Markets Today: Stocks Climb on Tesla Earnings and Reduced U.S. Recession Fears

Morning Markets

March S&P 500 futures (ESH23) this morning are up +0.53%, and March Nasdaq 100 E-Mini futures (NQH23) are up +0.94%. 

U.S. stock index futures this morning are moderately higher on strength in technology stocks, as Tesla jumped more than +7% in pre-market trading after reporting stronger-than-expected Q4 revenue.  Stock indexes fell back from their best levels after bond yields spiked higher when this morning’s U.S. economic news showed Q4 GDP expanded more than expected and weekly initial unemployment claims unexpectedly fell to a 9-month low. However, stock indexes held the bulk of their gains since the stronger-than-expected Q4 GDP eased recession concerns.

Positive corporate news today is supportive of stock indexes.  Seagate Technology Holdings jumped more than +7% after reporting better-than-expected Q2 revenue.  Also, Chevron climbed more than +2% after raising its dividend and announcing plans to buy back $75 billion of its shares.  In addition, American Airlines Group is up more than +2%, and Levi Strauss is up more than +6% after reporting stronger-than-expected Q4 EPS.

On the negative side for stocks, IBM is down more than -2% in pre-market trading after reporting weaker-than-expected Q4 free cash flow.  Also, Sherwin Williams plunged -14%, and Dow Inc sank -5%, after reporting weaker-than-expected Q4 net sales.

Higher bond yields are bearish for stocks, with the 10-year T-note yield up +6.6 bp at 3.508%.  Also, the 10-year German bund yield is up +3.9 bp at 2.197%, and the 10-year Japan JGB bond yield climbed to a 1-week high of 0.497%.

U.S. weekly initial unemployment claims unexpectedly fell -6,000 to a 9-month low of 186,000, showing a stronger labor market than expectations of an increase to 205,000.

U.S. Q4 GDP rose +2.9% (q/q annualized), stronger than expectations of +2.6%.  The Q4 core PCE deflator rose +2.9%, right on expectations and the slowest pace of increase since Q1 of 2021.

U.S. Dec durable goods orders rose +5.6% m/m, stronger than expectations of +2.5% m/m and the biggest increase in nearly 2-1/2 years.  Dec capital goods new orders nondefense ex-aircraft and parts fell -0.2% m/m, right on expectations.

Overseas markets are mixed.  The Euro Stoxx 50 index is up +0.59%.  Japan’s Nikkei Stock index closed down -0.12%, and Hong Kong’s Hang Seng Index closed up +2.37%.  China remained closed for the Lunar New Year holidays. 

The Euro Stoxx 50 index climbed to a 1-week high today on strength in quarterly corporate earnings.  Nokia Oyj jumped more than +3% after reporting better-than-expected Q4 profit, and STMicroelectronics NV surged more than +5% amid rising revenue as demand from the auto industry remains strong.  On the negative side, European software stocks fell, led by a -3% drop in SAP SE, after the software maker said it plans to cut 3,000 jobs this year while exploring a sale of its remaining stake in Qualtrics International. 

The Italian Jan consumer confidence index unexpectedly fell -1.6 to 100.9, weaker than expectations of no change at 102.5.

Hong Kong reopened from the Lunar New Year holiday today, and the Hang Seng Stock Index rallied sharply to a 10-1/2 month high.  Preliminary data showing strength in Chinese travel and consumer spending during the week-long Lunar New Year holiday sparked a rally today in Hong Kong stocks.  The holiday period saw tourism rebound in Hong Kong and Macau, with 40,000 mainland visitors arriving in Macau on the second day of the holiday, the most since the start of the pandemic.

Japan’s Nikkei Stock Index today fell back from a 1-1/4 month high and closed slightly lower.  Weakness in Japanese semiconductor companies weighed on the overall market after earnings results from global peers ASML Holding and Lam Research disappointed.  The Nikkei Stock Index today initially moved higher on an easing of price pressures after the Japan Dec PPI service prices rose at the slowest pace in 9 months.  The yen weakened today after an account of the Jan BOJ meeting showed a policy maker said more time was needed for December’s yield curve control adjustment to have an impact on the functioning of markets and that there is still “a long way to go” to achieve the BOJ’s sustainable price target.   

Today’s Japanese economic news was supportive for stocks after the Japan Dec PPI services prices rose +1.5% y/y, weaker than expectations of +1.6% y/y and the slowest pace of increase in 9 months.

Pre-Market U.S. Stock Movers

Tesla (TSLA) jumped more than +7% in pre-market trading after reporting Q4 revenue of $24.32 billion, better than the consensus of $24.07 billion.  Other electric vehicle makers rallied on the Tesla news, with Rivian Automotive (RIVN) and Lucid Group (LCID) up more than +4%.

Chevron (CVX) climbed more than +2% in pre-market trading after announcing plans to buy back $75 billion of its shares and raising its dividend by 6.3% to $1.51 a share.

Seagate Technology Holdings (STX) rallied more than +7% in pre-market trading after reporting Q2 revenue of $1.89 billion, stronger the consensus of $1.83 billion, and forecasting Q3 revenue of $1.85 billion-$2.15 billion, the midpoint above the consensus of $1.89 billion.

Levi Strauss (LEVI) climbed more than +6% in pre-market trading after reporting Q4 adjusted EPS of 34 cents, higher than the consensus of 29 cents. 

American Airlines Group (AAL) rose more than +2% in pre-market trading after reporting Q4 adjusted EPS of $1.17, better than the consensus of $1.15, and forecast 2023 adjusted EPS of $2.50-$3.50, well above the consensus of $1.89.

Northrop Grumman (NOC) rose more than +1% in pre-market trading after reporting Q4 sales of $10.00 billion, better than the consensus of $9.65 billion, and forecasting 2023 sales of $38.0 billion-$38.4 billion, stronger than the consensus of $37.95 billion.

International Business Machines (IBM) fell more than -2% in pre-market trading after reporting Q4 free cash flow of $5.21 billion, below the consensus of $5.80 billion.

Sherwin-Williams (SHW) plunged more than -14% in pre-market trading after reporting Q4 net sales of $5.23 billion, weaker than the consensus of $5.26 billion, and forecast 2023 adjusted EPS of $7.95-$8.65, well below the consensus of $10.18.

Dow Inc (DOW) tumbled more than -5% in pre-market trading after reporting Q4 net sales of $11.86 billion, below the consensus of $12.07 billion.

Lam Research (LRCX) slid more than -1% in pre-market trading after forecasting Q3 adjusted EPS of $5.75-$7.25, weaker than the consensus of $7.78. 

McCormick (MKC) dropped more than -3% in pre-market trading after reporting Q4 adjusted EPS of 73 cents, weaker than the consensus of 86 cents, and forecasting 2023 adjusted EPS of $2.56-$2.61, below the consensus of $2.90. 

Today’s U.S. Earnings Reports (1/26/2023)

Alaska Air Group Inc (ALK), American Airlines Group Inc (AAL), Archer-Daniels-Midland Co (ADM), Arthur J Gallagher & Co (AJG), Comcast Corp (CMCSA), Dow Inc (DOW), Eastman Chemical Co (EMN), Intel Corp (INTC), KLA Corp (KLAC), L3Harris Technologies Inc (LHX), Marsh & McLennan Cos Inc (MMC), Mastercard Inc (MA), McCormick & Co Inc/MD (MKC), Northrop Grumman Corp (NOC), Nucor Corp (NUE), ResMed Inc (RMD), Robert Half International Inc (RHI), Rockwell Automation Inc (ROK), Sherwin-Williams Co/The (SHW), Southwest Airlines Co (LUV), T Rowe Price Group Inc (TROW), Tractor Supply Co (TSCO), Valero Energy Corp (VLO), Visa Inc (V), W R Berkley Corp (WRB), Weyerhaeuser Co (WY), Xcel Energy Inc (XEL).

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