Stock Index Futures Move Higher As Dovish Fed Comments Boost Hopes Of Fed Pivot

March S&P 500 futures (ESH23) are up +0.21%, and March Nasdaq 100 E-Mini futures (NQH23) are up +0.34% this morning after three major U.S. benchmark indices closed higher on Thursday as investors cheered comments by Atlanta Federal Reserve President Raphael Bostic that signaled a “slow and steady” approach to raising U.S. interest rates. 

In Thursday’s trading session, U.S. stocks initially plunged as the yield on 10-year Treasury notes jumped to a 3-1/2 month high following hotter-than-expected labor market data. However, T-note yields retreated later in the session as comments from Atlanta Fed President Raphael Bostic eased worries over a return to more aggressive Fed rate hikes. Also, Salesforce Inc (CRM) surged over +11% and was the top percentage gainer on both the Dow and the S&P 500 after reporting upbeat Q4 results and posting strong sales guidance. At the same time, Tesla Inc (TSLA) plunged more than -5% after its Investor Day passed disappointingly without any details on the company’s financials and the timing of new models.

The Labor Department report on Thursday showed claims for state unemployment benefits unexpectedly dropped -2K to a seasonally adjusted 190K last week, stronger than expectations of 195K, pointing to the continued labor market’s resilience. A separate report showed U.S. labor costs were revised upward to 3.2% q/q from 1.1% q/q in the fourth quarter, stronger than expectations of 1.6% q/q. At the same time, U.S. Nonfarm Productivity was revised lower to 1.7% q/q from 3.0% q/q in the fourth quarter, weaker than expectations of 2.6% q/q. 

Atlanta Fed President Raphael Bostic said Thursday he favors “steady” quarter-point rate increases to limit risk to the economy as the impact of higher interest rates may only begin to “bite” in the spring. Bostic also said the Fed might be able to pause rate increases by mid- or late-summer. At the same time, he warned that stronger-than-expected inflation data might shape Fed policy. Also, Fed Governor Christopher Waller said a string of “hot” data might force the U.S. central bank “to raise interest rates even more,” citing January’s red-hot payrolls report.

Today, all eyes are focused on the U.S. ISM Non-Manufacturing PMI data in a couple of hours. Economists, on average, forecast that February ISM Non-Manufacturing PMI will stand at 54.5, compared to the previous value of 55.2.

U.S. S&P Global Composite PMI will also be closely watched today. Economists foresee this figure to stand at 50.2 in February, compared to January’s number of 46.8.

U.S. Services PMI data will be reported today as well. Economists estimate February’s figure to be 50.5, compared to 46.8 in January.

In addition, investors are likely to focus on a batch of speeches from Fed officials Logan, Bostic, Bowman, and Barkin for further clues on the outlook for rates.

In the bond markets, United States 10-Year rates are at 4.005%, down -1.68%.

The Euro Stoxx 50 futures are up +0.94% this morning as investors digested a slew of important regional economic data. European stocks have received a positive handover from Wall Street and Asia after main indexes gained ground on dovish comments from Atlanta Fed President Bostic, positive Chinese data, and cooler inflation reading from Tokyo. At the same time, Morgan Stanley on Friday raised its forecast for the European Central Bank’s ‘terminal’ rate to 4%, up from the previous forecast of 3.25% as “inflationary pressures weigh on the Eurozone.” In corporate news, shares of Lufthansa Ag (LHA.D.DX) gained over +4% after the German airliner reported a “clearly positive result” in 2022, boosted by a strong increase in travel demand. 

Spain’s Services PMI, Italy’s Services PMI, France’s S&P Global Composite PMI, France’s Services PMI, Germany’s Composite PMI, Germany’s Services PMI, Eurozone’s S&P Global Composite PMI, Eurozone’s Services PMI, U.K.’s Composite PMI, U.K.’s Services PMI, and Eurozone’s PPI data were released today.

The Spanish February Services PMI has been reported at 56.7, stronger than expectations of 54.3.

The Italian February Services PMI stood at 51.6, weaker than expectations of 53.1.

The French February S&P Global Composite PMI came in at 51.7, stronger than expectations of 51.6.

The French February Services PMI was at 53.1, stronger than expectations of 52.8.

The German February Composite PMI came in at 50.7, weaker than expectations of 51.1.

The German February Services PMI was at 50.9, weaker than expectations of 51.3.

Eurozone February S&P Global Composite PMI has been reported at 52.0, weaker than expectations of 52.3.

Eurozone February Services PMI was at 52.7, weaker than expectations of 53.0.

U.K. February Composite PMI stood at 53.1, stronger than expectations of 53.0.

U.K. February Services PMI came in at 53.5, stronger than expectations of 53.3.

Eurozone January PPI stood at -2.8% m/m and +15.0% y/y, weaker than expectations of -0.3% m/m and +17.7% y/y.

Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.54%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.56%.

China’s Shanghai Composite today closed higher after a private survey showed the country’s services sector expanded at the fastest pace in six months in February. The Chinese February Caixin Services PMI rose to 55.0 from 52.9 in January and was above expectations of 54.7. The strong Caixin reading followed the government data that revealed the country’s business activity expanded at the quickest pace in over a decade, boosting optimism over the Chinese economic recovery this year. Investor attention now shifts to an upcoming week-long annual meeting of the National Party Congress, where the government is expected to unveil its GDP growth forecast for the current year.

Japan’s Nikkei 225 Stock Index closed higher and hit a new 1-month high on a soft inflation reading from Japan’s capital city. Data on Friday showed Tokyo’s core consumer price index rose +3.3% y/y in February, a softer print from an over 40-year high of +4.3% y/y in January. Also, the Japanese Services PMI rose to 54.0 in February, above expectations of 53.6. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 0.70% to 15.89.

Pre-Market U.S. Stock Movers

C3 Ai Inc (AI) climbed over +15% in pre-market trading after the company reported upbeat Q3 results and posted above-consensus Q4 and FY23 guidance.

Veru Inc (VERU) plunged about -31% in pre-market trading after the company announced that the U.S. FDA declined to authorize sabizabulin for the treatment of hospitalized adults with moderate to severe COVID-19.

ChargePoint Holdings Inc (CHPT) dropped over -11% in pre-market trading after the company reported downbeat Q4 results and issued weak Q1 revenue guidance.

Costco Wholesale Corp (COST) slid more than -2% in pre-market trading after the company released a mixed Q2 earnings report. 

Marvell Technology Group Ltd (MRVL) tumbled over -9% in pre-market trading after the company reported mixed Q4 results and posted a soft Q1 outlook.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Friday - March 3rd

Grupo Aval (AVAL), National Western Life Insurance (NWLI), Hibbett Sports (HIBB), Terns Pharmaceuticals (TERN), Compass Therapeutics (CMPX), Ur Energy (URG), Kansas City Life Insurance (KCLI), Stereotaxis (STXS), inTest (INTT), OFS Capital Corp (OFS), Oncolytics Biotech (ONCY), Westwater Resources (WWR), Rapid Micro Biosystems (RPID).

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