Markets Today: Stocks Mixed on a Bleak Earnings Forecast from Intel

Morning Markets

March E-Mini S&P 500 futures (ESH24) are up +0.09%, and March Nasdaq 100 E-Mini futures (NQH24) are down -0.16%. 

Stock index futures this morning are mixed.  Weakness in chip stocks is weighing on Nasdaq futures on a bleak earnings forecast from Intel, which is down more than -11% in pre-market trading. Also, KLA Corporation is down more than -3% after forecasting weaker-than-expected Q3 adjusted EPS.  However, stock index futures recovered most of their losses, with S&P futures climbing into positive territory, as bond yields fell after the U.S. Dec PCE core deflator, the Fed's preferred measure of inflation, rose at the slowest pace in 2-3/4 years, a dovish factor for Fed policy.

On the positive side, American Express is up more than +3% in pre-market trading after forecasting better-than-expected 2024 EPS.  Also, Booz Allen Hamilton Holding Corp is up more than +4% after reporting Q3 adjusted EPS above consensus and raising its 2024 adjusted EPS estimate.

U.S. Dec personal spending rose +0.7% m/m, stronger than expectations of +0.5% m/m, while Nov was revised higher to up +0.4% m/m from +0.2% m/m. 

The U.S. Dec PCE core deflator, the Fed's preferred measure of inflation, eased to +2.9% y/y from +3.2% y/y in Nov, better than expectations of +3.0% y/y and the slowest pace of increase in 2-3/4 years. 

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 -0.8 bp at 4.110%.  The 10-year German bund yield fell to a 1-/2 week low of 2.239% and is down -0.4 bp at 2.1865%.  The 10-year UK gilt yield is down -2.2 bp at 3.9615%.  

Overseas stock markets are mixed.  The Euro Stoxx 50 is up +1.01%.  China’s Shanghai Composite Index closed up +0.14%.  Japan’s Nikkei Stock Index closed down -1.34%.

The Euro Stoxx 50 rallied to a 23-year high today and is moderately higher.  Strength in luxury stocks is leading the overall market higher, with LVMH surging more than +10% after reporting stronger-than-expected Q4 sales.  Other European luxury stocks rallied as well after Barclays Plc upgraded their recommendation on the sector.  A decline in European government bond yields is also supportive for stocks as the 10-year German bund yield fell to a 1-1/2 week low.  On the negative side, German Feb GfK consumer confidence unexpectedly fell to an 11-month low.

ECB Governing Council member Kazaks said while interest rates "should start to go down," barring any major shocks, the gravest error the ECB could make would be a premature easing that allows inflation to bounce back.

Eurozone Dec M3 money supply unexpectedly rose +0.1% y/y, stronger than expectations of -0.7% y/y and the first increase in six months.

German Feb GfK consumer confidence unexpectedly fell -4.3 to an 11-month low of -29.7, weaker than expectations of an increase to -24.6.

Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 19% for its next meeting on March 75 and at 89% for the following meeting on April 11.

China’s Shanghai Composite Index today climbed to a 2-1/2 week high and closed slightly higher.  Chinese stocks moved higher today after the PBOC unveiled broad plans to put money into sectors of national importance to boost the economy.  The PBOC will set up a new credit market department to promote financing to technology, green, and other sectors and will also cut the interest rate on more than 2 trillion yuan ($279 billion) of low-cost funds for banks, a move intended to encourage more lending.  However, the Shanghai Composite fell back from its best levels as technology stocks tumbled on the threat of possible sanctions by the U.S.  WuXi AppTec sank 32%, and WuXi Biologics plunged 28% on a proposal by U.S. lawmakers to ban the medical technology companies due to their ties to the Chinese Communist Party. 

Money poured into Chinese stocks over the past week as Bank of America reported that a total of $11.9 billion was allocated to Chinese stocks in the week through January 24, the second-highest weekly total ever, citing EPFR data. 

Japan’s Nikkei Stock Index today fell to a 1-week low and closed moderately lower.  Strength in the yen weighed on exporter stocks. Also, Japanese chip stocks retreated on Intel’s lower-than-expected earnings outlook.  Japanese stocks were also under pressure after the minutes of the December 18-19 BOJ meeting showed policymakers deepened their discussions over the timing of an exit of negative interest rates.  On the positive side, government bond yields fell as price pressures in Japan eased after the Tokyo Jan CPI rose at the slowest pace in 22 months.

The Japan Nov leading index CI was revised lower by -0.1 to a 3-year low of 107.6 from the previously reported 107.7.

Tokyo Jan CPI eased to +1.6% y/y from +2.4% y/y in Dec, weaker than expectations of +2.0% y/y and the slowest pace of increase in 22 months.

Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 34% for its next meeting on March 19 and at 70% for the following meeting on April 26.

Pre-market U.S. Stock Movers

Intel (INTC) sank more than -11% in pre-market trading after forecasting Q1 adjusted revenue of $12.2 billion-$13.2 billion, well below the consensus of $14.25 billion. 

KLA Corporation (KLAC) tumbled more than -3% in pre-market trading after forecasting Q3 adjusted EPS of $4.66-$5.86, the midpoint below the consensus of $5.83. 

Visa (V) dropped more than -2% in pre-market trading after reporting Q1 total processed transactions of $57.50 billion, below the consensus of $57.77 billion. 

Norfolk Southern (NSC) fell more than -1% in pre-market trading after reporting Q4 adjusted EPS of $2.83, weaker than the consensus of $2.87.  

T-Mobile US (TMUS) fell more than -1% in pre-market trading after reporting Q4 total net customers of 1.62 million, below the consensus of 1.72 million.

Western Digital (WDC) tumbled more than -3% in pre-market trading even after reporting better-than-expected Q2 earnings results after Morgan Stanley said it expected more upside. 

L3Harris Technologies (LHX) fell more than -2% in pre-market trading after forecasting 2024 adjusted EPS of $12.40-$12.80, weaker than the consensus of $13.06. 

American Express (AXP) climbed more than +3% in pre-market trading after forecasting 2024 EPS of $12.65-$13.15, stronger than the consensus of $12.40.

Snap (SNAP) rose more than +2% in pre-market trading after Deutsche Bank upgraded the stock to buy from neutral. 

Estee Lauder (EL) rose more than +2% in pre-market trading on positive carryover from a +10% jump in LVMH, which reported stronger-than-expected Q4 sales.

Booz Allen Hamilton Holding Corp (BAH) climbed more than +4% in pre-market trading after reporting Q3 adjusted EPS of $1.41, above the consensus of $1.14, and raised its 2024 adjusted EPS to $5.25-$5.40 from a previous forecast of $4.95-$5.10, stronger than the consensus of $5.05. 

Autoliv (ALV) rose more than +3% in pre-market trading after reporting Q4 sales of $2.75 billion, better than the consensus of $2.73 billion.

Earnings Reports (1/26/2024)

American Express Co (AXP), Archer-Daniels-Midland Co (ADM), Booz Allen Hamilton Holding Co (BAH), Colgate-Palmolive Co (CL), First Citizens BancShares Inc/ (FCNCA), First Hawaiian Inc (FHB), Fortrea Holdings Inc (FTRE), Gentex Corp (GNTX), Norfolk Southern Corp (NSC), TFS Financial Corp (TFSL).

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