Markets Today: Stock Index Futures Tumble as U.S. Jan PPI Exceeds Forecasts

Morning Markets

March S&P 500 futures (ESH23) this morning are down -1.12%, and March Nasdaq 100 E-Mini futures (NQH23) are down -1.42%.

U.S. stock index futures this morning are moderately lower.  Disappointing quarterly earnings results from Shopify, Paramount Global, and Vulcan Materials weighed on the overall market.  Stock index futures extended their losses as bond yields jumped on this morning’s U.S. economic reports.

This morning’s larger-than-expected increase in U.S. Jan producer prices and hawkish comments from Cleveland Fed President Mester pushed the 10-year T-note yield up to a 1-1/2 month high of 3.840%.

U.S Jan final-demand PPI rose +0.7% m/m and +6.0% y/y, stronger than expectations of +0.4% m/m and +5.4% y/y.  Also, Jan PPI ex-food and energy rose +0.5% m/m and +5.4% y/y, stronger than expectations of +0.3% m/m and +4.9% y/y.

U.S. weekly initial unemployment claims unexpectedly fell -1,000 to 194,000, showing a stronger labor market than expectations of an increase to 200,000.

U.S. Jan housing starts fell -4.5% m/m to a 2-1/2 year low of 1.309 million, weaker than expectations of 1.356 million.  Jan building permits rose +0.1% m/m to 1.339 million, weaker than expectations of 1.350 million.

The U.S. Feb Philadelphia Fed business outlook survey unexpectedly fell -15.4 to a 2-3/4 year low of -24.3, weaker than expectations of -7.5.

Cleveland Fed President Mester said she saw a "compelling" case for a +50 bp rate hike at the last FOMC meeting, and "at this juncture, the incoming data have not changed my view that we will need to bring the fed funds rate above 5% and hold it there for some time."

Negative corporate earnings results are weighing on stock index futures.  Shopify tumbled more than -9% in pre-market trading after forecasting weaker-than-expected Q1 revenue growth.  Also, Paramount Global and Vulcan Materials are down more than -4% after reporting Q4 revenue below estimates.  In addition, Datadog is down more than -6% after forecasting weaker-than-expected 2023 adjusted EPS.

On the positive side, Cisco Systems is up more than +4% after reporting better-than-expected Q2 revenue and raising its full-year revenue forecast.  Also, Roku and Seagen are up at least +7% after reporting stronger-than-expected Q4 net revenue.  In addition, Albemarle is up more than +4% after reporting Q4 adjusted EPS above estimates.

Strength in European stocks is providing carry-over support to U.S. stock index futures, with the Euro Stoxx 50 up +0.26% at a 13-month high.  Meanwhile, China’s Shanghai Composite stock index closed down -0.96%, and Japan’s Nikkei Stock index closed up +0.71%. 

The Euro Stoxx 50 index today rallied to a 13-month high and is moderately higher.  Strength in bank stocks supports the overall market, with Standard Chartered Plc up more than +3% after announcing a $1 billion share buyback program and forecasting higher returns.  Also, telecom-equipment makers are climbing after Cisco Systems late Wednesday issued an upbeat forecast that showed demand for tech infrastructure is holding up better than expected.

ECB Executive Board member Panetta said that small interest rate hikes would allow the ECB for more honed adjustment as previous tightening starts to slow economic activity.

China’s Shanghai Composite today fell back from a 2-1/2 week high and closed moderately lower.  Concerns that U.S.-China tensions could intensify sparked long liquidation in Chinese stocks today after China and Iran said they would look to expand cooperation, which comes weeks after the U.S. said it would increase pressure on China to stop buying Iranian oil.  Chinese stocks today initially moved higher, led by strength in property stocks, after today’s economic news showed China’s Jan home prices were unchanged, ending a 16-month decline.   

Japan’s Nikkei Stock Index today closed moderately higher.  Strength in Japanese automakers was positive for the overall market after Wednesday’s economic news showed U.S. Jan retail sales rose more than expected.  Better-than-expected Japanese corporate earnings results pushed the overall market higher today.  Bridgestone rose after reporting stronger-than-expected Q4 net income, and Mitsubishi Chemical rallied after raising its full-year operating profit forecast.  Also, Adway said it would buy back 13.57% of its total shares for 2 billion yen. 

Japanese trade news was mixed.  Japan Jan exports unexpectedly rose +3.5% y/y, stronger than expectations of a decline of -1.7% y/y.  However, Jan imports rose +17.8% y/y, weaker than expectations of +20.6% y/y.

Japan Dec core machine orders rose +1.6% m/m, weaker than expectations of +2.8% m/m.

Pre-Market U.S. Stock Movers

Shopify (SHOP) tumbled more than -9% in pre-market trading after forecasting Q1 revenue growth in the high-teen percentages, weaker than the consensus of 20%. 

Vulcan Materials (VMC) dropped more than -4% in pre-market trading after reporting Q4 revenue of $1.73 billion, well below the consensus of $1.84 billion, and forecasting 2023 adjusted Ebitda of $1.73 billion-$1.88 billion, the midpoint below the consensus of $1.87 billion.

RingCentral (RING) sank more than -12% in pre-market trading after forecasting Q1 software subscription revenue of $503 million-$505 million, weaker than the consensus of $520.3 million. 

Nvidia (NVDA) slipped more than -1% in pre-market trading after DZ Bank AG downgraded the stock by two notches to sell from buy.

Paramount Global (PARA) dropped more than -7% in pre-market trading after reporting Q4 revenue of $8.13 billion, weaker than the consensus of $8.17 billion. 

Datadog (DDOG) tumbled more than -6% in pre-market trading after forecasting 2023 adjusted EPS of $1.02-$1.09, weaker than the consensus of $1.12. 

Invitation Homes (INVH) dropped more than -2% in pre-market trading after Evercore ISI downgraded the stock to inline from outperform. 

Cisco Systems (CSCO) climbed more than +4% in pre-market trading after reporting Q2 revenue of $13.59 billion, above the consensus of $13.43 billion, and raised its full-year revenue forecast to +9% to +10.5% from a previous estimate of +4.5% to +6.5%, stronger than the consensus of +5.7%.

Roku (ROKU) jumped more than +10% in pre-market trading after reporting Q4 net revenue of $867.1 million, better than the consensus of $804.5 million, and forecast Q1 net revenue of $700 million, above the consensus of $687.1 million. 

Seagen (SGEN) rallied more than +7% in pre-market trading after reporting Q4 revenue of $528 million, well above the consensus of $480.8 million. 

Albemarle (ALB) climbed more than +4% in pre-market trading after reporting Q4 adjusted EPS of $8.62, stronger than the consensus of $8.19 and forecast full-year adjusted EPS of $26.00-$33.00, the midpoint above the consensus of $28.17. 

Twilio (TWLO) surged more than +13% in pre-market trading after reporting Q4 revenue of $1.02 billion, above the consensus of $1.00 billion, and authorizing a $1 billion share buyback program. 

Zillow (ZG) climbed more than +3% in pre-market trading after reporting Q4 revenue of $435 million, above the consensus of $414.4 million.

Scotts Miracle-Gro (SMG) rose more than +2% in pre-market trading after Wells Fargo Securities upgraded the stock to overweight from equal weight. 

Today’s U.S. Earnings Reports (2/16/2023)

Applied Materials Inc (AMAT), Bio-Rad Laboratories Inc (BIO), Constellation Energy Corp (CEG), Digital Realty Trust Inc (DLR), Entergy Corp (ETR), EPAM Systems Inc (EPAM), Hasbro Inc (HAS), Henry Schein Inc (HSIC), Laboratory Corp of America Hol (LH), NRG Energy Inc (NRG), Organon & Co (OGN), Paramount Global (PARA), Pool Corp (POOL), Southern Co/The (SO), Vulcan Materials Co (VMC), West Pharmaceutical Services I (WST), Zebra Technologies Corp (ZBRA).

• Deere Earnings: Iron Condor Could See 38% Return On Risk
• S&P Futures Tick Lower Ahead of Key U.S. PPI Data
• Stocks Recover Early Losses and Close Higher on Hopes for Soft Landing
• Unusually Large Covered Call in Tenet Healthcare Makes Pseudo Dividend