Stocks Set To Open Higher After Worst Week Of The Year, Retail Earnings In Focus

March S&P 500 futures (ESH23) are trending up +0.46% this morning after three major U.S. benchmark indices closed lower on Friday as stronger-than-expected U.S. economic data fueled expectations of more aggressive rate hikes from the Federal Reserve. Three major U.S. stock indexes were weighed down primarily by losses in the Technology, Consumer Services, and Healthcare sectors.

In Friday’s trading session, Wall Street’s major indexes posted their biggest weekly drop of 2023, with the S&P 500 dropping to a 5-week low, the Dow shedding to a 2-month low, and the Nasdaq falling to a 4-week low.

Data on Friday showed the core PCE Price Index, which is the Fed’s preferred gauge of inflation, stood at +0.6% m/m and +4.7% y/y in January, stronger than expectations of +0.4% m/m and +4.3% y/y, adding to worries that the Fed may have to keep rates higher for longer to tame inflation. Also, U.S. personal spending demonstrated the biggest increase in 1-3/4 years, jumping +1.8% m/m in January compared to expectations of +1.3% m/m. In addition, the University of Michigan’s consumer sentiment index rose to a 13-month high of 67.0 in February.

Cleveland Fed President Loretta Mester said Friday that “inflation remains too high” and the Federal Reserve will need “to bring interest rates above 5%” to tame inflation. Also, Boston Fed President Susan Collins said that more interest rate hikes are required to curb “too high” inflation. “I anticipate further rate increases to reach a sufficiently restrictive level and then holding there for some, perhaps extended, time,” Collins said. In addition, Fed Governor Philip Jefferson said, “the ongoing imbalance between the supply and demand for labor, combined with the large share of labor costs in the services sector, suggests that high inflation may come down only slowly.”

Meanwhile, U.S. rate futures have priced in a 73.8% chance of a 25 basis point rate increase and a 26.2% chance of a 50 basis point hike at the next monetary policy meeting in March. 

In the coming week, investors will be monitoring a spate of economic data, including the U.S. CB Consumer Confidence, Goods Trade Balance (preliminary), S&P/CS HPI Composite - 20 n.s.a., Chicago PMI, Richmond Manufacturing Index, Manufacturing PMI, ISM Manufacturing PMI, ISM Manufacturing Employment, Crude Oil Inventories, Initial Jobless Claims, Nonfarm Productivity (preliminary), Unit Labor Costs (preliminary), S&P Global Composite PMI, Services PMI, ISM Non-Manufacturing PMI, and ISM Non-Manufacturing Employment.

On the earnings front, high-profile retailers such as Target Corporation (TGT), Dollar Tree Inc (DLTR), Lowe’s Companies Inc (LOW), Macy’s Inc (M), Best Buy Co Inc (BBY), Nordstrom Inc (JWN), Costco Wholesale Corp (COST) are set to report results this week.

Today, all eyes are focused on the U.S. Core Durable Goods Orders data in a couple of hours. Economists, on average, forecast that January Core Durable Goods Orders will stand at +0.1% m/m, compared to the previous value of -0.2% m/m.

Also, investors are likely to focus on the U.S. Pending Home Sales data, which was at +2.5% m/m in December. Economists anticipate the new figure to be +1.0% m/m.

U.S. Durable Goods Orders data will be reported today as well. Economists foresee this figure to come in at -4.0% m/m in January, compared to the previous number of +5.6% m/m.

In the bond markets, United States 10-Year rates are at 3.963%, up +0.35%.

The Euro Stoxx 50 futures are up +1.45% this morning, led by gains in energy and retail stocks, while market participants await more regional inflation data throughout the week. Preliminary February data on Germany, France, Spain, Italy, and Eurozone headline inflation will be closely watched this week as investors look for more clues on the near-term path of interest rates. The European Central Bank is widely expected to deliver a 50 basis point rate increase at the upcoming meeting in mid-March, with traders pricing in another 75 basis points of moves in the euro area before the end of the summer. In corporate news, shares of Associated British Foods Plc (ABF.LN) rose over +1% after the Primark owner raised its financial guidance for the full-year 2022-23.

Italy’s Consumer Confidence, Eurozone’s M3 Money Supply, and Eurozone’s Consumer Confidence data were released today.

The Italian February Consumer Confidence has been reported at 104.0, stronger than expectations of 102.7.

Eurozone January M3 Money Supply came in at 3.5% y/y, weaker than expectations of 3.9% y/y.

Eurozone February Consumer Confidence stood at -19.0, in line with expectations.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.28%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.11%.

China’s Shanghai Composite today closed lower as uncertainty over forthcoming Chinese economic data weighed on sentiment. Investors await data on China’s PMI due on Wednesday, which is expected to demonstrate a mixed recovery in the country’s business activity.

At the same time, Japan’s Nikkei 225 Stock Index closed lower, weighed down by losses in the Textile, Chemical, Petroleum & Plastic, and Banking sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 5.20% to 16.59.

Pre-Market U.S. Stock Movers

Seagen Inc (SGEN) climbed more than +12% in pre-market trading after the WSJ reported that Pfizer Inc (PFE) is in early-stage talks to acquire the biotech.

Jounce Therapeutics Inc (JNCE) slid about -3% in pre-market trading after SMBC Nikko downgraded the stock to neutral from outperform.

Twilio Inc (TWLO) gained more than +1% in pre-market trading after Jefferies raised the firm’s price target on the stock to $60 from $50 and kept a hold rating.

Li Auto Inc (LI) soared about +5% in pre-market trading after the company reported better-than-expected Q4 results and initiated a Q1 outlook.

Tegna Inc (TGNA) plunged over -22% in pre-market trading after the Federal Communications Commission sent the proposed acquisition of Tegna by Standard General to its administrative law judge.

Sono Group NV (SEV) fell more than -1% in pre-market trading after Cantor Fitzgerald downgraded the stock to neutral from overweight.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Monday - February 27th

Occidental (OXY), Workday (WDAY), ONEOK (OKE), Heico (HEI), Li Auto (LI), Zoom Video (ZM), Heico A (HEIa), Viatris (VTRS), Bunzl plc (BZLFY), Ovintiv (OVV), Darling Ingredients (DAR), Universal Health Services (UHS), Pinnacle West (PNW), Acadia Healthcare (ACHC), Range Resources (RRC), MKS Instruments (MKSI), FS KKR Capital (FSK), Trex (TREX), Perrigo (PRGO), AAON (AAON), ICU Medical (ICUI), Howard Hughes (HHC), National Storage Affiliates Trust (NSA), Kosmos Energy (KOS), Ingevity (NGVT), Vaxcyte (PCVX), ACADIA (ACAD), Inari Med (NARI), Freshpet Inc (FRPT), Progyny (PGNY), Axsome Therapeutics Inc (AXSM), Ameresco (AMRC), Itron (ITRI), Innovative Industrial Properties (IIPR), TTEC (TTEC), Revolution Med (RVMD), Helios Tech (HLIO), FibroGen Inc (FGEN), Hims Hers Health (HIMS), Taskus (TASK), RLJ Lodging (RLJ), Fisker (FSR), Addus (ADUS), Establishment Labs (ESTA), PRA Group Inc (PRAA), BGC Partners (BGCP), Green Brick Partners Inc (GRBK), Primoris (PRIM), Ready Capital (RC), Kinetik Holdings (KNTK), New Mountain Finance (NMFC), Diamond Offshore Drilling (DO), Global Partners (GLP), Sterling Construction (STRL), FREYR Battery (FREY), Argo Group Int (ARGO), ProAssurance (PRA), Dril-Quip (DRQ).

More Stock Market News from Barchart

• Alphabet Stock Has Tumbled But Short Put Income Plays Are Still Popular
• Earnings, ISM Reports And Other Key Themes To Watch This Week
• Stocks Close Lower as a Resilient Economy Bolsters the Case for More Rate Hikes
• Online Retailers Continue to Struggle