Stock Index Futures Tick Higher as Investors Shift Focus to Earnings

March S&P 500 E-Mini futures (ESH24) are up +0.05%, and March Nasdaq 100 E-Mini futures (NQH24) are up +0.08% this morning as market participants looked ahead to the next round of corporate earnings, with the spotlight on results from U.S. streaming leader Netflix.

In Monday’s trading session, Wall Street’s major indices ended in the green, with the benchmark S&P 500, the blue-chip Dow, and the tech-heavy Nasdaq 100 notching new record highs. Western Digital Corporation (WDC) climbed over +4% after Morgan Stanley designated the stock as a top pick among U.S. semiconductor stocks and raised its price target on the stock to $73 from $52. Also, SolarEdge Technologies Inc (SEDG) rose about +4% 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. In addition, NuStar Energy LP (NS) soared over +18% after Sunoco agreed to acquire the company in an all-stock deal valued at about $7.3 billion, including assumed debt. On the bearish side, Gilead Sciences Inc (GILD) tumbled more than -10% and was the top percentage loser on the Nasdaq 100 following the biopharma company’s announcement of disappointing results from a late-stage trial for Trodelvy, a drug used to treat metastatic non-small cell lung cancer. Also, Advanced Micro Devices (AMD) slid over -3% after Northland Securities downgraded the stock to Market Perform from Outperform.

“The equity rally we are seeing is based on the soft-landing scenario that’s being priced. If the economy does well, then why would you sell equities? And the counterfactual for equity markets is that if things do weaken, they will get rate cuts,” said Charles Diebel at Mediolanum International Funds. 

Economic data on Monday showed that the U.S. leading economic index fell -0.1% m/m in December, a smaller decline than expectations of -0.3% m/m.

Meanwhile, U.S. rate futures have priced in a 2.6% chance of a 25 basis point rate cut at the next central bank meeting in January and a 42.4% probability of a 25 basis point rate cut at the March FOMC meeting.

Fourth-quarter earnings season is gathering pace, with investors awaiting fresh reports from major global companies today, including Netflix (NFLX), J&J (JNJ), Procter&Gamble (PG), Texas Instruments (TXN), Lockheed Martin (LMT), and 3M (MMM).

On the economic data front, investors will likely focus on the U.S. Richmond Manufacturing Index, due later in the day. Economists estimate January’s figure to be -7, compared to the previous number of -11.

In the bond markets, United States 10-year rates are at 4.132%, up +0.86%.

The Euro Stoxx 50 futures are down -0.27% this morning as investors exercised caution in anticipation of the European Central Bank’s policy meeting later this week. Healthcare and real estate stocks underperformed on Tuesday, while mining stocks gained ground. Meanwhile, investors await the European Central Bank’s monetary policy decision on Thursday to gain insights into the timing of potential interest rate cuts. While a pause in interest rate hikes is almost priced in for the upcoming meeting, traders are expecting cuts of approximately 130 basis points this year, with an almost 97% likelihood of the first reduction occurring in June. In corporate news, Swatch Group Ag/The (UHR.Z.IX) fell over -2% after the world’s biggest watchmaker reported weaker-than-expected 2023 results. At the same time, Schindler Holding Ag (SCHP.Z.IX) gained more than +2% after Jefferies upgraded the stock to Buy from Hold.

The European economic data slate is mainly empty on Tuesday.

Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.53%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.08%.

China’s Shanghai Composite Index closed higher today on news of a new market rescue package. New energy stocks outperformed on Tuesday. Tech giants and mainland developers listed in Hong Kong also surged. Premier Li Qiang chaired a cabinet meeting on Monday, during which officials signaled their intention to implement more forceful and effective measures to stabilize market confidence. Bloomberg News reported on Tuesday that Chinese authorities are looking to mobilize roughly 2 trillion yuan ($278 billion), primarily from the offshore accounts of Chinese state-owned enterprises, as part of a stabilization fund to buy shares onshore through the Hong Kong exchange link. Chinese officials have also allocated a minimum of 300 billion yuan of local funds to invest in onshore shares through China Securities Finance Corp. or Central Huijin Investment Ltd., as reported by individuals familiar with the matter. Meanwhile, China’s gaming regulator, as indicated by checks conducted by Reuters on Tuesday, has removed rules it proposed last month from its website, which were intended to restrict spending and rewards that encourage playing video games. On the ground of this, NetEase Inc climbed about +6%, and Tencent Holdings Ltd rose more than +3%. In other news, Bloomberg News reported on Tuesday that China is broadening its ban on net stock selling from major mutual funds to some insurers. In corporate news, Hangzhou Oxygen Plant Group Co Ltd gained over +3% after revealing its intention to invest 110 million yuan in a new air separation unit in China’s Shanxi province.

Japan’s Nikkei 225 Stock Index closed slightly lower today, erasing early gains as investors booked profits following the Bank of Japan’s widely anticipated decision to maintain its interest rates. Utilities and technology stocks led the declines on Tuesday, while healthcare and financial stocks outperformed. The BOJ kept its short-term rate at -0.1% and left its yield curve control parameters unchanged at the end of a two-day meeting. Also, the central bank cut its inflation forecast for the fiscal year beginning in April, lowering it from 2.8% to 2.4% in a quarterly outlook report, attributing the adjustment to recent declines in oil prices. Meanwhile, the yen extended its advance following BOJ Governor Kazuo Ueda’s remarks at a press conference, where he said that the certainty of achieving its projections has been gradually increasing, and he will consider ending negative rates if the price goal comes into view. That language aligns with the prevailing expectation among economists that the BOJ will increase rates at some point in the first part of this year. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -3.84% to 21.06.

Pre-Market U.S. Stock Movers

Vroom (VRM) plummeted about -42% in pre-market trading following the company’s announcement that it is discontinuing its e-commerce operations and winding down its used vehicle dealership business to preserve liquidity.

United Airlines Holdings Inc (UAL) climbed over +5% in pre-market trading after the Chicago-based airline company reported upbeat Q4 results and issued solid FY24 adjusted EPS guidance.

B. Riley Financial Inc (RILY) slumped more than -5% in pre-market trading following a report from Bloomberg that Brian Kahn is resigning as CEO of Franchise Group, a few months after B. Riley assisted in a leveraged buyout of the company. A separate Bloomberg report over the weekend indicated that the SEC is probing B. Riley regarding its connections to Kahn.

Coinbase Global Inc (COIN) slid more than -4% in pre-market trading after JPMorgan downgraded the stock to Underweight from Neutral with an unchanged price target of $80.

Sirius XM Holding Inc (SIRI) dropped over -3% in pre-market trading after Wells Fargo downgraded the stock to Underweight from Equal Weight with a price target of $4.50.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Tuesday - January 23rd

J&J (JNJ), Procter&Gamble (PG), Netflix (NFLX), Verizon (VZ), Texas Instruments (TXN), General Electric (GE), Intuitive Surgical (ISRG), Rtx Corp (RTX), Lockheed Martin (LMT), Canadian National Railway (CNI), 3M (MMM), DR Horton (DHI), PACCAR (PCAR), Baker Hughes (BKR), Halliburton (HAL), Steel Dynamics (STLD), Synchrony Financial (SYF), Logitech (LOGI), New Oriental Education&Tech (EDU), East West Bancorp (EWBC), Webster Financial (WBS), Invesco (IVZ), MakeMyTrip (MMYT), Old National Bancorp (ONB), GATX (GATX), Community Bank System (CBU), Atlantic Union (AUB), Stride (LRN), NBT Bancorp (NBTB), Renasant (RNST), Triumph Bancorp (TFIN), WesBanco (WSBC), Forestar (FOR), Trustmark (TRMK), First Busey (BUSE), National Bank Holdings (NBHC), Veritex Holdings Inc (VBTX), Peoples Bancorp (PEBO), QCR (QCRH), Premier Financial (PFC), Covenant (CVLG), Business First (BFST), Hanmi (HAFC).

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