March S&P 500 E-Mini futures (ESH24) are down -0.04%, and March Nasdaq 100 E-Mini futures (NQH24) are up +0.11% this morning as market participants braced for the Federal Reserve’s first monetary policy committee meeting of the year, a flurry of earnings reports from some of the biggest tech heavyweights, and the latest U.S. jobs report due later this week.
In Friday’s trading session, Wall Street’s major indexes closed mixed. Intel Corporation (INTC) plunged over -11% and was the top percentage loser on all three major Wall Street averages after the chipmaker’s Q1 guidance for both sales and profit fell short of Wall Street expectations. Also, KLA Corporation (KLAC) slid more than -6% after the semiconductor equipment manufacturer provided a weaker-than-expected Q3 forecast. In addition, Western Digital Corporation (WDC) fell over -3% after the data storage company posted its seventh straight quarterly drop in revenue. On the bullish side, American Express Company (AXP) climbed more than +7% and was the top percentage gainer on the Dow and S&P 500 after the credit card company issued stronger-than-expected FY24 guidance.
Data from the U.S. Department of Commerce on Friday showed that the U.S. core PCE price index, a key inflation gauge monitored by the Federal Reserve, came in at +0.2% m/m and +2.9% y/y in December, compared to expectations of +0.2% m/m and +3.0% y/y. Also, U.S. December personal spending rose +0.7% m/m, stronger than expectations of +0.4% m/m. In addition, U.S. pending home sales rose +8.3% m/m in December, stronger than expectations of +1.5% m/m and the largest increase in 3-1/2 years.
“Economic data in the U.S. continues to point to a benign backdrop for markets - with resilient growth, moderating inflation, and the prospect of rate cuts. We expect the Fed to feel comfortable cutting rates starting in May, though this will likely require further signs that the economy is cooling off between now and then,” said Solita Marcelli at UBS Global Wealth Management.
The U.S. Federal Reserve interest rate decision and Fed Chair Jerome Powell’s post-policy meeting press conference will take center stage in the coming week. The Federal Open Market Committee is anticipated to hold interest rates steady for the fourth consecutive meeting on Wednesday, with the primary focus being on what lies ahead. U.S. rate futures have priced in a 50.5% chance of a 25 basis point rate cut at the March meeting and a 91.0% probability of at least a 25 basis point rate cut at the conclusion of the Fed’s May meeting.
Fourth-quarter earnings season continues to roll on, and investors await fresh reports from major global companies this week, including Microsoft (MSFT), Alphabet (GOOGL), Apple (AAPL), Amazon.com (AMZN), Meta Platforms (META), Advanced Micro (AMD), Pfizer (PFE), Starbucks (SBUX), Boeing (BA), Mastercard (MA), Qualcomm (QCOM), Exxon Mobil (XOM), Chevron (CVX), and AbbVie (ABBV).
On the economic data front, the U.S. Nonfarm Payrolls report for January will be the main highlight. Also, market participants will be monitoring a spate of other economic data releases this week, including the U.S. CB Consumer Confidence, JOLTs Job Openings, S&P/CS HPI Composite - 20 n.s.a., ADP Nonfarm Employment Change, Employment Cost Index, Chicago PMI, Crude Oil Inventories, Initial Jobless Claims, Nonfarm Productivity (preliminary), Unit Labor Costs (preliminary), S&P Global Manufacturing PMI, ISM Manufacturing PMI, Construction Spending, Average Hourly Earnings, Private Nonfarm Payrolls, Unemployment Rate, Factory Orders, and Michigan Consumer Sentiment.
In other news, President Joe Biden’s administration is anticipated to award billions of dollars in subsidies in the coming weeks to leading semiconductor companies, such as Intel and Taiwan Semiconductor Manufacturing Co., to assist in the construction of new factories in the U.S., as reported by the Wall Street Journal on Saturday. The forthcoming announcements are intended to kick-start manufacturing of advanced semiconductors, which drive smartphones, artificial intelligence, and weapons systems, the WSJ reported.
The U.S. economic data slate is largely empty on Monday.
In the bond markets, United States 10-year rates are at 4.102%, down -1.47%.
The Euro Stoxx 50 futures are down -0.13% this morning as market participants geared up for a heavy event week packed with corporate earnings, top-tier data releases, and key central bank meetings, including the Fed. Travel stocks retreated on Monday, with Ryanair Holdings Plc (RYA.I.DX) dropping over -2% after the budget airline slashed its annual profit forecast. Financial stocks also lost ground. At the same time, energy stocks outperformed. Meanwhile, investors will be closely monitoring policy decisions from the Federal Reserve on Wednesday and the Bank of England on Thursday. In other news, Goldman Sachs cut its 2024 earnings growth forecast for European STOXX 600 companies from 7% to 3%, citing headwinds from lower oil prices and inflation. In corporate news, Holcim Ag (HOLN.Z.IX) climbed more than +3% after the Swiss building materials giant said it plans to spin off its North American business. At the same time, Koninklijke Philips N.V. (PHIA.NA) slid over -6% following the announcement of the suspension of sales for sleep apnea devices and ventilators in the U.S. after reaching an agreement with the U.S. Food and Drug Administration concerning its faulty medical equipment.
European Central Bank Vice-President Luis de Guindos stated on Monday that the ECB will reduce interest rates sooner or later, considering the recent positive inflation trends in the Eurozone. At the same time, ECB governing council member Klaas Knot said on Sunday that the central bank would require evidence of decelerating wage growth in the Eurozone before considering a reduction in interest rates.
The European economic data slate is mainly empty on Monday.
Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.92% and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.77%.
China’s Shanghai Composite Index closed lower today. Apprehensions regarding broader sanctions on China’s key industries weighed on sentiment after a draft bill in the U.S. Congress was lodged, which aims to prohibit Chinese biotech companies from securing government contracts. Also, sentiment was further dampened due to concerns about a proposal requiring U.S. cloud firms to disclose foreign clients involved in developing AI applications. Meanwhile, a Hong Kong court on Monday ordered the liquidation of property giant China Evergrande Group after it failed to reach a restructuring agreement with creditors. On the positive side, China’s securities regulator said on Sunday that it would suspend the lending of certain shares for short selling from Monday. The regulator will also slow the share lending process in the securities refinancing market from March 18th. Investors are now eagerly awaiting the release of purchasing managers’ index readings for January, scheduled for Wednesday, to gain further insights into business activity at the beginning of the new year.
Japan’s Nikkei 225 Stock Index closed higher today. Energy stocks led the gains on Monday, propelled by rising oil prices following a drone attack on U.S. forces in Jordan, which heightened concerns about supply disruptions in the Middle East. Export-heavy automobile stocks also advanced on the back of a softer yen, with Honda Motor and Toyota Motor climbing over +3%. In corporate news, Misumi Group Inc. rose more than +6% despite the company experiencing an almost 22% decline in its nine-month attributable net income. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +0.87% to 19.81.
“As earnings season starts, attention will be on individual company performances, which may create some ups and downs in the stock market. But I don’t think it will change the fundamental rise of the Nikkei,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management.
Pre-Market U.S. Stock Movers
McGrath RentCorp (MGRC) surged about +10% in pre-market trading after WillScot Mobile Mini agreed to acquire the B2B rental company in a cash-and-stock deal valued at $3.8 billion, including debt.
American Airlines Group (AAL) rose over +1% in pre-market trading after Citi upgraded the stock to Buy from Neutral with a price target of $20.
Warner Bros Discovery Inc (WBD) slid more than -2% in pre-market trading after Wells Fargo downgraded the stock to Equal Weight from Overweight with a price target of $12.
Beam Therapeutics Inc (BEAM) climbed about +5% in pre-market trading after JPMorgan upgraded the stock to Overweight from Neutral with a price target of $40.
ZIM Integrated Shipping Services Ltd (ZIM) advanced over +5% in pre-market trading after Jefferies upgraded the stock to Buy from Hold with a price target of $20.
Dollar Tree Inc (DLTR) gained more than +2% in pre-market trading after JPMorgan upgraded the stock to Overweight from Neutral with a price target of $157.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - January 29th
Nucor (NUE), Super Micro Computer (SMCI), Alexandria RE (ARE), Graco (GGG), Franklin Resources (BEN), Equity Lifestyle (ELS), F5 Networks (FFIV), Cleveland-Cliffs (CLF), Woodward (WWD), SoFi Technologies (SOFI), Whirlpool (WHR), Cadence Bancorp (CADE), Celestica Inc. (CLS), PotlatchDeltic (PCH), ServisFirst Bancshares (SFBS), Helmerich Payne (HP), Sanmina (SANM), Calix (CALX), Alliance Resource (ARLP), Pacific Premier (PPBI), Heartland Financial (HTLF), Harmonic (HLIT), Capital Southwest (CSWC), Transcat (TRNS), Dynex Capital (DX), Five Star Bancorp (FSBC), Bank of Marin (BMRC), HomeStreet (HMST), Bank7 (BSVN), Finwise Bancorp (FINW), Provident (PROV).
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On the date of publication, Oleksandr Pylypenko 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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