March S&P 500 futures (ESH23) are trending down -0.36% this morning after three major U.S. benchmark indices finished the regular session mixed as another round of U.S. economic data and hawkish comments from Fed officials reinforced expectations that the Federal Reserve would keep raising interest rates to combat inflationary pressures.
In Wednesday’s trading session, the Nasdaq and S&P 500 indexes retreated as the U.S. 10-year Treasury yield topped 4% for the first time since November following a fresh deluge of economic data and the remarks from Fed officials. Energy and materials sectors, however, gained ground on higher commodity prices after China’s manufacturing activity expanded at the fastest pace in over a decade in February.
Data on Wednesday showed the February ISM Manufacturing PMI rose to 47.7 from 47.4 in January but remained in contraction territory for a fourth straight month. At the same time, the ISM manufacturing prices paid index stood at 51.3 in February compared to 44.5 in January and was above expectations of 45.1, pointing to signs that “the disinflation in goods has run out of steam.”
Minneapolis Fed President Neel Kashkari said in remarks on Wednesday that inflation is “very high” and he is “open-minded” to either a 25 basis point or a 50 basis point rate hike at the Fed’s meeting in March. Also, Atlanta Fed President Raphael Bostic said in an online essay that the Fed needs to keep raising interest rates to the 5%-5.25% range and hold there until “well into 2024.”
Meanwhile, U.S. rate futures have priced in a 69.4% chance of a 25 basis point rate increase and a 30.6% chance of a 50 basis point hike at the next monetary policy meeting in March.
On the earnings front, well-known major companies like Broadcom (AVGO), Costco (COST), Kroger (KR), and Dell Tech (DELL) are scheduled to release their earnings results today.
Today, all eyes are focused on the U.S. Initial Jobless Claims data in a couple of hours. Economists, on average, forecast that Initial Jobless Claims will stand at 195K, compared to last week’s value of 192K.
U.S. Nonfarm Productivity data will come in today. Economists foresee this figure to stand at +2.6% q/q in the fourth quarter, compared to the third-quarter number of +1.4% q/q.
U.S. Unit Labor Costs data will be reported today as well. Economists estimate the fourth-quarter figure to be +1.6% q/q, compared to +2.0% q/q in the third quarter.
In addition, investors are likely to focus on speeches from Fed officials Waller and Kashkari for more clues on the Fed’s rate hike path.
In the bond markets, United States 10-Year rates are at 4.038%, up +1.05%.
The Euro Stoxx 50 futures are down -0.05% this morning as investors assessed the preliminary Eurozone consumer price inflation data for February while awaiting the release of the minutes from the ECB’s latest policy meeting. Eurozone CPI has been reported at +8.5% y/y in February, down from +8.6% y/y in January but was above expectations of +8.2% y/y. However, Eurozone February Core CPI rose to +5.6% y/y from +5.3% y/y in January, keeping pressure on the ECB. Meanwhile, ECB President Christine Lagarde, in an interview with Spanish TV on Thursday, said, “the case for a 50 bps rate hike this month is still on the table as inflation is still too high.” In corporate news, shares of CRH Plc (CRH.LN) jumped over +9% after the company reported better-than-expected FY22 results and increased the 2023 share buyback to $3 billion.
Spain’s Unemployment Change, Italy’s CPI (preliminary), and Eurozone’s Unemployment Rate data were also released today.
The Spanish February Unemployment Change stood at +2.6K, stronger than expectations of +11.5K.
The Italian February CPI came in at +0.3% m/m and +9.2% y/y, compared to expectations of +1.4% m/m and +8.8% y/y.
Eurozone January Unemployment Rate was at 6.7%, weaker than expectations of 6.6%.
Asian stock markets today closed in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.05%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.06%.
China’s Shanghai Composite today closed lower as a two-day rally faded, with worries about rising inflation and interest rates keeping the mood downbeat. Data on Wednesday showed that manufacturing activity in China expanded at the quickest pace in over a decade, adding to evidence of an economic recovery in the world’s second-biggest economy. Investor focus is now on an upcoming week-long annual meeting of the National Party Congress, which kicks off this weekend, with the government expected to reveal its GDP growth projection for this year.
Japan’s Nikkei 225 Stock Index closed slightly lower even after data showed capital spending rose more than expected to +7.7% y/y in the fourth quarter. At the same time, the country’s household confidence stood at 31.1 in February, weaker than expectations of 32.0, hinting at a potential deterioration in retail spending. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 3.78% to 15.78.
Pre-Market U.S. Stock Movers
Salesforce Inc (CRM) climbed about +15% in pre-market trading after the cloud-based business-software giant reported upbeat Q4 results and gave a strong Q1 and FY24 sales forecast.
Silvergate Capital Corp (SI) plunged about -30% in pre-market trading after the cryptocurrency-focused bank delayed filing a 10-K statement amid additional losses and regulatory scrutiny.
Snowflake Inc (SNOW) slid over -6% in pre-market trading after the company reported better-than-expected Q4 results but posted a weak Q1 outlook.
Okta Inc (OKTA) rose over +13% in pre-market trading after the company delivered upbeat Q4 results and issued strong Q1 guidance.
Funko Inc (FNKO) tumbled about -27% in pre-market trading after the company reported a wider-than-anticipated Q4 adjusted loss per share.
NIO Inc (NIO) fell over -1% in pre-market trading after JPMorgan downgraded the stock to neutral from overweight.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Thursday - March 2nd
Broadcom (AVGO), Costco (COST), Toronto Dominion Bank (TD), Canadian Natural (CNQ), Ambev SA (ABEV), Kroger (KR), Dell Tech (DELL), Hormel Foods (HRL), Zscaler (ZS), Best Buy (BBY), Cooper (COO), AerCap Holdings NV (AER), Burlington Stores (BURL), Erie Indemnity (ERIE), Polestar Automotive Holding A (PSNY), Samsara (IOT), Bilibili (BILI), Macy’s Inc (M), Clariant AG (CLZNY), Crescent Point Energy (CPG), ChargePoint Holdings (CHPT), Cvent Holding (CVT), Sprouts Farmers (SFM), Victoria's Secret Co (VSCO), Nordstrom (JWN), PagSeguro Digital (PAGS), Curaleaf (CURLF), Utz Brands (UTZ), Six Flags (SIX), Stagwell (STGW), Portillo's (PTLO), Tecnoglass (TGLS), Integral Ad Science Holding LLC (IAS), V2X Inc (VVX), Paragon 28 (FNA), Xponential Fitness (XPOF), Sterling Check (STER), Zuora (ZUO), Purecycle Technologies Holdings (PCT), CRA (CRAI), Eagle Bulk Shipping (EGLE).
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On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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