The global economy is poised for a slowdown due to persistently higher inflation than anticipated, with potential pockets of resilience, according to Moody's Investors Service. Marie Diron, Managing Director for Global Sovereign and Sub-Sovereign Risk at Moody's, indicated that the slowdown is influenced by three key factors. These include sustained elevated interest rates, China's decelerating growth, and pressures on the financial system. Diron mentioned that central banks have successfully guided the global economy and fostered a disinflationary trend by raising interest rates. However, the concern of sticky inflation remains, which could lead to extended periods of slow growth if not addressed. Another risk stems from stress within the financial system. While banks have managed to handle higher rates, there's potential for strains to emerge, possibly in the later part of this year or next. China also contributes to the vulnerability. Moody's anticipates prolonged sluggish growth in the world's second-largest economy, impacting the broader region and potentially influencing default rates. Despite the anticipated slowdown, Moody's identifies certain "pockets of resilience." Diron highlights the favorable conditions and robust growth potential in markets like India and Indonesia. Indonesia, with its abundant natural resources, including essential materials for electric vehicle production, has the chance to develop its downstream sectors and leverage its resources effectively.
The Nasdaq Composite marked its fifth consecutive positive day on August 30 but endured its largest monthly loss in 2023. Closing Thursday's session at 14,034.97, the tech-heavy index rose by 0.11%. The Dow Jones Industrial Average dropped 0.48% to 34,721.91, and the S&P 500 decreased by 0.16% to 4,507.66. Despite recent gains trimming monthly losses, the S&P 500 faced a 1.77% drop, the Nasdaq lost 2.17%, and the Dow fell 2.36% in August. Examining U.S. inflation data, the core personal consumption expenditures (PCE) index increased by 0.2% in July and 4.2% year over year, aligning with predictions. This is a significant inflation indicator for the Federal Reserve. Joseph Cusick of Calamos Investments highlighted that equity movements are influenced by bonds, specifically U.S. Treasury yields, with a decline potentially supporting stock gains. Salesforce saw a 3% increase after reporting strong fiscal results and optimistic third-quarter guidance. With non-farm payroll data set to be released on Friday morning, traders await insights into the economy's trajectory. Economists predict 170,000 job additions, hoping the report will indicate a meaningful economic slowdown, potentially leading the central bank to reconsider benchmark interest rate hikes.
Oil is set for a weekly rise as Russia signals export cuts extension and US inventories decline. West Texas Intermediate (WTI) crude is stable above $83 per barrel, up almost 5% this week. Russia's OPEC+ agreement for further export reductions will be detailed next week, while a similar move is anticipated from Saudi Arabia. The collaboration between OPEC and allies to reduce shipments has led to lower US crude stockpiles. Recent government data showed a draw of over 10 million barrels this week, the lowest since December. Oil's climb this week helped the US benchmark secure a third straight monthly gain, supported by expectations of fewer rate hikes by the Federal Reserve and Beijing's measures to boost its economy in Asia. Underlying indicators suggest tighter market conditions, with WTI's three-month spread in a bullish pattern, the largest since November.
On the stocks market front, notable stocks such as Palantir Technologies Inc. (NYSE:PLTR) and Dollar General Corporation (NYSE:DG) were downgraded by analysts, among many others. Check out the complete article to see some other stocks recently downgraded by analysts.
Analysts on Wall Street Lower Ratings for These 10 Stocks
Victoria's Secret & Co. (NYSE:VSCO), a prominent retail brand, faced a significant shift on August 31 when Wells Fargo & Company downgraded its stock rating. This move departed from the previous "Overweight" stance, shifting towards a more balanced "Equal Weight" outlook aligned with market expectations. The downgrade's immediate impact was evident in the adjustment of the Victoria's Secret & Co. (NYSE:VSCO) price target. The original target of $34.00, linked to the "Overweight" classification, was revised downward to $18.00, reflecting the updated recommendation. Additionally, the current share price of $19.18 highlights that the stock is considered overvalued, with a subsequent +6.9% change indicating the degree of adjustment prompted by the revised recommendation.
Similar to how Palantir Technologies Inc. (NYSE:PLTR) and Dollar General Corporation (NYSE:DG) faced downgrades by analysts, Victoria's Secret & Co. (NYSE:VSCO) has also been subject to such a downgrade.
On August 31, Hostess Brands, Inc. (NASDAQ:TWNK) underwent a significant development as JPMorgan Chase & Co. lowered its stock rating. This strategic alteration signified a notable shift in perspective regarding the company's performance outlook. Having previously held an "Overweight" classification, which indicated an optimistic stance on the stock's potential, Hostess Brands, Inc. (NASDAQ:TWNK) rating was revised to "Neutral" by JPMorgan Chase & Co. This adjustment reflects a more balanced viewpoint that aligns with market expectations, suggesting that the stock's growth trajectory might now better correlate with the overall market trend. The stock's price reflected the immediate market response to this downgrade, which experienced a modest 1.5% increase from $28.00 to $28.48. This subtle adjustment underscores the market's sensitivity to analyst opinions, highlighting the pivotal role that such assessments play in shaping investor sentiment and influencing market dynamics.
Carillon Tower Advisers made the following comment about Hostess Brands, Inc. (NASDAQ:TWNK) in its Q3 2022 investor letter:
“Hostess Brands, Inc. (NASDAQ:TWNK) manufacturers baked sweet goods. Some of its most well-known and popular products are Donettes, Twinkies, and HoHos. Investors rewarded the company for managing cost inflation better than peers and for continuing to gain market share in key distribution channels.”
On August 31, MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT), a prominent company specializing in boat manufacturing experienced a significant market shift. This change was triggered by a downgrade in its stock rating by B. Riley, a strategic move that indicated a notable shift in perspective regarding the company's future performance. Previously categorized as a "Buy," which denoted a positive outlook on the stock's potential, MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT) rating was adjusted to "Neutral" by B. Riley. This adjustment signifies a more balanced viewpoint, suggesting that the stock's growth trajectory may now align more closely with the overall market trend. The analyst revised the price target from $37.00 to $23.00 in conjunction with the downgrade. The immediate market response was observed in the stock's current price of $21.76, reflecting the combined impact of the analyst's downgrade and the revised price target.
Just like Palantir Technologies Inc. (NYSE:PLTR) and Dollar General Corporation (NYSE:DG), MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT) has also encountered an analyst-initiated downgrade.
On August 31, Kanzhun Limited (NASDAQ:BZ), a company operating in the talent recruitment industry, experienced a significant market shift. This change was brought about by a downgrade in its stock rating executed by UBS Group, a strategic move that marked a substantial shift in perspective regarding the company's future performance. Formerly categorized as a "Buy," signifying an optimistic outlook on the stock's potential, Kanzhun Limited (NASDAQ:BZ) rating was revised to "Neutral" by UBS Group. This adjustment in assessment suggests a more balanced viewpoint, implying that the stock's growth trajectory may align more closely with the broader market trend. The immediate market response was reflected in the stock's current price of $14.80, representing a slight decrease of -0.6%. This adjustment underscores the market's sensitivity to analyst opinions, highlighting the significant influence that such evaluations possess in shaping investor sentiment and guiding market behavior.
On August 30, Texas Instruments Incorporated (NASDAQ:TXN), a key player in the semiconductor industry, experienced a notable transformation in its market status. This shift was set in motion by a downgrade in its stock rating by Sanford C. Bernstein, a strategic maneuver that marked a significant alteration in perspective regarding the company's forthcoming performance. Having previously been categorized under the "Market Perform" banner, which implied an alignment of performance with the broader market, Texas Instruments Incorporated (NASDAQ:TXN) rating underwent a shift to "Underperform", according to Sanford C. Bernstein's analysis. This adjustment underscores a more cautious outlook, hinting that the stock's growth potential might now be lower than prevailing market expectations. The immediate market response was discernible through the stock's price, which declined by -0.7%, ultimately settling at $168.06.
The London Company Large Cap Strategy made the following comment about Texas Instruments Incorporated (NASDAQ:TXN) in its second quarter 2023 investor letter:
“Texas Instruments Incorporated (NASDAQ:TXN) – TXN shares declined 2% during the quarter. Demand was weaker in all markets except auto. While revenue was down 11% due to the slowing economy, we believe the outlook is positive. The company continues to invest in manufacturing facilities and should benefit from increased spending related to the CHIPS act. TXN is exposed to various end markets across the economy (e.g. automotive industrials). We believe growth in analog semiconductor content demand, in most markets, will drive TXN.”
