March S&P 500 E-Mini futures (ESH24) are up +0.42%, and March Nasdaq 100 E-Mini futures (NQH24) are up +0.73% this morning as the tech-inspired global rally continued, with investors awaiting more U.S. economic data and a speech from a Federal Reserve official.
In Thursday’s trading session, Wall Street’s major averages ended in the green, with the tech-heavy Nasdaq 100 rising to a new record high. Fastenal Company (FAST) climbed over +7% and was the top percentage gainer on the S&P 500 and Nasdaq 100 after the company reported upbeat Q4 results. Chip stocks also advanced after Taiwan Semiconductor Manufacturing issued strong revenue guidance for 2024, with Applied Materials Inc (AMAT) and Lam Research Corp (LRCX) rising more than +4%. In addition, Apple Inc (AAPL) gained over +3% after BofA Global Research upgraded the stock to Buy from Neutral with a price target of $225. On the bearish side, Discover Financial Services (DFS) tumbled more than -10% and was the top percentage loser on the S&P 500 after reporting mixed Q4 results. Also, Humana Inc (HUM) plunged about -8% after the company lowered its 2023 adjusted earnings outlook.
The Labor Department’s report on Thursday showed claims for state unemployment benefits unexpectedly fell -16K to a 16-month low of 187K last week, stronger than expectations of 207K. Also, the U.S. Philly Fed’s gauge of manufacturing activity stood at -10.6 in January, weaker than expectations of -7.0. In addition, U.S. December building permits, a proxy for future construction, rose +1.9% m/m to 1.495M, stronger than expectations of 1.480M. Finally, U.S. housing starts fell -4.3% m/m to 1.460M in December, stronger than expectations of 1.426M.
“The story this week continues to be robust economic data and how it may keep rate cuts on ice for a while. Until we start to consistently see softer numbers, especially in the labor market, the Fed will likely stick to its higher-for-longer stance,” said Chris Larkin at E*Trade from Morgan Stanley.
Atlanta Fed President Raphael Bostic said on Thursday that he doesn’t expect the Federal Reserve to commence interest rate cuts until the third quarter of this year. However, he added that “if we continue to see a further accumulation of downside surprises in the data, it’s possible for me to get comfortable to advocate normalization sooner than the third quarter. But the evidence would need to be convincing.”
Meanwhile, U.S. rate futures have priced in a 2.6% chance of a 25 basis point rate cut at the January FOMC meeting and a 53.8% probability of a 25 basis point rate cut at the March FOMC meeting.
In other news, U.S. Congress cleared a temporary spending bill to fund the government until early March, preventing a partial government shutdown this weekend and providing additional time for lawmakers to hammer out funding bills for the fiscal year that commenced in October.
On the earnings front, notable companies like Schlumberger (SLB), Ally Financial (ALLY), Comerica (CMA), Fifth Third (FITB), Travelers (TRV), Regions Financial (RF), and State Street (STT) are set to report their quarterly results today.
Today, all eyes are focused on U.S. Existing Home Sales data in a couple of hours. Economists, on average, forecast that December Existing Home Sales will stand at 3.82M, compared to the previous value of 3.82M.
The U.S. Michigan Consumer Sentiment preliminary reading will be reported today as well. Economists foresee this figure to stand at 70.0 in January, compared to December’s number of 69.7.
In addition, investors will likely focus on a speech from San Francisco Fed President Mary Daly for additional insights into the timing and extent of rate cuts this year.
In the bond markets, United States 10-year rates are at 4.140%, down -0.10%.
The Euro Stoxx 50 futures are up +0.27% this morning, though the index remained on course for a weekly loss as investors scaled back their rate-cut expectations following hawkish remarks from policymakers. Gains in technology and financial stocks are leading the overall market higher. The Office for National Statistics reported on Friday that U.K. retail sales fell much more than anticipated in December from November, marking the most significant decline in nearly three years. At the same time, data showed on Friday that German producer prices experienced a larger-than-anticipated decline in December. In corporate news, Temenos Ag (TEMN.Z.IX) climbed over +4% after the software maker reported preliminary Q4 and FY23 results that topped analysts’ expectations. Also, Teleperformance (TEP.FP) advanced more than +6% after Stifel upgraded the stock to Buy from Hold.
U.K.’s Core Retail Sales, U.K.’s Retail Sales, and Germany’s PPI data were released today.
U.K. December Core Retail Sales stood at -3.3% m/m and -2.1% y/y, weaker than expectations of -0.6% m/m and +1.3% y/y.
U.K. December Retail Sales came in at -3.2% m/m and -2.4% y/y, weaker than expectations of -0.5% m/m and +1.1% y/y.
The German December PPI arrived at -1.2% m/m and -8.6% y/y, weaker than expectations of -0.5% m/m and -8.0% y/y.
Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.47% and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.40%.
China’s Shanghai Composite Index closed lower today as persistent policy uncertainties and economic concerns continued to exert downward pressure on investor sentiment. Coal and photovoltaic stocks led the declines on Friday. Tech giants and mainland developers listed in Hong Kong also slipped. At the same time, stocks linked to Apple’s supply chain advanced, with Foxconn Industrial Internet Co Ltd rising over +3% and Luxshare Precision Industry Co Ltd gaining more than +2%. Meanwhile, Bloomberg News reported on Friday that Citic Securities Co., China’s largest brokerage, suspended short selling for certain clients in mainland markets amid a deepening rout in the nation’s stocks. The state-owned asset manager stopped lending stocks to individual investors and increased the requirements for institutional clients earlier this week following so-called window guidance from regulators, according to the Bloomberg report. In other news, fund manager Value Partners anticipates a recovery in China’s economy commencing in the second quarter of this year. “We expect the market to be bottoming, with some funds starting to reposition for a U-shape rebound this year,” said Kelly Chung, investment director at Value Partners.
Japan’s Nikkei 225 Stock Index closed higher today as investors digested the latest inflation reading and geared up for the Bank of Japan’s two-day monetary policy meeting early next week. Chip-related stocks outperformed on Friday, mirroring overnight gains of U.S. counterparts after Taiwan Semiconductor Manufacturing Co.’s outlook boosted hopes for a global recovery in the sector, with Advantest Corp surging over +8% and Tokyo Electron Ltd climbing more than +6%. Meanwhile, data showed on Friday that Japan’s core inflation decelerated for a second consecutive month in December. On the ground of this, the yen continued its slide to a new 7-week low against the dollar as expectations grew that the Bank of Japan would maintain its current monetary policy stance next week. In corporate news, Rakus Co Ltd climbed over +7% after the company revealed that its consolidated sales rose more than 43% year-over-year to 3.45 billion yen in December 2023. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +1.08% to 20.67.
The Japanese December National Core CPI stood at +2.3% y/y, in line with expectations.
Pre-Market U.S. Stock Movers
Chip stocks extended yesterday’s gains in pre-market trading, with Advanced Micro Devices Inc (AMD) and Intel Corporation (INTC) rising more than +1%.
Super Micro Computer Inc (SMCI) soared over +12% in pre-market trading after the maker of information technology hardware raised its Q2 revenue and profit guidance.
Silk Road Medical Inc (SILK) climbed more than +6% in pre-market trading after Stifel upgraded the stock to Buy from Hold with a price target of $20.
iRobot Corporation (IRBT) plummeted about -36% in pre-market trading following a report from the Wall Street Journal indicating that the European antitrust regulator is anticipated to block its planned $1.7 billion sale to Amazon.
Chegg Inc (CHGG) slid over -3% in pre-market trading after Goldman Sachs downgraded the stock to Sell from Neutral with a price target of $8.
Broadcom Inc (AVGO) rose more than +1% in pre-market trading after Goldman Sachs reinstated coverage of the stock with a Buy rating and a $1,325 price target.
Texas Instruments Incorporated (TXN) gained about +2% in pre-market trading after UBS upgraded the stock to Buy from Neutral with a price target of $195.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Friday - January 19th
Schlumberger (SLB), Travelers (TRV), State Street (STT), Fifth Third (FITB), Huntington Bancshares (HBAN), Regions Financial (RF), Ally Financial Inc (ALLY), Comerica (CMA), World Acceptance (WRLD).
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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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