Morning Markets
March E-Mini S&P 500 futures (ESH24) are up +0.35%, and March Nasdaq 100 E-Mini futures (NQH24) are up +0.46%.Â
Stock index futures this morning are moderately higher as prospects for a U.S. soft landing improved. U.S. Q4 GDP grew more than expected, powered by strength in consumer spending. Also, the Q4 core PCE price index was unchanged from Q3, signaling tame price pressures.  In addition, weekly jobless claims rose more than expected, a dovish factor for Fed policy.Â
Some better-than-expected corporate earnings results also boosted stock index futures, with International Business Machines up more than +6% in pre-market trading after reporting stronger-than-expected Q4 operating EPS. Also, American Airlines Group is up more than +4% after forecasting 2024 adjusted EPS above consensus.
Conversely, Tesla is down more than -7% in pre-market trading after reporting weaker-than-expected Q4 adjusted EPS and saying 2024 vehicle growth volume may be notably lower than 2023. Also, health insurers are moving lower, led by a -13% fall in Humana after forecasting 2024 adjusted EPS well below the consensus and saying it was withdrawing its 2025 earnings target.
U.S. weekly initial unemployment claims rose +25,000 to 214,000, showing a weaker labor market than expectations of 200,000.
U.S. Q4 GDP grew at a +3.3% (y/y annualized) pace, stronger than expectations of +2.0%. Q4 personal consumption grew +2.8%, stronger than expectations of +2.5%. The Q4 core PCE price index was unchanged at +2.0% from Q3, right on expectations.
U.S. Dec capital goods new orders ex-aircraft and parts, a proxy for capital spending, rose +0.3% m/m, stronger than expectations of +0.1% m/m.
The markets are discounting the chances for a -25 bp rate cut at 3% at the next FOMC meeting on Jan 30-31 and 47% for that same -25 bp rate cut for the following meeting on March 19-20.
U.S. and European government bond yields today are lower. The 10-year T-note yield is down -2.7 bp at 4.149%. The 10-year German bund yield fell back from a 7-week high of 2.372% and is down -1.7 bp at 2.325%. The 10-year UK gilt yield fell back from a 6-week high of 4.065% and is down -1.5 bp at 3.995%. Â
Overseas stock markets are higher. The Euro Stoxx 50 is up +0.11%. China’s Shanghai Composite Index closed up +3.03%. Japan’s Nikkei Stock Index closed up +0.03%.
The Euro Stoxx 50 today recovered from early losses and is slightly higher at a 3-week high. European stocks are climbing on carryover strength from gains in U.S. stock index futures after U.S. Q4 GDP grew more than expected. European stocks today initially moved lower on weakness in technology stocks, led by a -5% fall in STMicroelectronics after the chipmaker’s 2024 revenue and gross margin forecasts were below consensus.  Also, economic concerns undercut stocks after the German Jan IFO business climate unexpectedly fell to a 3-1/2 year low.
The ECB, as expected, kept its deposit facility rate unchanged at 4.00% and said the rate level must be maintained for a sufficiently long time to ensure inflation returns to 2% in a timely way.
The German Jan IFO business climate unexpectedly fell -1.1 to a 3-1/2 year low of 85.2, weaker than expectations of an increase to 86.6.
Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 16% for its next meeting on March 75 and at 73% for the following meeting on April 11.
China’s Shanghai Composite Index today soared to a 2-1/2 week high and closed sharply higher. Chinese stocks rallied sharply today on positive carryover from Wednesday when the PBOC cut the reserve requirement ratio for banks by 50 bp to 10.00%. State-owned enterprises led the overall market higher, with PetroChina, China Coal Energy, China Unicom, and China Communication Construction up 10% each. Chinese property stocks also rallied today after regulators rolled out more support by easing rules on their use of loans. The PBOC and the National Financial Regulatory Administration will allow bank loans pledged against developers’ commercial properties to be used to repay other loans and bonds.Â
Foreign buying of Chinese shares also supported today’s rally as foreign investors bought 6.3 billion yuan ($879 million) of onshore Chinese equities, the most in nearly a month.
Japan’s Nikkei Stock Index today recovered from early losses and closed slightly higher. Japanese stocks garnered support today on hopes that additional stimulus measures by China will revive its economic growth, which would support Japanese exporters as China is Japan’s largest trading partner. Japanese shipping stocks also rallied today after Nomura raised price targets on three shipping firms. In addition, Japanese semiconductor stocks rose today after positive earnings reports from ASML Holding NV and Lam Research. Japanese stocks today initially moved lower as higher government bond yields weighed on stocks after the 10-year JGB bond yield rose to a 6-week high at 0.751%.Â
Japan Dec machine tool orders were revised upward by +0.3 to -9.6% y/y from the previously reported -9.9% y/y.
Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 19% for its next meeting on March 19 and at 76% for the following meeting on April 26.
Pre-market U.S. Stock Movers
American Airlines Group (AAL) climbed more than +4% in pre-market trading after forecasting 2024 adjusted EPS of $2.25-$3.25, well above the consensus of $2.22.Â
International Business Machines (IBM) jumped more than +6% in pre-market trading after reporting Q4 operating EPS of $3.87, above the consensus of $3.76.Â
Paramount Global (PARA) rose more than +3% in pre-market trading after Bloomberg reported that David Ellison made an offer to buy National Amusements, the holding company that controls 77% of the voting stock in Paramount.
Comcast (CMCSA) rose more than +2% in pre-market trading after reporting Q4 revenue of $31.25 billion, better than the consensus of $30.42 billion.
Las Vegas Sands (LVS) climbed more than +2% in pre-market trading after reporting Q4 net revenue of $2.92 billion, above the consensus of $2.89 billion.Â
Blackstone (BX) rose more than +3% in pre-market trading after reporting Q4 assets under management of $1.04 trillion, better than the consensus of $1.02 trillion.Â
Tesla (TSLA) tumbled more than 7% in pre-market trading after reporting Q4 adjusted EPS of 71 cents, below the consensus of 73 cents, and said 2024 vehicle growth volume may be notably lower than 2023.
Boeing (BA) fell more than -2% in pre-market trading after the U.S. Federal Aviation Administration (FAA) halted planned increases in production of Boeing’s 737 Max airliner.Â
Humana (HUM) sank more than -13% in pre-market trading after forecasting 2024 adjusted EPS of about $16.00, well below the consensus of $29.18, and said it was withdrawing its 2025 earnings target. Other health insurers fell on the news, with UnitedHealth Group (UNH), Centene (CNC), Cigna Group (CI), and Elevance Health (ELV) down more than -3%.Â
Sherwin-Williams (SHW) tumbled more than -4% in pre-market trading after forecasting 2024 adjusted EPS of $10.85-$11.35, well below the consensus of $11.41.Â
Northrop Grumman (NOC) dropped more than -4% in pre-market trading after forecasting 2024 sales of $40.80 billion-$41.20 billion, the midpoint below the consensus of $41.15 billion.
VF Corp (VFC) fell more than -2% in pre-market trading after Williams Trading downgraded the stock to sell from hold with a price target of $13. Â
Earnings Reports (1/25/2024)
American Airlines Group Inc (AAL), Arthur J Gallagher & Co (AJG), Blackstone Inc (BX), Capital One Financial Corp (COF), Comcast Corp (CMCSA), Dow Inc (DOW), Fair Isaac Corp (FICO), Humana Inc (HUM), Intel Corp (INTC), KLA Corp (KLAC), L3Harris Technologies Inc (LHX), Marsh & McLennan Cos Inc (MMC), McCormick & Co Inc/MD (MKC), NextEra Energy Inc (NEE), Northrop Grumman Corp (NOC), Sherwin-Williams Co/The (SHW), Southwest Airlines Co (LUV), T-Mobile US Inc (TMUS), Union Pacific Corp (UNP), Valero Energy Corp (VLO), Visa Inc (V), Western Digital Corp (WDC), Weyerhaeuser Co (WY), Xcel Energy Inc (XEL).
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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.
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