Stocks Set to Open Mixed as Investors Brace for Earnings Season

June S&P 500 futures (ESM23) are up +0.05%, and June Nasdaq 100 E-Mini futures (NQM23) are down -0.10% this morning as market participants looked ahead to a major earnings week on Wall Street.

In Friday’s trading session, Wall Street’s main indexes ended lower as a slew of mixed economic data strengthened investor expectations for another Federal Reserve interest rate hike. Limiting the downside on Friday, financials gained ground to lead gains among the major S&P sectors, boosted by an over +7% jump in shares of JPMorgan (JPM) after the megabank reported upbeat Q1 results and lifted its net interest income outlook for 2023. Citigroup (C) and Wells Fargo (WFC) also reported stronger-than-expected results.

Data on Friday showed that U.S. Retail Sales fell -1.0% m/m in March, weaker than expectations of -0.4% m/m as consumers trimmed purchases of motor vehicles and other big-ticket items. At the same time, the University of Michigan’s preliminary reading showed the U.S. consumer sentiment index stood at 63.5 in April, stronger than expectations of 62.0, while one-year inflation expectations rose to 4.6% in April, from 3.6% in March. Also, U.S. industrial production edged up +0.4% m/m in March, stronger than expectations of +0.2% m/m. 

Atlanta Fed President Raphael Bostic told Reuters on Friday that one more 25 basis point hike could allow the Federal Reserve to end its tightening cycle. At the same time, Fed Governor Christopher Waller said Friday that further monetary tightening would be needed as the Fed hasn’t “made much progress” in returning inflation to its 2% objective.

U.S. rate futures have priced in an 88.2% probability of a 25 basis point rate increase and an 11.8% chance of no hike at next month’s policy meeting.

Meanwhile, earnings season heats up, with results expected from several more big banks, including Bank of America (BAC), Goldman Sachs (GS), and Morgan Stanley (MS). Also, major global companies, including Netflix (NFLX), Lockheed Martin (LMT), Johnson & Johnson (JNJ), and Tesla (TSLA), are expected to post quarterly updates this week.

Investors will also be monitoring a spate of economic data this week, including the U.S. Building Permits, Housing Starts, Crude Oil Inventories, Initial Jobless Claims, Philadelphia Fed Manufacturing Index, Existing Home Sales,  Manufacturing PMI (preliminary), S&P Global Composite PMI (preliminary), and Services PMI (preliminary). 

In addition, several Fed officials will be making appearances in the next few days, including New York Fed President John Williams, Governor Michelle Bowman, Governor Christopher Waller, and Governor Lisa Cook.

Today, all eyes are focused on the U.S. NY Empire State Manufacturing index in a couple of hours. Economists, on average, forecast that the April NY Empire State Manufacturing index will come in at -18.00, compared to the previous value of -24.60.

Also, investors are likely to focus on the U.S. NAHB Housing Market Index, which stood at 44 in March. Economists foresee the new figure to be 44.

In the bond markets, United States 10-Year rates are at 3.517%, down -0.15%.

The Euro Stoxx 50 futures are down -0.07% this morning as investors awaited more earnings reports for fresh clues on the state of the U.S. economy. European Central Bank Governing Council member and governor of the Bank of Finland Olli Rehn said Friday that the ECB must “carry on and act consistently” with interest rate hikes. He also said the central bank’s next rate decision will be “data dependent.” In addition, investors will likely focus on a speech from ECB President Christine Lagarde at the Council of Foreign Relations in New York, due later in the day. In corporate news, shares of Network International (NETW.LN) jumped over +18% after the payments provider received a takeover proposal from CVC Capital Partners and Francisco Partners. 

Italy’s CPI was released today.

The Italian March CPI came in at -0.4% m/m and +7.6% y/y, weaker than expectations of -0.3% m/m and +7.7% y/y.

Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +1.42%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.07%.

China’s Shanghai Composite today closed sharply higher and hit a 9-month high after the People’s Bank of China maintained its 1-year medium-term lending facility operation unchanged at 2.75%, keeping monetary policy steady ahead of data on retail sales, industrial output, and gross domestic product due on Tuesday. Also, official data showed on Saturday that China’s March new home prices rose at the fastest pace in 21 months, supporting consumer demand and confidence. In addition, shares of China Quanjude Group rose over +1% after the restaurant operator reported a 49% increase in sales during the January-March period and turned to a profit, highlighting consumption recovery. Meanwhile, investors continued to buy China’s state-owned companies on reform hopes, with China Mobile climbing more than +4%.

“The stock market is expected to trend higher on the back of economic recovery and expectations of improving liquidity situations overseas,” Guotai Asset Management Co said in a note.

Japan’s Nikkei 225 Stock Index eked out a small gain, ending higher for a seventh straight session as the yen’s weakness boosted export-oriented stocks, while bank stocks tracked the Friday’s strong performance of their U.S. peers. However, a more than -2% drop in shares of Uniqlo brand owner Fast Retailing limited gains in the benchmark index. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 0.67% to 16.60.

Pre-Market U.S. Stock Movers

Prometheus Biosciences Inc (RXDX) surged over +70% in pre-market trading after Merck (MRK) agreed to acquire a clinical-stage biotech focused on immunology for $200.00 per share in cash.

Satsuma Pharmaceuticals Inc (STSA) spiked about +148% in pre-market trading after the company agreed to be acquired by Shin Nippon Biomedical Laboratories for $0.91 in cash per share at the closing of the transaction plus one non-tradeable contingent value right of up to $5.77 per share.

Xpeng Inc (XPEV) climbed more than +11% in pre-market trading after the Chinese electric vehicle maker unveiled Sunday a new platform for making vehicles that would reduce the development and manufacturing costs for its upcoming models.

Stem Inc (STEM) rose over +3% in pre-market trading after BMO Capital initiated coverage on the stock with a market perform rating.

PENN Entertainment Inc (PENN) fell more than -1% in pre-market trading after JMP Securities downgraded the stock to market perform from outperform.

Biogen Inc (BIIB) rose over +1% in pre-market trading after Piper Sandler upgraded the stock to overweight from neutral.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Monday - April 17th

Charles Schwab (SCHW), State Street (STT), M&T Bank (MTB), JB Hunt (JBHT), Shaw B (SJR), Equity Lifestyle (ELS), GAP ADR (PAC), Freedom (FRHC), Pinnacle (PNFP), Hysan Development Co (HYSNY), ServisFirst Bancshares (SFBS), FB Financial (FBK), Riley Exploration Permian (REPX), Indus Realty Trust (INDT), CrossFirst Bankshares (CFB), CNB Financial (CCNE), Guaranty Bancshares (GNTY), BayCom (BCML), Lifecore Biomedical (LFCR), Bed Bath & Beyond (BBBY), AMCON Distributing (DIT).

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