Stocks Set To Open Lower As Investors Await Fed Meeting, Big Tech Earnings

March S&P 500 futures (ESH23) are trending down -0.88% this morning after three major U.S. benchmark indices ended higher on Friday as further signs of cooling inflation bolstered hopes that the Federal Reserve will reduce its pace of aggressive monetary tightening. Three major U.S. stock indexes were fueled primarily by gains in the Consumer Goods, Technology, and Consumer Services sectors.

In Friday’s trading session, all three major U.S. stock indices settled in the green, with the S&P 500 rising to a 6-week high, the Dow hitting a 1-1/2 week high, and the Nasdaq 100 notching a 4-1/2 month high. The Commerce Department’s Core PCE Price Index, which is the Fed’s preferred inflation gauge, stood at +0.3% m/m and +4.4% y/y in December, in line with expectations, indicating softening demand and easing inflation. Also, U.S. personal spending fell for a second straight month to -0.2% m/m in December. In addition, the University of Michigan Surveys of Consumers showed one-year inflation expectations fell to a 1-3/4 year low of 3.9% in January.

“The PCE report is another building block to the inflation data we’ve been seeing recently Supply chains continue to open up and improve, opening the door for the Fed to end its aggressive rate hiking cycle,” said Ryan Detrick, a chief market strategist at Carson Group.

Fourth-quarter earnings season, meanwhile, is gaining momentum, with U.S. tech heavyweights such as Amazon (AMZN), Apple (AAPL), Alphabet (GOOGL), and Meta Platforms (META) set to report results this week. Analysts expect aggregate S&P 500 earnings to drop 2.9% year-over-year in the fourth quarter, compared with an expected decline of 1.6% at the start of the year.

In the coming week, the U.S. Federal Reserve interest rate decision and Fed Chair Jerome Powell’s post-policy meeting press conference will be the main highlight. U.S. rate futures have priced in a 98.9% chance of a 25 basis point rate increase on Wednesday.

In addition, market participants will be eyeing a spate of economic data, including U.S. CB Consumer Confidence, Chicago PMI, S&P/CS HPI Composite - 20 n.s.a., Employment Cost Index, ADP Nonfarm Employment Change, Manufacturing PMI, ISM Manufacturing Employment, ISM Manufacturing PMI, JOLTs Job Openings, Crude Oil Inventories, Initial Jobless Claims, Nonfarm Productivity (preliminary), Unit Labor Costs (preliminary), Factory Orders, Average Hourly Earnings, Nonfarm Payrolls, Private Nonfarm Payrolls, Unemployment Rate, S&P Global Composite PMI, Services PMI, and ISM Non-Manufacturing PMI.

The U.S. economic data slate is largely empty on Monday.

In the bond markets, United States 10-Year rates are at 3.537%, up +0.53%.

The Euro Stoxx 50 futures are down -0.88% this morning, with rate-sensitive tech stocks dropping the most as investors geared up for a key policy decision from Federal Reserve officials later this week. In addition to the Fed, the European Central Bank and the Bank of England are also set to announce interest rate decisions on Thursday, with both expected to hike rates by 50 basis points. In corporate news, shares of Koninklijke Philips NV (PHIA.A.DX) gained over +5% after the company announced it would cut 6,000 jobs to improve profitability.

Spain’s CPI (preliminary), Germany’s GDP (preliminary), and Eurozone Consumer Confidence data were released today.

The Spanish January CPI has been reported at +5.8% y/y, stronger than expectations of +4.9% y/y.

The German GDP stood at -0.2% q/q and +0.5% y/y in the fourth quarter, weaker than expectations of 0.0% q/q and +0.8% y/y.

Eurozone January Consumer Confidence came in at -20.9, in line with expectations.

Asian stock markets today settled mixed. However, China’s Shanghai Composite Index (SHCOMP) closed up +0.14%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.19%.

China’s Shanghai Composite today closed higher, resuming trade after the week-long Lunar New Year holiday. State media reports indicated domestic travel and consumption had rebounded sharply to near pre-pandemic levels in the past week. The Chinese government also boosted sentiment, reiterating its commitment to shore up spending and stimulate local consumption this year. Still, rising COVID-19 cases in the country are expected to delay a full economic recovery as China grapples with its worst-yet COVID-19 outbreak. 

At the same time, Japan’s Nikkei 225 Stock Index posted moderate gains and hit a new 1-month high. The index’s upward momentum was fueled by gains in the Banking, Gas & Water, and Chemical sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 1.68% to 17.00.

Pre-Market U.S. Stock Movers

Edwards Lifesciences Corp (EW) fell over -1% in pre-market trading after Piper Sandler downgraded the stock to neutral from overweight with a price target of $80, down from $95.

Kohl’s Corp (KSS) dropped more than -2% in pre-market trading after Goldman Sachs initiated coverage of the stock with a sell rating. 

CN Energy Group Inc (CNEY) plunged over -47% in pre-market trading after the company announced intentions to offer its securities in a public offering.

Lockheed Martin Corporation (LMT) gained about +1% in pre-market trading after DZ Bank upgraded the stock to buy from hold.

Illumina Inc (ILMN) fell about -2% in pre-market trading after Piper Sandler lowered the firm’s price target on the stock to $290 from $300 and kept an overweight rating.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Monday - January 30th

Sumitomo Mitsui Financial ADR (SMFG), NXP (NXPI), Bank Rakyat (BKRKY), Bank Mandiri Persero ADR (PPERY), Alexandria RE (ARE), Central Japan Railway Co (CJPRY), Canon ADR (CAJ), Principal Financial (PFG), PTT Exploration & Production (PEXNY), Ryanair ADR (RYAAY), NVR (NVR), Franklin Resources (BEN), Koninklijke Philips ADR (PHG), Shionogi ADR (SGIOY), Equity Lifestyle (ELS), Sumitomo Mitsui Trust Holdings PK (SUTNY), VF (VFC), Wynn Resorts (WYNN), Graco (GGG), United Utilities ADR (UUGRY), Whirlpool (WHR), Symbotic (SYM), Hitachi Metals ADR (HMTLY), OMRON ADR (OMRNY), Daiwa ADR (DSEEY), Confluent (CFLT), Capcom ADR (CCOEY), AGNC Invest (AGNC), Woodward (WWD), H&R Block (HRB), SoFi Technologies (SOFI), Helmerich Payne (HP), Cadence Bancorp (CADE), PotlatchDeltic (PCH), Sanmina (SANM), J & J Snack Foods (JJSF), Alliance Resource (ARLP), Heartland Financial (HTLF), Adams Diversified Equity Closed (ADX), Harmonic (HLIT), Meridian (VIVO), ADTRAN (ADTN), Heartland Express (HTLD), Kayne Anderson MLP Invest Closed (KYN), Costamare (CMRE), Merchants Bancorp (MBIN), German American Bancorp (GABC), LiCycle Holdings (LICY), Dynex Capital (DX), Capital Southwest (CSWC), Transcat (TRNS), Five Star Bancorp (FSBC), Financial Institutions (FISI).

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