Futures are Signaling a Weak Open for Wall Street As Data Fuels Rate Hike Worries

March S&P 500 futures (ESH23) are down -0.65%, and March Nasdaq 100 E-Mini futures (NQH23) are down -0.84% this morning after three major U.S. benchmark indices finished the regular session in the red as hotter-than-expected U.S. producer prices data and a fall in weekly jobless claims stoked investor fears that the Federal Reserve would keep raising interest rates to fight inflation. Three major U.S. stock indexes were weighed down primarily by losses in the Technology, Consumer Goods, and Consumer Services sectors.

A Labor Department report showed the U.S. producer price index rose +0.7% m/m and +6.0% y/y in January amid an increase in the cost of energy products, stronger than expectations of +0.4% m/m and +5.4% y/y. Another Labor Department report showed claims for state unemployment benefits unexpectedly dropped -1K to a seasonally adjusted 194K last week, stronger than expectations of 200K, pointing to a tight labor market.

“With data like this, the Fed is going to keep raising rates, and none of us want that. There are at least whispers now of the possibility of a 50 basis point hike at the next meeting,” said Tim Ghriskey, a senior portfolio strategist at Ingalls & Snyder.

Federal Reserve Bank of Cleveland President Loretta Mester said on Thursday inflation remains too high and noted that she saw a “compelling economic case” for another 50 basis point rate hike at the last monetary policy meeting. Also, Federal Reserve Bank of St. Louis President James Bullard urged more interest rate increases to ensure inflation returns to the Fed’s 2% target over time. Bullard added that he “wouldn’t rule out a 50 basis point rate hike” at the central bank’s next meeting in March.

Meanwhile, U.S. rate futures have priced in an 81.9% chance of a 25 basis point rate increase and an 18.1% chance of a 50 basis point hike at the next monetary policy meeting in March. 

On the economic front, investors are likely to focus on the U.S. Export Price Index, which was at -2.6% m/m in December. Economists foresee the fresh figure to be -0.2% m/m.

U.S. Import Price Index will be reported today as well. Economists foresee this figure to stand at -0.2% m/m in January, compared to the previous number of +0.4% m/m.

In addition, market participants will be looking toward speeches from Fed officials Barkin and Bowman for further clues on the outlook for rates.

In the bond markets, United States 10-Year rates are at 3.904%, up +1.58%.

The Euro Stoxx 50 futures are down -1.00% this morning as investors digested hotter-than-expected U.S. producer prices data and more hawkish commentary from the Federal Reserve. Also, European Central Bank Executive Board member Isabel Schnabel said on Friday that investors risk underestimating the persistence of inflation, adding, “we are still far away from claiming victory.” On the positive side, U.K. retail sales unexpectedly rose +0.5% m/m in January, an improvement from the -1.2% m/m decline in December and above expectations of -0.3% m/m. In corporate news, shares of Sika Ag (SIKA.Z.IX) rose over +4% after the Swiss chemicals company reported a better-than-expected operating profit for 2022.

U.K.’s Core Retail Sales, U.K.’s Retail Sales, Germany’s PPI, and France’s CPI data were released today.

U.K. January Core Retail Sales stood at +0.4% m/m and -5.3% y/y, compared to expectations of 0.0% m/m and -5.3% y/y.

U.K. January Retail Sales came in at +0.5% m/m and -5.1% y/y, stronger than expectations of -0.3% m/m and -5.5% y/y.

The German January PPI has been reported at -1.0% m/m and +17.8% y/y, stronger than expectations of -1.6% m/m and +16.4% y/y.

The French January CPI was at +0.4% m/m and +6.0% y/y, in line with expectations. 

Asian stock markets today closed in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.77%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.66%.

China’s Shanghai Composite today closed lower even after government officials announced a “decisive victory” over COVID-19, noting a low fatality rate. However, recent economic data showed that certain parts of the country’s economy were still struggling to rebound from the impact of the COVID-19 pandemic. On the ground of this, the Chinese government has undertaken a slew of stimulus measures to shore up economic growth.

At the same time, Japan’s Nikkei 225 Stock Index closed lower amid continued uncertainty over the path of monetary policy after the Japanese government nominated academic Ueda as the new Bank of Japan governor. The index’s downward momentum was fueled by losses in the Transportation Equipment, Warehousing, and Banking sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 2.84% to 14.71.

Pre-Market U.S. Stock Movers

DoorDash Inc (DASH) climbed about +6% in pre-market trading after the company reported better-than-expected Q4 revenue and announced a $750M share buyback.

DraftKings Inc (DKNG) gained about +5% in pre-market trading after the company reported upbeat Q4 results and said it expects to see positive EBITDA by FY24.

Moderna Inc (MRNA) slid over -5% in pre-market trading after the company announced interim results from its pivotal Phase 3 safety and immunogenicity trial of mRNA-1010. 

IVERIC bio Inc (ISEE) rose about +17% in pre-market trading after announcing that the FDA completed its filing review and accepted the company’s NDA for Avacincaptad Pegol.

HubSpot Inc (HUBS) soared more than +10% in pre-market trading after the company reported upbeat Q4 results and issued an above-consensus outlook.

ZIM Integrated Shipping Services Ltd (ZIM) rose more than +1% in pre-market trading after JPMorgan upgraded the stock to overweight from neutral.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Friday - February 17th

Hermes International SA (HESAY), Deere&Company (DE), Daimler (DDAIF), Safran SA (SAFRY), Sika ADR (SXYAY), PPL (PPL), CenterPoint Energy (CNP), Liberty Broadband Srs A (LBRDA), Corebridge Financial (CRBG), AutoNation (AN), Air France KLM SA (AFLYY), Balchem (BCPC), Arbor (ABR), Barnes (B), Marcus & Millichap (MMI), Pediatrix Medical (MD), AdvanSix (ASIX), American Axle&Manufacturing (AXL), Cowen Group (COWN), National HealthCare (NHC), AMC Networks (AMCX).

More Stock Market News from Barchart

• Stocks Slump as Fed Officials Mention Bigger Rate Hikes
• Profit Estimates for Tech Stocks Continue to Fall
• The CRUZ ETF- A Bearish Trend and Reversal
• Strength in U.S. Producer Prices and Hawkish Fed Speak Weighs on Stocks