Your elbow is close, but you can't bite it. This Russian expression perfectly captures how American investors felt just a week ago when they thought the August market turmoil was behind them and new stock market highs were within reach. Just a few trading sessions later, it all came crashing down. The S&P 500 dropped 4.25%, while the Nasdaq 100 plummeted 5.9%. It was the worst week for the tech-heavy index since the transition between October and November 2023, according to my own morning tally. Meanwhile, the European stock market fared no better, spending the entire week in the red and closing with a -3.5% loss on the Stoxx Europe 600. The French CAC40 took an extra hit with the collapse of its luxury sector.

Wall Street's decline was driven by growing doubts about the strength of the US economy, sparked by a collection of pesky little details. These details have reinforced the argument that the US central bank has been too slow to cut interest rates, creating a messy situation, even though some of the economic statistics haven't deteriorated drastically. You can’t help but wonder if there isn’t some sort of Machiavellian secret society pushing for lower rates just to access cheap money faster, regardless of the economic conditions. At the same time, the deflation of the AI bubble has contributed to further losses. Nvidia dropped 14% over four sessions. Super Micro Computer lost 12%, though it's worth noting that the company had already stepped on a rake the previous week, thanks to a well-timed blow from short-seller Hindenburg, which had caused a 28% drop. The last glimmer of hope rested on Broadcom’s late release on Thursday. While not as prominent as Nvidia, Broadcom—formerly a part of HP—is seen as a reliable indicator of the AI sector’s health, and certainly more dependable than Super Micro Computer. Unfortunately, the stock fell 11% on Friday, showing that it too failed to reassure investors on the hottest topic of the moment—quite the opposite, in fact.

These doubts have dampened spirits and confirmed that September is truly an unusual month for the stock market. However, the U.S. employment statistics released on Friday showed that while the economy is slowing, there’s no disaster on the horizon yet. These figures helped refocus the market's overblown expectations regarding the monetary policy decision that the U.S. central bank is set to make on September 18. The latest forecast suggests a quarter-point rate cut, while the possibility of a half-point cut briefly gained popularity earlier in the week. Tactically, the Fed has every reason to lower rates gradually rather than making a sharp move, if only to demonstrate to the financial world that it remains in control. Nine days remain until the decision is made, and nine days can feel like an eternity when markets are jittery—especially with new statistics coming up that could fuel speculation, including inflation data on Wednesday and producer prices on Thursday for the month of August. Meanwhile, the European Central Bank is widely expected to cut its rates on Thursday, which could help lift investor sentiment.

What’s been circulating in the international press in recent hours?
  • Mario Draghi is stepping in to boost European competitiveness. The former ECB president and Italian Prime Minister is set to present a key report today on how Europe can better compete with the USA, China, and emerging economies. This report is expected to spark new debates on the role of EU institutions.
  • In China, inflation was lower than expected in August, and producer prices accelerated their decline. What does this mean? It's best not to rely on the Chinese economy to drive global growth anytime soon.
  • In the United States, Donald Trump's campaign won't be hindered by the verdict in the Stormy Daniels case, as the courts have decided to delay the ruling until after the presidential election.
  • On Trump again, the presidential candidate has proposed a 100% customs surcharge on countries that abandon the US dollar for their third-party trade.
  • In Greece, a new tax on cruise ship arrivals is set to protect popular islands from overtourism.
  • Apple will host its back-to-school product event today, with high expectations centered on AI. While the market views the company as having missed the initial AI wave, it is still seen as capable of catching up with the leaders.
In the Asia-Pacific region, markets remain shaky this morning. Japan's Nikkei is down 0.7% for the fifth consecutive session. In China, markets are tumbling after a double hit of gloomy statistics, with the Hang Seng down 1.8%, bringing its yearly gains to a crawl. South Korea and Australia are experiencing moderate declines, while India is holding steady. European futures suggest indices will try to stage a recovery as the week begins.

Today's economic highlights:

US wholesale inventories will be published at 10:00 am. Full agenda here.

The dollar is worth EUR 0.9054 and GBP 0.7640. The ounce of gold remains firm at USD 2,500. Oil is down, with North Sea Brent at USD 71.56 a barrel and US light crude WTI at USD 67.74. The yield on 10-year US debt is at 3.74%. Bitcoin is trading just under USD 55,275.

In corporate news:

  • Alphabet - The U.S. Department of Justice plans to release, by December, an overview of the measures Google must take to restore competition after a judge ruled that the company had illegally monopolized the online search market, said the prosecutor during a Friday hearing in Washington.
  • American Airlines, JetBlue Airways - On Friday, the two companies failed in their attempt to dismiss class actions alleging that a former alliance between them led passengers to pay higher prices for certain flights in the northeastern United States.
  • Apple - On Monday, Apple unveils its new smartphone, the iPhone 16, a model without major aesthetic changes, whose features should benefit from the unprecedented contribution of artificial intelligence.
  • B. Riley - B. Riley has entered exclusive negotiations with a global asset manager to sell a 53% stake in its Great American Group business, valued at approximately $380 million, the investment bank announced on Monday.
  • Big Lots - The home goods retailer is preparing to file for bankruptcy and plans to sell its chain of stores as part of a court-supervised process, Bloomberg reported on Friday, citing people familiar with the matter.
  • BlackRock - The U.S. Federal Energy Regulatory Commission approved on Friday BlackRock's acquisition of Global Infrastructure Partners for $12.5 billion.
  • Boeing - Boeing announced on Sunday that it had reached a tentative agreement with a union representing more than 32,000 employees in the Seattle and Portland areas, potentially averting a strike scheduled for September 13. The stock is up 5% in pre-market trading.
  • Carlyle Group - StandardAero, an aviation maintenance services provider backed by Carlyle Group and Singapore's sovereign wealth fund GIC, filed for an initial public offering in the U.S. on Friday.
  • Dell Technologies, Palantir Technologies, Erie Indemnity - S&P Dow Jones Indices announced on Friday that the three companies would join the S&P 500 index on September 23, replacing American Airlines, Etsy, and Bio-Rad Laboratories. Dell is up 5.9% and Palantir is up 8% in pre-market trading.
  • Eli Lilly - The U.S. drugmaker announced the appointment of Lucas Montarce as chief financial officer, effective immediately, a few months after Anat Ashkenazi resigned to join Alphabet.
  • Exxon - Exxon has withdrawn from the race to buy half of Galp Energia's stake in a major oil discovery in Namibia, according to sources familiar with the matter.
  • FedEx - The U.S. Equal Employment Opportunity Commission filed a lawsuit against the delivery giant, accusing it of placing disabled workers on unpaid leave or terminating them if they were not "100% healed."
  • Norfolk Southern - On Sunday evening, Norfolk Southern announced that it had opened an investigation into allegations concerning the conduct of its CEO, Alan Shaw, regarding an inappropriate relationship in the workplace. The company said its audit committee is working with a law firm "to conduct an independent investigation into the allegations."
  • Semi-conductors - Most semiconductor stocks, which experienced massive sales last week, are up in pre-market trading, with AMD and Marvell Technology rising by 1% and 1.7%, respectively.
  • Stellantis - The U.S. National Highway Traffic Safety Administration (NHTSA) said on Monday it had opened an investigation into approximately 781,459 Stellantis vehicles due to a fire that occurred while the vehicle was off.
  • Tesla - Elon Musk denied a report that his artificial intelligence startup xAI had entered talks to obtain a share of Tesla's future revenue in exchange for access to the electric vehicle maker's technology and resources.
  • Terns Pharmaceuticals - Terns Pharmaceuticals announced on Monday that its oral obesity drug reduced weight by 4.9% on average in a preliminary study. The stock is up 31% in pre-market trading.
  • Vista Outdoor - Investment firm MNC Capital announced on Saturday that it had increased its acquisition offer for Vista Outdoor to $43 per share, up from $42 previously. The offer values Vista at $2.51 billion, a 12.30% premium over its last closing price.
  • Walt Disney - Satellite broadcaster DirecTV said on Sunday it had filed a complaint with the U.S. Federal Communications Commission (FCC), accusing Walt Disney of failing to negotiate in good faith to renew their distribution agreement and engaging in anti-competitive behavior.

Analyst recommendations:

  • Associated British Foods: RBC Capital maintains its outperform recommendation and reduces the target price from 2750 to GBX 2600.
  • Bellring Brands: Deutsche Bank maintains its buy recommendation and raises the target price from USD 65 to USD 66.
  • Colgate-Palmolive Company: Deutsche Bank downgrades to hold from buy with a price target raised from USD 107 to USD 109.
  • Diageo: AlphaValue/Baader Europe maintains its buy recommendation and reduces the target price from 33.30 to GBP 31.75.
  • Estee Lauder: Redburn Atlantic maintains its neutral recommendation with a price target reduced from USD 122 to USD 91.
  • General Mills: Deutsche Bank maintains its hold recommendation with a price target raised from 66 to USD 70.
  • Imi: Investec maintains its buy recommendation and raises the target price from 2150 to GBX 2200.
  • Kenvue: Deutsche Bank maintains its buy recommendation and raises the target price from 24 to USD 25.
  • Kimberly-Clark Corporation: Deutsche Bank maintains its hold recommendation with a price target raised from 142 to USD 146.
  • Kraft Heinz: Deutsche Bank maintains its buy recommendation and reduces the target price from 40 to USD 39.
  • Molson Coors Beverage Company: Deutsche Bank maintains its hold recommendation with a price target raised from 57 to USD 58.
  • Monster Beverage Corporation: Deutsche Bank maintains its buy recommendation and raises the target price from 59 to USD 61.
  • Nucor Corporation: JP Morgan upgrades to overweight from neutral with a target price raised from USD 170 to USD 174.
  • Pilgrim's Pride Corporation: Barclays maintains its equalweight recommendation and raises the target price from 43 to USD 45.
  • Steel Dynamics: JP Morgan upgrades to neutral from underweight with a target price raised from USD 120 to USD 131.
  • The Clorox Company: Deutsche Bank maintains its hold recommendation with a price target raised from 151 to USD 157.
  • Tritax Big Box Reit: Peel Hunt maintains its hold recommendation with a price target raised from GBX 170 to GBX 175.
  • Tyson Foods: Barclays maintains its overweight recommendation and raises the target price from 72 to USD 76.
  • United States Steel Corporation: JP Morgan upgrades to overweight from neutral with a target price raised from USD 40 to USD 42.
  • Verizon Communications: DZ Bank AG Research maintains its sell recommendation with a price target raised from USD 35 to USD 37.