Markets Today: Stocks Slightly Lower Ahead of FOMC

Morning Markets

March S&P 500 futures (ESH23) this morning are down -0.25% and March Nasdaq 100 E-Mini futures (NQH23) are down -0.09%. 

U.S. stock index futures this morning are modestly lower as the markets await the results of today’s FOMC meeting.  Disappointing quarterly earnings reports from Snap, Electronic Arts, and Western Digital are weighing on the overall market.  Stock index futures recovered most of their overnight losses after this morning’s report on Jan ADP employment showed U.S. companies slowed their pace of hiring more than expected, which is dovish for Fed policy.   

Expectations are for the FOMC later today to raise the fed funds target range by 25 bp to 4.50%-4.75%, slowing from last month’s 50 bp rate increase and November’s 75 bp increase. The markets will look to post-FOMC meeting comments from Fed Chair Powell to see if he will push back against market expectations of easier monetary policy later this year.

A rally in European stocks today is providing carry-over support to U.S. stock indexes.  An easing of Eurozone consumer price pressures is fueling stock gains today after  Eurozone Jan CPI eased to 8.5% y/y from 9.2% y/y in Dec, weaker than expectations of 8.9% y/y and the slowest pace of increase in 8 months.

Some positive corporate news today supports stocks, with Advanced Micro Devices up more than +3% in pre-market trading and Stryker climbing more than +4% after both companies reported better-than-expected Q4 earnings.

Lower bond yields are supportive for stocks, with the 10-year T-note yield down -4.8 bp today to 3.459%. Also, the 10-year German bund yield is down -0.9 bp to 2.277%.

The U.S. Jan ADP employment change rose +106,000, weaker than expectations of +180,000 and the smallest increase in 2 years.

Overseas markets are higher.  The Euro Stoxx 50 index is up +0.47%.  China’s Shanghai Composite stock index closed up +0.90%, and Japan’s Nikkei Stock index closed up +0.07%. 

The Euro Stoxx 50 index today is moderately higher. Strength in medical equipment stocks leads the overall market higher after Stryker forecasted stronger-than-expected 2023 EPS.  Also, an easing of consumer price pressures pushed stocks higher after Eurozone Jan CPI eased to 8.5% y/y from 9.2% y/y in Dec, the slowest increase in 8 months.  Weakness in telecom stocks is limiting the upside in the overall market, with Vodafone Group Plc down more than -2% after reporting Q3 organic service revenue rose +1.8%, the first time growth fell below 2% since fiscal 2021. 

Eurozone Jan CPI eased to 8.5% y/y from 9.2% y/y in Dec, weaker than expectations of 8.9% y/y and the slowest pace of increase in 8 months.  However, Jan core CPI remained unchanged at 5.2% y/y, stronger than expectations of 5.1% y/y.

The Eurozone Dec unemployment rate was unchanged at 6.6% y/y, showing a weaker labor market than expectations of a decline to 6.5% y/y.

China’s Shanghai Composite today posted moderate gains.  Chinese artificial intelligence (AI) related stocks jumped today on the rising popularity of ChatGBT, with Huaxi Securities saying it expects the new technology to boost growth in the AI sector.   Also, Chinese casino stocks with exposure to Macau rallied today after Macau Jan casino revenue surged +82.5% y/y.

The China Jan Caixin manufacturing PMI rose +0.2 to 49.2, weaker than expectations of 49.8.

Japan’s Nikkei Stock Index today rallied to a 1-1/2 month high and closed slightly higher.  A rally in Japanese chip-equipment makers lifted the overall market after Advantest and Screen posted Q3 profits in line with expectations and maintaining their full-year forecasts.  The Nikkei Stock Index gave up most of its advance today as exporter stocks declined on a stronger yen.

Pre-Market U.S. Stock Movers

Snap (SNAP) plunged more than -15% in pre-market trading after reporting Q4 revenue of $1.30 billion, below the consensus of $1.31 billion. The company also said that changes to its advertising products might be “disruptive” to its business.  Other companies that receive revenue from online advertising also fell after Snap’s results.  Pinterest (PINS) is down more than -2%, and Meta Platforms (META) and Trade Desk (TTD) are down more than -1%. 

Electronic Arts (EA) sank more than -11% in pre-market trading after cutting its full-year net bookings forecast to $7.07 billion-$7.17 billion from a previous estimate of$7.65 billion-$7.85 billion, well below the consensus of $7.78 billion.  The company also announced a six-week delay in releasing its next Star Wars game. 

Western Digital (WDC) dropped more than -4% in pre-market trading after forecasting Q3 revenue of $2.60 billion-$2.80 billion, weaker than the consensus of $3.12 billion.

Match Group (MTCH) tumbled more than -8% in pre-market trading after reporting Q4 revenue of $786.2 million, below the consensus of $788.5 million and forecasting Q1 revenue of $790 million-$800 million, weaker than the consensus of $816 million.

Juniper Networks (JNPR) dropped more than -3% in pre-market trading after reporting Q4 net revenue of $1.45 billion, weaker than the consensus of $1.48 billion.

T-Mobile US (TMUS) slid more than -1% in pre-market trading after forecasting 2023 postpaid net customers of 5.0 million to 5.5 million, weaker than the consensus of 5.8 million.

Advanced Micro Devices (AMD) climbed more than +3% in pre-market trading after reporting Q4 revenue of $5.60 billion, stronger than the consensus of $5.52 billion. 

Stryker (SYK) rose more than +4% in pre-market trading after reporting Q4 adjusted EPS of $3.00, better than the consensus of $2.84, and forecast 2023 adjusted EPS of $9.85-$10.15, well above the consensus of $9.83.

Casino stocks with exposure to Macau gained in pre-market trading after Macau Jan gaming revenue jumped +82.5% y/y.  Las Vegas Sands (LVS), Wynn Resorts (WYNN), and Melco Resorts and Entertainment (MLCO) are up more than +1%. 

Peloton Interactive (PTON) climbed more than +4% in pre-market trading after forecasting Q3 revenue of $690 million-$715 million, above the consensus of $693.9 million.

Foot Locker (FL) jumped more than +4% in pre-market trading after Credit Suisse upgraded the stock to outperform from neutral and hiked its price target on the stock to $62 from $38. 

Today’s U.S. Earnings Reports (2/1/2023)

Aflac Inc (AFL), Align Technology Inc (ALGN), Allstate Corp/The (ALL), Altria Group Inc (MO), AmerisourceBergen Corp (ABC), Bio-Techne Corp (TECH), Boston Scientific Corp (BSX), CH Robinson Worldwide Inc (CHRW), Corteva Inc (CTVA), DXC Technology Co (DXC), Fortive Corp (FTV), Globe Life Inc (GL), Hologic Inc (HOLX), Humana Inc (HUM), Johnson Controls International (JCI), McKesson Corp (MCK), Meta Platforms Inc (META), MetLife Inc (MET), Mid-America Apartment Communities (MAA), Old Dominion Freight Line Inc (ODFL), Otis Worldwide Corp (OTIS), PTC Inc (PTC), Qorvo Inc (QRVO), Thermo Fisher Scientific Inc (TMO), T-Mobile US Inc (TMUS), Waste Management Inc (WM), Westrock Co (WRK).

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