rivian and VW is one of the most logical potential OEM deals at the moment: it brings Rivian funding, scale and potential industrial expertise, and helps VW accelerate its progress in electric architecture," sums up Jefferies automotive analyst Philippe Houchois.

In Asia-Pacific, the Nikkei 225 gained a further 1.3% for a third session in the green in Japan. The Chinese and Korean indices are slightly up. The margin is thinner in India. In Australia, the ASX lost 0.8% on fears that inflation would force the RBA to raise rates. European leading indexes are bearish, and so are futures on Wall Street.

Today’s economic highlights:

US new home sales and DOE crude inventories ae on the agenda. The full agenda is here.

The dollar is up 0.2% both against the euro and the pound to EUR 0.9360 and GBP 0.7903. The ounce of gold falls further to USD 2,317. Oil is stable, with North Sea Brent at USD 84.62 a barrel and US light crude WTI at USD 81.16. The yield on 10-year US debt rises to 4.26%. Bitcoin is trading at USD 61,000.

In corporate news:

  • FedEx announced on Tuesday that it expects profits for fiscal year 2025 to exceed analysts' expectations, with group executives saying that cost-cutting and consolidation of operations will improve performance, even if demand for parcel deliveries remains weak. Share price up 13.3% in pre-market trading.
  • Nvidia advanced 2% in premarket trading on Wednesday after gaining nearly 7% on Tuesday, ending three consecutive sessions of decline that wiped out some $430 billion in market capitalization. In its wake, Micron, which will publish its quarterly results after the close, gains 2.7% in premarket trading, while Broadcom rises 1.6% and Qualcomm 0.8%.
  • Apple gains around 1% in pre-market trading, with Rosenblatt upgrading its rating on the iPhone maker from "neutral" to "buy", and raising its price target from $196 to $260.
  • Rivian - Volkswagen Group is to invest up to $5 billion in US electric vehicle manufacturer Rivian as part of a new 50/50 joint venture, the two groups announced on Tuesday evening. Rivian jumped 40% in pre-market trading to $16.85.
  • Whirlpool gains 10.3% in pre-market trading after Reuters reports that German group Bosch is considering a bid for Whirlpool, which would enable it to strengthen its position in the household appliance market.
  • General Mills is down 3.9% in pre-market trading. On Wednesday, the Cheerios cereal maker forecast lower-than-expected annual earnings, as consumers turn to cheaper alternatives to its products.
  • Boeing - The Federal Aviation Administration (FAA) announced it was adopting a new airworthiness directive, a legally binding regulation, for 13 Boeing 757-200 aircraft registered in the USA. This follows reports of cracks in certain structural elements of the aircraft, which could lead to in-flight depressurization.
  • Southwest Airlines fell by 8.8% in pre-market trading, as the airline said on Wednesday it expected second-quarter revenue per available seat mile to fall by 4% to 4.5%, compared with a previous forecast of a decline of 1.5% to 3.5%.
  • Blackstone - The private equity giant announced on Wednesday that it had acquired the British hotel operator Village Hotels, which manages 33 mid-range hotels, in an undisclosed deal.
  • Albemarle - The world's leading lithium producer plans to hold more auctions of lithium, a metal used in electric vehicle batteries, to enhance price transparency and promote a better understanding of a market deemed opaque, a group executive said Tuesday evening. Share price up 2.7% in pre-market trading.
  • Norfolk Southern - Jennifer Homendy, chairwoman of the National Transportation Safety Board (NTSB), found that Norfolk Southern sought to fabricate evidence and failed to provide documents during its investigation into a 2023 derailment in Ohio. Last month, the railroad agreed to pay a civil fine and millions of dollars in future costs in a lawsuit brought by the U.S. government.

Analyst recommendations:

  • Accenture Plc: Morgan Stanley downgrades to equal weight from overweight with a price target reduced from USD 382 to USD 300.
  • Americold Realty Trust, Inc.: JP Morgan upgrades to overweight from neutral with a target price of USD 30.
  • Aptiv Plc: Piper Sandler & Co downgrades to underweight from neutral with a price target reduced from USD 78 to USD 63.
  • Campbell Soup Company: JP Morgan upgrades to overweight from neutral with a target price raised from USD 45 to USD 52.
  • Corpay, Inc.: Baptista Research upgrades to buy from outperform with a price target raised from USD 321.80 to USD 326.70.
  • Robinhood Markets, Inc.: Wolfe Research upgrades to outperform from peerperform with a target price of USD 29.
  • Sarepta Therapeutics, Inc.: Citi downgrades to neutral from buy with a price target raised from USD 172 to USD 176.
  • United States Steel Corporation: BMO Capital Markets upgrades to outperform from market perform and raises the target price from USD 43 to USD 45.
  • Universal Health Services, Inc.: Baird upgrades to outperform from neutral with a price target raised from USD 198 to USD 236.
  • Celsius Holdings, Inc.: Stifel maintains its buy recommendation and reduces the target price from USD 85 to USD 65.
  • Chipotle Mexican Grill, Inc.: Morgan Stanley maintains its market weight recommendation and reduces the target price from USD 3100 to USD 62.
  • Rivian Automotive, Inc.: Truist Securities maintains its hold recommendation with a price target raised from USD 10 to USD 13.
  • Solaredge Technologies, Inc.: DZ Bank AG Research maintains its hold recommendation with a price target reduced from USD 54 to USD 30.
  • Walmart Inc.: President Capital Management Corp maintains its buy recommendation and raises the target price from USD 65 to USD 80.
  • General Dynamics Corporation: BTIG initiates a Buy recommendation with a target price of USD 345.
  • Humana Inc.: Piper Sandler & Co initiates an overweight recommendation with a target price of USD 392.
  • Howmet Aerospace Inc.: BTIG initiates a Buy recommendation with a target price of USD 95.
  • Carnival Corporation: Oddo BHF upgrades to neutral from underperform with a price target raised from GBX 8.40 to GBX 11.50.
  • Centamin Plc: Liberum downgrades to hold from sell with a price target raised from GBX 107 to GBX 117.
  • Future Plc: Jefferies upgrades to buy from underperform with a target price raised from GBX 635 to GBX 1280.
  • Legal & General Plc: HSBC downgrades to hold from buy with a price target reduced from GBP 3.10 to GBP 2.60.
  • Molten Ventures Vct Plc: Liberum upgrades to buy from hold with a price target raised from GBX 1619 to GBX 1914.
  • Trustpilot Group Plc: Danske Bank downgrades to hold from buy with a price target raised from GBP 2.30 to GBP 2.50.