S&P Futures Slide As Rising Bond Yields Overshadow Earnings, Recession Fears Persist

March S&P 500 futures (ESH23) are trending down -0.39% this morning after three major U.S. benchmark indices finished the regular session in the red as rising bond yields bolstered fears of a looming recession, overshadowing a slew of upbeat earnings reports. Three major U.S. stock indices were weighed down primarily by losses in the Communication Services, Utilities, and Basic Materials sectors.

In Thursday’s trading session, shares of Alphabet (GOOGL) were one of the biggest drags on the market, extending losses from the previous session to fall over -4% after the company’s AI chatbot Bard delivered inaccurate answers in an online advertisement. Financials also weighed on the broader market, pressured by a drop in bank stocks as the yield curve between 2-year and 10-year notes inverted by 82 basis points, the deepest inversion since the early 1980s, triggering fresh worries about the economic outlook.

The Labor Department’s report on Thursday showed claims for state unemployment benefits rose +13K to 196K last week, above a forecast of 190K and up from the prior week. However, new claims held below 200K for a fourth straight week, indicating a still-tight labor market. 

Richmond Fed President Thomas Barkin said on Thursday that price pressures remain elevated and the Fed needs to ‘stay the course’ to ensure that inflation comes back to the 2% target.

On the earnings front, shares of PepsiCo Inc (PEP) closed up about +1% after the snack and beverage maker reported upbeat Q4 results, while AbbVie Inc (ABBV) closed up over +2% after the drugmaker topped Q4 profit expectations. At the same time, PayPal Holdings Inc (PYPL) rose about +1% in pre-market trading after the company delivered better-than-expected Q4 results and issued strong FY23 guidance.

Today, all eyes are focused on the U.S. Michigan Consumer Sentiment preliminary data in a couple of hours. Economists, on average, forecast that February Michigan Consumer Sentiment will stand at 65.0, compared to the previous value of 64.9.

Also, investors are likely to focus on the U.S. Michigan Consumer Expectations, which stood at 62.7 in January. Economists foresee the new figure to be 62.9. 

U.S. Federal Budget Balance will be reported today as well. Economists expect this figure to stand at -63.0B in January, compared to the previous number of -85.0B.

In addition, market participants will be looking toward speeches from Fed officials Waller and Harker for further clues on monetary policy.

In the bond markets, United States 10-Year rates are at 3.698%, up +0.40%.

The Euro Stoxx 50 futures are down -0.89% this morning in the wake of a Treasuries selloff, with investors continuing to assess the economic outlook. U.K. preliminary GDP data on Friday showed zero growth in the final three months of 2022, meaning the British economy narrowly avoided entering a recession. At the same time, the British economy contracted by -0.5% on the month in December. The Bank of England last week projected that the U.K. would enter a shallow but sprawling recession in the first quarter of 2023. In corporate news, shares of Thule Group Ab (THULE.S.DX) tumbled over -16% after the company reported weaker-than-expected fourth-quarter earnings results. Also, Adidas Ag (ADS.D.DX) dropped over -10% on a weak 2023 sales forecast.

U.K.’s GDP (preliminary), U.K.’s Industrial Production, U.K.’s Manufacturing Production, U.K.’s Trade Balance, and Italy’s Industrial Production data were released today.

U.K. GDP has been reported at 0.0% q/q and +0.4% y/y in the fourth quarter, in line with expectations.

U.K. December Industrial Production stood at +0.3% m/m and -4.0% y/y, stronger than expectations of -0.2% m/m and -5.3% y/y.

U.K. December Manufacturing Production came in at 0.0% m/m and -5.7% y/y, stronger than expectations of -0.2% m/m and -6.1% y/y.

U.K. December Trade Balance stood at -19.27B, weaker than expectations of -16.40B.

The Italian December Industrial Production came in at +1.6% m/m, stronger than expectations of -0.1% m/m.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.30%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.31%.

China’s Shanghai Composite today closed lower after data showed that the consumer price index grew less than anticipated in January while factory gate prices dropped further. The light readings pointed to a longer-than-expected rebound in the country’s economic activity after the relaxation of most anti-COVID curbs earlier this year.

The Chinese January CPI has been reported at +0.8% m/m and +2.1% y/y, compared to expectations of +0.7% m/m and +2.2% y/y. 

The Chinese January PPI stood at -0.8% y/y, weaker than expectations of -0.5% y/y.

At the same time, Japan’s Nikkei 225 Stock Index closed higher after data revealed producer inflation retreated slightly more than anticipated in January but remained close to 40-year highs. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 0.75% to 16.04.

The Japanese January PPI came in at 0.0% m/m and +9.5% y/y, weaker than expectations of +0.3% m/m and +9.6% y/y. 

Pre-Market U.S. Stock Movers

LYFT Inc (LYFT) plunged over -32% in pre-market trading after the company reported mixed Q4 results and issued disappointing Q1 guidance.

Expedia Inc (EXPE) fell about -2% in pre-market trading after the company reported downbeat Q4 results.

Cloudflare Inc (NET) climbed over +8% in pre-market trading after the company reported better-than-expected Q4 results and posted a strong FY23 revenue outlook.

Bloom Energy Corp (BE) rose more than +7% in pre-market trading after the company’s Q4 earnings topped Wall Street estimates.

Black Hills Corporation (BKH) slid about -3% in pre-market trading after RBC Capital downgraded the stock to sector perform from outperform.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Friday - February 10th

Enbridge (ENB), IQVIA Holdings (IQV), Mettler-Toledo (MTD), Sampo OYJ (SAXPY), Shiseido Company (SSDOY), Fortis Inc (FTS), Magna Intl (MGA), W P Carey Inc (WPC), Newell Brands (NWL), Essent Group Ltd (ESNT), Kawasaki Heavy Industries ADR (KWHIY), Millicom DRC (MICCF), Millicom (TIGO), Mr. Cooper (COOP), Sensient Technologies (SXT), Aperam PK (APEMY), Spectrum Brands (SPB), Sylvamo (SLVM), Usinas Siderurgicas de Minas Gerais (USNZY), Lancashire (LCSHF), Aiful ADR (AIFLY).

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