Morning Markets
March E-Mini S&P 500 futures (ESH24) are up +0.12%, and March Nasdaq 100 E-Mini futures (NQH24) are up +0.25%.
Stock index futures this morning are modestly higher on mixed corporate earnings results. Airline stocks are higher in pre-market trading after United Airlines Holdings reported stronger-than-expected Q4 adjusted EPS. Also, Verizon Communications is up more than +4% after forecasting 2024 adjusted EPS above consensus.
Conversely, 3M Co is down more than -7% in pre-market trading after forecasting 2024 adjusted EPS below consensus, and General Electric is down more than -3% after predicting weaker-than-expected Q1 profits.
The markets are discounting the chances for a -25 bp rate cut at 1% at the next FOMC meeting on Jan 30-31 and 43% for that same -25 bp rate cut for the following meeting on March 19-20.
U.S. and European government bond yields today are higher. The 10-year T-note yield is up +1.9 bp at 4.124%. The 10-year German bund yield is up +2.0 bp at 2.310%. The 10-year UK gilt yield is up +4.8 bp at 3.952%.
Overseas stock markets are mixed. The Euro Stoxx 50 is down -0.24%. China’s Shanghai Composite Index closed up +0.53%. Japan’s Nikkei Stock Index closed down -0.08%.
The Euro Stoxx 50 today is moderately lower. Weak corporate news is undercutting stocks, with Ericsson AB down -1% to lead telecom stocks lower after it warned that the market outside of China will continue to decline this year. Also, Swatch Group AG fell more than -3% after its full-year 2023 earnings results fell short of expectations. On the positive side, mining stocks rose after iron ore prices climbed more than +2% on the prospects for stronger Chinese demand after Chinese Premier Li Qiang called for more rigorous and effective measures to improve the economic recovery.
Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 2% for its next meeting on January 25 and at 17% for the following meeting on March 7.
China’s Shanghai Composite Index today recovered from a 3-3/4 year low and closed moderately higher. Short covering emerged in Chinese stocks today on the prospects of additional stimulus measures after Premier Li Qiang called for “forceful” steps to support the market. Also, Bloomberg reported that Chinese authorities are seeking to mobilize a stock rescue package of about 2 trillion yuan ($278 billion), mainly 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. They have also earmarked at least 300 billion yuan of local funds to invest in onshore shares through China Securities Finance Corp or Central Huijin Investment Ltd.
Japan’s Nikkei Stock Index today fell back from a nearly 34-year high and settled slightly lower. Stocks gave back early gains and moved lower as Japanese bond yields rose on expectations that the BOJ is moving closer to normalizing monetary policy. The 10-year JGB bond yield rose to a 1-month high of 0.677% after the BOJ maintained its policy rate at -0.1% and kept the 10-year JGB yield target at about 0%. However, BOJ Governor Ueda said certainty for the BOJ’s outlook is rising gradually, signaling the BOJ is moving closer to ending negative interest rates. Japanese stocks initially rose today after the BOJ raised its 2024 GDP forecast and cut its 2024 inflation forecast.
As expected, the BOJ voted 9-0 to maintain its policy rate at -0.1% and keep the 10-year JGB yield target at about 0%.
The BOJ raised its 2024 GDP forecast to +1.2% from a previous estimate of +1.0% and cut its 2024 core CPI estimate to 2.4% from 2.8%.
BOJ Governor Ueda said certainty in the BOJ's outlook is rising gradually, and policy will remain accommodating even if the BOJ ends negative rates.
Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 24% for its next meeting on March 19 and at 50% for the following meeting on April 26.
Pre-market U.S. Stock Movers
Airline stocks are climbing in pre-market trading, led by a +6% jump in United Airlines Holdings (UAL) after reporting Q4 adjusted EPS of $2.00, stronger than the consensus of $1.69. Also, American Air Lines Group (AAL), Delta Air Lines (DAL), and Southwest Airlines (LUV) are up more than +2%.
Verizon Communications (VZ) rose more than +4% in pre-market trading after forecasting 2024 adjusted EPS of $4.50-$4.70, the midpoint above the consensus of $4.58.
Western Digital (WDC) rose more than +3% in pre-market trading after Cantor Fitzgerald initiated coverage of the stock with a recommendation of overweight and a price target of $70
RTX Corp (RTX) climbed more than +3% in pre-market trading after reporting Q4 adjusted EPS of $1.29, better than the consensus of $1.24.
Brown & Brown (BRO) rose more than +2% in pre-market trading after reporting Q4 revenue of $1.03 billion, above the consensus of $987.6 million.
Zuora (ZUO) climbed more than +2% in pre-market trading after Goldman Sachs upgraded the stock to buy from neutral with a price target of $12.
U.S.-listed Chinese stocks are moving higher in pre-market trading after Bloomberg reported that Chinese authorities are considering a package of measures to stabilize the stock market. As a result, Alibaba Group Holding (BABA), Baidu (BIDU), JD.com (JD), NetEase (NTES), PDD Holdings (PDD), and Trip.com (TCOM) are up more than +1%.
3M Co (MMM) dropped more than -7% in pre-market trading after forecasting 2024 adjusted EPS of $9.35-$9.75, below the consensus of $9.81.
General Electric (GE) fell more than -3% in pre-market trading after forecasting Q1 adjusted EPS of 60 cents-65 cents, weaker than the consensus of 70 cents.
DR Horton (DHI) tumbled more than -7% in pre-market trading after reporting Q1 EPS of $2.82, weaker than the consensus of $2.89.
Alkami Technology (ALKT) slid more than -2% in pre-market trading after Goldman Sachs downgraded the stock to neutral from buy.
Invesco (IVZ) slid more than -2% in pre-market trading after reporting Q4 net flows unexpectedly fell -$8.3 billion, weaker than expectations of an increase of +$8.78 billion.
Coinbase Global (COIN) fell more than -4% in pre-market trading after JPMorgan Chase downgraded the stock to underweight from neutral with a price target of $80.
Earnings Reports (1/23/2024)
3M Co (MMM), Baker Hughes Co (BKR), DR Horton Inc (DHI), General Electric Co (GE), Halliburton Co (HAL), Intuitive Surgical Inc (ISRG), Invesco Ltd (IVZ), Johnson & Johnson (JNJ), Lockheed Martin Corp (LMT), Netflix Inc (NFLX), PACCAR Inc (PCAR), Procter & Gamble Co/The (PG), RTX Corp (RTX), Steel Dynamics Inc (STLD), Synchrony Financial (SYF), Texas Instruments Inc (TXN), Verizon Communications Inc (VZ).
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On the date of publication, Rich Asplund 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.
