Wall Street's main indexes were down in pre-market trading today, after the Labor Department's report showed nonfarm payrolls rose by 199,000 jobs in December, with the unemployment rate dropping to 3.9% from 4.2% in November. Economists surveyed by Reuters expected nonfarm payrolls to increase by 400,000 jobs in December, but the average hourly earnings rose by 0.6% against expectations of 0.4%.
Yesterday, U.S. markets went into a third consecutive session in the red. And even though the declines were quite modest, the initial attempts at a rebound in technology stocks were not successful. It is in this kind of situation that questions of legitimacy and illegitimacy arise. For example, is the purge of US cloud stocks deserved because these companies have not yet earned a kopeck and are worth billions? Should we be happy that cryptocurrencies are being heckled?
There’s often a bit of Schadenfreude in seeing illegitimate stars get abused, sometimes to their downfall. And the stock markets are no exception to the rule. At the start of each stock market correction, the "I told you so" clan suddenly swells to support the usual wrongdoers, doomsayers and grumpy people. There are those who knew, those who bring out their old economic models or those who pillory this or that person.
Is Tesla's stock price legitimate? If you ask investment professionals, the answer will greatly differ. There will be those who will find that the stock is not really legitimate but who will refrain from saying so because they have invested in it against all their principles. And those who find that it is finally deserved but who say it every time too late and who never got into the action. Others will be unable to find any economic or rational criteria, but will accept the situation because "it's just the way it is" or because they perceive a huge undefined asset.
Legitimacy, or illegitimacy, is far too subjective a notion to be defined in this case: there is no universal code in finance. All of this brings me back to a very good paper published yesterday by the excellent Morgan Housel, in which he quotes investor Jim Grant. "To assume that the value of a stock is determined solely by a company's earnings, discounted by the relevant interest rates and adjusted for the marginal tax rate, is to forget that people burned witches, fought wars on a whim, defended Joseph Stalin, and believed Orson Welles when he told them on the radio that the Martians had landed," Grant wrote. In other words, data is not everything, far from it, and context plays a major role. And more than context, Housel explains, is the story that is told all around. That story, if compelling, has the power to make what seems illegitimate legitimate.
Even if the legitimacy cursor is moving and the numbers can't explain everything, serious investors know that applying some common sense rules can lead to solid performance over the long term. This doesn't prevent us from sometimes taking more exotic bets to spice up our portfolios, but within the limits of an acceptable, not to say legitimate, risk. This is what has always worked and will continue to work. The rest is just noise.
Economic highlights of the day:
The market indicator is the report on the job market in December in the United States. Elsewhere, we have European retail sales and inflation.
The dollar settled at EUR 0.883. Gold is losing ground at USD 1791 per ounce. Oil is strengthening, with Brent crude at USD 82.05 per barrel and WTI at USD 79.34 per barrel. U.S. debt maturing in 10 years and paying 1.72% (+1 point). Bitcoin is trading around USD 42,000.
* Gamestop jumps nearly 17% in pre-market trading after reports that the gaming distributor is preparing to launch development of a non-fungible token (NFT) trading platform and enter the cryptocurrency market.
* Johnson & Johnson announced Thursday that a real-life study showed a single dose of its COVID-19 vaccine protected against severe forms of the disease and hospitalizations for up to six months.
* Walmart - Chinese authorities are blaming Walmart for violating cybersecurity laws, local media report, while the U.S. retailer is already under fire for allegedly halting the sale of products made in Xinjiang.
* McDonald's announced Friday that its restaurants in Japan would only serve small portions of French fries for about a month due to supply issues.
* Rivian Automotive - The electric car maker's stock, which briefly fell below its November IPO price on Thursday, is reported up 0.8 percent in pre-market trading.
* The New York Times announced Thursday the purchase of sports news site The Athletic for $550 million cash.
- American Water: J.P. Morgan downgrades to underweight from neutral. PT down 2.5% to $171
- AT&T: Wells Fargo Securities upgrades to equal-weight from underweight. PT up 3.4% to $27
- Baxter: Morgan Stanley upgrades to overweight from equal-weight. PT up 27% to $110
- BP Plc: Exane BNP Paribas upgraded its rating to Outperform from Neutral with a target of GBp 410.
- Centamin: Liberum upgrades from sell to buy targeting GBp 106.
- Comerica: Baird downgrades to underperform from neutral. PT down 19% to $78
- Costco: First Shanghai Securities initiated coverage with a recommendation of buy. PT up 18% to $647
- Dover: Oppenheimer & Co upgrades to outperform from market perform. PT up 13% to $205
- DTE Energy: J.P. Morgan downgrades to neutral from overweight. PT up 5.4% to $126
- Fifth Third: Baird analyst downgrades to neutral from outperform. PT down 9% to $44
- Great Southern Banc: Piper Sandler analyst downgrades to neutral from overweight. PT up 2.7% to $63
- ITV: Morgan Stanley moves from Equal-weight to Overweight with a target of GBp 110
- Lyft: Jefferies cut the recommendation on Lyft Inc. Class A to hold from buy. PT up 15% to $50
- McKesson: Credit Suisse upgrades to outperform from neutral. PT up 36% to $333
- Medtronic: Morgan Stanley analyst Cecilia Furlong downgrades to equal-weight from overweight. PT up 14% to $120
- Next: AlphaValue upgrades from light to heavyweight with a target of GBP 8681.
- Public Service Enterprise Group: J.P. Morgan upgrades to overweight from neutral. PT up 11% to $73
- Starbucks: Oppenheimer & Co cut the recommendation on the stock to market perform from outperform.
- Sthree: Jefferies downgrades its Buy rating to Hold with a target price of GBp 500.
- Stryker: Morgan Stanley downgrades to equal-weight from overweight. PT up 12% to $305
- Teleflex: Morgan Stanley downgrades to equal-weight from overweight. PT up 17% to $383
- Tivity Health: Credit Suisse upgrades to neutral from underperform. PT up 17% to $29
- Zimmer Biomet: Morgan Stanley downgrades to equal-weight from overweight. PT up 12% to $145