Markets Today: Stocks Slightly Higher Ahead of Fed Chair Powell’s Speech

Morning Markets

March S&P 500 futures (ESH23) this morning are down -0.12%, and March Nasdaq 100 E-Mini futures (NQH23) are up +0.04%.

U.S. stock index futures this morning are on edge ahead of a speech later today from Fed Chair Powell at the Economic Club of Washington.  The markets will be watching to see if Mr. Powell issues fresh hawkish statements following last Friday’s strong payroll report for January, such as saying that the peak in interest rates may be higher than policymakers had previously expected.

Positive corporate news today supported stocks.  Activision Blizzard is up more than +2% in pre-market trading after reporting stronger-than-expected Q4 net bookings.  Also, Oak Street Health surged more than +30% after the Wall Street Journal report that the company is close to an agreement to be acquired by CVS Health for about $10.5 billion.  In addition, energy stocks and energy service providers are moving higher in pre-market trading, with the price of WTI crude up more than +1%.

On the negative side, Chegg plunged more than -20% in pre-market trading after forecasting 2023 revenue below consensus.  Also, Pinterest is down more than -3% after reporting weaker-than-expected Q4 revenue. ZoomInfo Technologies is down more than -10% after forecasting full-year revenue below consensus.

Minneapolis Fed President Kashkari said January's strong labor-market report shows that the Fed needs to keep raising interest rates and "right now he's still around 5.4%," referring to his forecast for how high interest rates need to go to curb inflation.  FOMC members, in their December dot-plot, forecasted a median expectation of a peak funds rate of 5.1% at the end of this year.

The U.S. Dec trade deficit of -$67.4 billion was slightly narrower than the consensus of -$68.5 billion, which had a mildly positive implication for Q4 GDP.  In 2022, the U.S. trade deficit widened to a record high of -$106.4 billion in March 2022 but then narrowed to a 2-year low of -$61.0 billion in November 2022.

Overseas markets are mixed.  The Euro Stoxx 50 index is up +0.09%.  China’s Shanghai Composite stock index closed up +0.29%, and Japan’s Nikkei Stock index closed down -0.03%. 

The Euro Stoxx 50 index today is slightly higher on some positive corporate news.  BNP Paribas SA raised its profitability targets for the year and said it would buy back 5 billion euros ($5.4 billion) of its stock following the sale of its U.S. unit.  Also, BP Plc jumped +3% after it posted a record profit of $27.65 billion for 2022, increased its quarterly dividend by 10%, and added an extra $2.75 billion to its stock buyback program.  On the negative side, Carlsberg A/S dropped more than -3% after it said 2023 would be a challenging year and set a forecast that includes the possibility of a drop in earnings. 

Today’s Eurozone economic news was negative for stocks after German Dec industrial production fell -3.1% m/m, weaker than expectations of -0.8% m/m and the biggest decline in 9 months.

China’s Shanghai Composite today posted moderate gains.  Strength in technology stocks lifted the overall market, led by an +8% jump in Baidu after the company said it plans to roll out a ChatGBT-like service in March. Also, some Chinese property developer stocks moved higher after Wuhan, China’s eighth-most populous city, eased a key restriction on housing purchases, which may prompt other Chinese cities to do the same.  Weakness in Chinese automakers limited the upside in the overall market after the China Passenger Car Association reported that China Jan passenger vehicle sales fell -43% m/m and -41% y/y to 1.24 million units. 

Japan’s Nikkei Stock Index today closed slightly lower.  Strength in the yen today weighed on Japanese exporter stocks and weighed on the overall market.  Also, Japanese steel makers declined after JFE cut its full-year profit forecast.  On the positive side, Japanese electronic components companies rose when Nippon Chemi-Con surged as much as 20% after it reported 9-month cumulative consolidated earnings growth from a year ago.

Today’s Japanese economic news was mixed for stocks.  On the negative side, Dec household spending fell -1.3% y/y, weaker than expectations of -0.4% y/y and the biggest decline in 8 months.  Also, the Dec leading index CI fell -0.5 to a 2-year low of 97.2, slightly stronger than expectations of 97.1.  On the positive side, Dec household spending fell -1.3% y/y, weaker than expectations of -0.4% y/y and the biggest decline in 8 months.

Pre-Market U.S. Stock Movers

Activision Blizzard (ATVI) climbed more than +2% in pre-market trading after reporting Q4 net bookings of $3.57 billion, stronger than the consensus of $3.08 billion. 

Oak Street Health (OSH) surged more than +30% in pre-market trading after the Wall Street Journal report that the company is close to an agreement to be acquired by CVS Health for about $10.5 billion. 

Energy stocks and energy service providers are moving higher in pre-market trading, with the price of WTI crude up more than +1%.  Devon Energy (DVN), Diamondback Energy (FANG), Haliburton (HAL), Occidental Petroleum (OXY), and Valero Energy (VLO) are up more than +1%.

Baidu (BIDU) ADRs jumped more than +10% in pre-market trading on hopes about the Chinese search engine’s ChatGT-like service, which the company said is on track to roll out in March.  AI stocks also moved higher on the Baidu news, with SoundHound AI (SOUN) +15%, BigBear.ai (BBAI), and C3.ai (AI) up more than +3%.   

Pinterest (PINS) dropped more than -3% in pre-market trading after reporting Q4 revenue of $877.2 million, weaker than the consensus of $887.2 million. 

Tyson Foods (TSN) slid nearly -1% in pre-market trading after Goldman Sachs downgraded the stock top neutral from buy. 

Chegg (CHGG) plunged more than -20% in pre-market trading after forecasting 2023 revenue of $745 million-$760 million, well below the consensus of $820.5 million. 

ZoomInfo Technologies (ZI) tumbled more than -10% in pre-market trading after forecasting full-year revenue of $1.275 billion-$1.285 billion, weaker than the consensus of $1.31 billion. 

Adecoagro (AGRO) dropped more than -5% in pre-market trading after Morgan Stanley downgraded the stock to underweight from equal weight. 

Today’s U.S. Earnings Reports (2/7/2023)

Amcor PLC (AMCR), Assurant Inc (AIZ), Atmos Energy Corp (ATO), Carrier Global Corp (CARR), Catalent Inc (CTLT), Centene Corp (CNC), Chipotle Mexican Grill Inc (CMG), DuPont de Nemours Inc (DD), Enphase Energy Inc (ENPH), Essex Property Trust Inc (ESS), Fiserv Inc (FISV), FMC Corp (FMC), Fortinet Inc (FTNT), Gartner Inc (IT), Healthpeak Properties Inc (PEAK), Illumina Inc (ILMN), Incyte Corp (INCY), Jack Henry & Associates Inc (JKHY), Jacobs Solutions Inc (J), Linde PLC (LIN), Lumen Technologies Inc (LUMN), Omnicom Group Inc (OMC), Paycom Software Inc (PAYC), Prudential Financial Inc (PRU), Royal Caribbean Cruises Ltd (RCL), TransDigm Group Inc (TDG), Vertex Pharmaceuticals Inc (VRTX), VF Corp (VFC), Xylem Inc/NY (XYL).

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