Markets Today: Stock Indexes Fall as PCE Inflation Accelerates

Morning Markets

March S&P 500 futures (ESH23) this morning are down -1.30% and March Nasdaq 100 E-Mini futures (NQH23) are down -1.74%.

U.S. stock index futures this morning tumbled after stronger-than-expected U.S. economic reports today on Jan personal spending and Jan core PCE deflator, the Fed’s preferred gauge of inflation, rose more expected.  The reports bolster the case for the Fed to keep interest rates higher for longer. The 10-year T-note yield is up +6.3 bp to 3.939%, just below Thursday’s 3-1/2 month high of 3.974%.

U.S. Jan personal spending rose +1.8% m/m, stronger than expectations of +1.4% m/m and the biggest increase in 1-3/4 years.  Jan personal income rose +0.6% m/m, weaker than expectations of +1.0% m/m

U.S. Jan core PCE deflator rose +0.6% m/m and +4.7% y/y, stronger than expectations of +0.4% m/m and +4.3% y/y.

Hawkish comments today from Cleveland Fed President Mester weighed on stocks and pushed bond yields higher when she said the Fed is "going to have to do a little more to get back to price stability of 2%," and she still sees raising the fed funds rate "somewhat" above 5% and staying there for a time.

Some negative corporate news today is also weighing on stock index futures.  Autodesk dropped more than -4% in pre-market trading after forecasting 2024 billings below estimates.  Also, Warner Bros Discovery is down more than -4% after reporting weaker-than-expected Q4 revenue.  In addition, Adobe is down more than -3% after Bloomberg News reported that the U.S. Justice Department is preparing an antitrust lawsuit to block the company’s acquisition of Figma.

On the positive side, Block is up more than +6% in pre-market trading, and Live Nation Entertainment rose more than +1% after reporting better-than-expected Q4 net revenue. Also, Frontier Communications Holdings LLC is up more than +1% after forecasting 2023 adjusted Ebitda above estimates.

Overseas stock markets are mixed.  The Euro Stoxx 50 today is down -0.95%.  China’s Shanghai Composite stock index closed down -0.62%, and Japan’s Nikkei Stock Index closed up +1.29%. 

The Euro Stoxx 50 index today is moderately lower.  Economic concerns weighed on European stocks after Germany’s Q4 GDP was revised lower.  Also, hawkish comments from ECB Governing Council member and Bundesbank President Nagel weighed on stocks and pushed bund yields higher when he said with core inflation still much too high, he "does not exclude further significant interest rate hikes beyond March."  Some weak corporate earnings results undercut stocks as BASF SE tumbled more than -6% when it said it would cut about 2% of its global workforce and end a stock buyback program.   Also, IAG SA fell more than -5% after giving a disappointing earnings outlook.  On the positive side, today’s economic news showed German Mar GfK consumer confidence rose to an 8-month high. 

ECB Governing Council member and Bundesbank President Nagel said with core inflation, in particular, still much too high, monetary policy, therefore, has to tighten the reins," and  he "does not exclude further significant interest rate hikes beyond March."

German Q4 GDP was revised downward to -0.4% q/q and +0.3% y/y from the previously reported -0.2% q/q and +0.5% y/y.

German Mar GfK consumer confidence rose +3.3 to an 8-month high of -30.5, right on expectations.

China’s Shanghai Composite today posted moderate losses.  Weakness in Chinese technology stocks led the overall market lower amid signs of price wars and cash burns that are undermining profits.  Also, disappointing earnings results weighed on technology stocks after NetEase fell more than -3% when it reported a quarterly profit miss. In addition, Alibaba Group Holding dropped more than -5% after analysts remained cautious about the company’s sales growth prospects.

Japan’s Nikkei Stock Index rallied moderately today after Bank of Japan Governor nominee Ueda said current policy easing was appropriate.  Strength in exporter stocks led the overall market higher after the yen fell to a 2-month low against the dollar.  Japanese semiconductor stocks also moved higher on a bullish revenue outlook from Nvidia and a report that said Taiwan Semiconductor Manufacturing plans to build a second chipmaking plant in Kumamoto, with total investment expected to be more than 1 trillion yen.

BOJ Governor nominee Ueda said the BOJ's current easing is "appropriate" and a sudden tightening now would impact businesses negatively.  He also said the BOJ would mull yield-curve-control normalization if the price outlook improves and will stop its massive bond-buying if its 2% inflation target is met.

Japan Jan national CPI ex-fresh food and energy rose +3.2% y/y, the most in 32 years.

Pre-Market U.S. Stock Movers

Boeing (BA) dropped more than -2% in pre-market trading after it said it was pausing deliveries of its 787 Dreamliner due to a documentation issue. 

Warner Bros Discovery (WBD) fell more than -4% in pre-market trading after reporting Q4 revenue of $11.01 billion, weaker than the consensus of $11.23 billion. 

EOG Resources (EOG) tumbled more than -5% in pre-market trading after reporting Q4 adjusted EPS of $3.30, weaker than the consensus of $3.39.

Autodesk (ADSK) dropped more than -4% in pre-market trading after forecasting 2024 billings of $5.03 billion-$5.18 billion, below the consensus of $5.34 billion. 

Carvana (CVNA) fell more than -5% in pre-market trading after reporting Q4 revenue of $2.84 billion, below the consensus of $3.09 billion. 

Moderna (MRNA) slipped more than -2% in pre-market trading after SVB Securities downgraded the stock to underperform from market perform. 

Adobe (ADBE) fell more than -3% in pre-market trading after Bloomberg News reported that the U.S. Justice Department is preparing an antitrust lawsuit to block the company’s acquisition of Figma. 

Block (SQ) rallied more than +6% in pre-market trading after reporting Q4 net revenue of $4.65 billion, stronger than the consensus of $4.57 billion. 

LyondellBasell Industries NV (LYB) rose more than +1% in pre-market trading after RBC Capital Markets upgraded the stock to outperform from sector perform.

MP Materials (MP) jumped more than +5% in pre-market trading after reporting Q4 revenue of $93.2 million, better than the consensus of $81.6 million. 

Live Nation Entertainment (LYV) gained more than +1% in pre-market trading after reporting Q4 revenue of $4.29 billion, well above the consensus of $3.46 billion. 

Beyond Meat (BYND) surged more than +14% in pre-market trading after reporting a Q4 net revenue of $79.9 million, above the consensus of $75.7 million.

Frontier Communications Holdings LLC (FYBR) rose more than +1% in pre-market trading after forecasting 2023 adjusted Ebitda of $2.11 billion-$2.16 billion, the midpoint above the consensus of $2.11 billion.

Today’s U.S. Earnings Reports (2/24/2023)

Carter's Inc (CRI), Evergy Inc (EVRG), Frontier Communications Parent (FYBR), HF Sinclair Corp (DINO), Lamar Advertising Co (LAMR).

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