Stocks Set to Open Higher as Investors Await Key U.S. Inflation Data and Corporate Earnings

March S&P 500 E-Mini futures (ESH24) are up +0.27%, and March Nasdaq 100 E-Mini futures (NQH24) are up +0.58% this morning, pointing to a continuation of the recent tech-inspired rally, while market participants braced for a flurry of earnings reports from global industry leaders, central bank meetings, and the release of the Fed’s favorite inflation gauge later in the week.

In Friday’s trading session, Wall Street’s major averages closed higher, with the benchmark S&P 500, the blue-chip Dow, and the tech-heavy Nasdaq 100 notching all-time highs. The Travelers Companies Inc (TRV) climbed over +6% and was the top percentage gainer on the Dow after the insurer’s Q4 earnings topped Wall Street expectations. Also, chip stocks soared for a second day after Taiwan Semiconductor Manufacturing Co. provided a strong revenue outlook for this year, with Advanced Micro Devices Inc (AMD) surging more than +7% and NVIDIA Corporation (NVDA) rising over +4%. In addition, Schlumberger NV (SLB) advanced more than +2% after the company reported upbeat Q4 results. On the bearish side, iRobot Corporation (IRBT) tumbled about -27% 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.

Economic data on Friday showed that the University of Michigan’s gauge of consumer sentiment rose to a 2-1/2 year high of 78.8 in January, stronger than expectations of 70.0. Also, the University of Michigan’s January year-ahead inflation expectations unexpectedly fell to a 3-year low of 2.9%, better than expectations of 3.1%, while 5-year inflation expectations unexpectedly fell to 2.8% in January from 2.9% in December. At the same time, existing home sales unexpectedly fell -1.0% m/m to a 13-year low of 3.78M in December, missing the consensus estimate of 3.82M.

“After a more than two-year wait, the stock market hit a new record high. Easing inflation pressures and the prospect of both lower interest rates and a soft economic landing have stoked investors’ appetite for risk,” said Greg McBride at Bankrate. 

San Francisco Fed President Mary Daly stated Friday that it’s “premature” to think interest-rate cuts “are around the corner,” emphasizing the need for more evidence that inflation is on a consistent trajectory back to 2% before considering policy easing. “While I think it’s appropriate for us to look forward and ask when would policy adjustments be necessary so we don’t put a stranglehold on the economy, it’s really premature to think that that’s around the corner,” Daly said.

Meanwhile, U.S. rate futures have priced in a 2.1% chance of a 25 basis point rate cut at January’s policy meeting and a 44.2% probability of a 25 basis point rate cut at the March meeting.

Fourth-quarter earnings season kicks into full gear, and investors await fresh reports from major global companies this week, including Tesla (TSLA), Netflix (NFLX), J&J (JNJ), Procter&Gamble (PG), IBM (IBM), Visa A (V), Intel (INTC), 3M Company (MMM), and American Express (AXP).

On the economic data front, the December reading of the U.S. core personal consumption expenditures price index, the Fed’s preferred inflation gauge, will be the main highlight in the coming week. Also, market participants will be eyeing a spate of other economic data releases, including the U.S. GDP (preliminary), GDP Price Index (preliminary), Richmond Manufacturing Index, S&P Global Manufacturing PMI (preliminary), S&P Global Services PMI (preliminary), Crude Oil Inventories, Building Permits, Durable Goods Orders, Core Durable Goods Orders, Initial Jobless Claims, Wholesale Inventories (preliminary), New Home Sales, Personal Income, Personal Spending, and Pending Home Sales.

Today, investors will likely focus on the U.S. Leading Index. Economists, on average, forecast that the December leading economic index will stand at -0.3% m/m, compared to the previous value of -0.5% m/m.

In the bond markets, United States 10-year rates are at 4.121%, down -0.63%.

The Euro Stoxx 50 futures are up +0.60% this morning, extending the rally in global equities that propelled the benchmark S&P 500 to a record high on Friday, while investors await the European Central Bank’s policy decision scheduled for later this week. Gains in bank, real estate, and technology stocks are leading the overall market higher. Meanwhile, the European Central Bank holds its first policy meeting of 2024 on Thursday, with investors awaiting clear signals from the central bank regarding the timing of interest rate cuts. In corporate news, Kindred Group Plc (KIND.S.DX) surged over +16% following an offer from French gambling group La Francaise des Jeux SA to acquire the Swedish company for 27.95 billion kronor ($2.7 billion). Also, Asml Holding (ASML.NA) gained more than +2% after Bernstein upgraded the stock to Outperform from Market Perform.

The European economic data slate is mainly empty on Monday.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -2.68% and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.62%.

China’s Shanghai Composite Index closed sharply lower today, extending its decline to a new multi-year low as the absence of new economic stimulus and market support measures intensified investor pessimism. China kept benchmark lending rates unchanged at the monthly fixing on Monday, following the central bank’s decision to keep its medium-term policy rate unchanged last week. The one-year loan prime rate remained at 3.45%, while the five-year LPR held steady at 4.20%. While the decision was in line with market expectations, it did not meet the expectations of some investors who were anticipating additional policy-easing measures to address economic concerns. Meanwhile, Morgan Stanley reported that foreign funds have sold approximately $1.6 billion in Chinese equities collectively since the beginning of this year, driven mainly by European active funds and Hong Kong passive money. In corporate news, STO Express Co Ltd slid over -4% after the Chinese logistics services provider reported a slowdown in the year-over-year growth pace of express logistics revenue for December.

Japan’s Nikkei 225 Stock Index closed higher today and hit a new 34-year high, supported by gains in tech stocks, while investors eagerly awaited the outcome of the Bank of Japan’s two-day monetary policy meeting. All sectors of the Nikkei 225 ended in the green, with real estate and technology stocks experiencing the largest gains. Meanwhile, the BOJ kicked off its two-day monetary policy meeting today, and the announcement of its monetary policy decision is scheduled for Tuesday. The BOJ is anticipated to leave its main monetary policy settings unchanged, and investors will be closely watching how Governor Kazuo Ueda evaluates the progress made toward achieving sustainable inflation, a key factor for ending the negative interest rate. In corporate news, Yamaha Motor Co Ltd climbed over +6% after announcing a deal to acquire electric motor manufacturer Torqeedo from Germany’s Deutz AG. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +5.95% to 21.90.

Pre-Market U.S. Stock Movers

Boeing Co (BA) dropped more than -2% in pre-market trading after the U.S. Federal Aviation Administration recommended door plug inspections for an additional 737-900ER model.

Macy’s Inc (M) gained over +2% in pre-market trading after the company rejected a $21 a share takeover offer from investment firms Arkhouse Management and Brigade Capital Management, citing concerns over deal financing and valuation.

SolarEdge Technologies Inc (SEDG) climbed more than +7% in pre-market trading following a report from Calcalist stating that the company intends to lay off 900 employees, representing about 16% of its total workforce, including 550 workers in Israel.

Archer-Daniels-Midland Company (ADM) plunged over -8% in pre-market trading after the company placed CFO Vikram Luthar on administrative leave pending an investigation into certain accounting practices and procedures related to its nutrition segment following a document request from the Securities and Exchange Commission. The company said it expects to delay the release of Q4 earnings and the filing of its annual report on Form 10-K for FY23 while also withdrawing guidance for the nutrition unit.

StoneCo Ltd (STNE) rose more than +3% in pre-market trading after Goldman Sachs upgraded the stock to Buy from Neutral with a price target of $21.

Toll Brothers Inc (TOL) fell about -0.9% in pre-market trading after Seaport Research downgraded the stock to Neutral from Buy.

American Airlines Group (AAL) advanced over +1% in pre-market trading after Wolfe Research upgraded the stock to Outperform from Peer Perform.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Monday - January 22nd

Brown&Brown (BRO), United Airlines Holdings (UAL), AGNC Invest (AGNC), Zions (ZION), Bank of Hawaii (BOH), Independent Bank Group (IBTX), Agilysys (AGYS), Enterprise Financial (EFSC), Karooooo (KARO), Great Southern Bancorp (GSBC), CrossFirst Bankshares (CFB), TrustCo Bank NY (TRST), SmartFinancial Inc (SMBK), RBB Bancorp (RBB), Home Bancorp (HBCP).

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