March S&P 500 E-Mini futures (ESH24) are trending up +0.21% this morning as investors looked ahead to crucial U.S. PPI data for clues on the Federal Reserve’s rate path.
In Thursday’s trading session, Wall Street’s major indexes closed in the green. Zebra Technologies Corporation (ZBRA) soared over +12% and was the top percentage gainer on the S&P 500 after the company topped quarterly profit estimates and projected a smaller-than-expected decline in Q1 net sales. Also, Super Micro Computer Inc (SMCI) climbed more than +14% after Bank of America Global Research initiated coverage of the stock with a Buy rating and a price target of $1,040. In addition, EPAM Systems Inc (EPAM) gained over +8% after reporting better-than-expected Q4 results and providing a solid Q1 revenue forecast. On the bearish side, West Pharmaceutical Services Inc (WST) tumbled more than -14% and was the top percentage loser on the S&P 500 after the company posted mixed Q4 results and gave a downbeat FY24 outlook. Also, Deere & Company (DE) slumped over -5% after the agricultural machinery giant trimmed its full-year profit forecast.
Economic data on Thursday showed that U.S. retail sales fell -0.8% m/m in January, weaker than expectations of -0.2% m/m and the biggest decline in 10 months. Also, U.S. January core retail sales unexpectedly fell -0.6% m/m, weaker than expectations of +0.2% m/m. In addition, U.S. industrial production ticked down -0.1% m/m in January, weaker than expectations of +0.2% m/m. At the same time, the Philadelphia Fed’s gauge of manufacturing activity rose to a 6-month high of 5.2 in February, stronger than expectations of -8.0. Finally, the number of Americans filing for initial jobless claims in the past week fell -8K to 212K, compared to a consensus of 219K.
“[Thursday’s] weak retail sales and middle-of-the-road jobless claims total may help soothe the market’s nerves in the near term. But there may still be an element of ‘altitude sickness’ at work, since the higher the market rallies, the more vulnerable it may be to setbacks when individual economic numbers don’t fit the rate-cutting narrative,” said Chris Larkin at E*Trade from Morgan Stanley.
Atlanta Fed President Raphael Bostic said on Thursday that there is no urgency to cut interest rates given the robustness of the U.S. labor market and economy, while also warning that it remains uncertain whether inflation is heading sustainably toward the central bank’s 2% target. “The evidence from data, our surveys, and our outreach says that victory is not clearly in hand, and leaves me not yet comfortable that inflation is inexorably declining to our 2% objective,” Bostic said in a speech in New York.
Meanwhile, U.S. rate futures have priced in an 8.5% chance of a 25 basis point rate cut at the next central bank meeting in March and a 32.3% chance of a 25 basis point rate cut at the May meeting.
Today, all eyes are focused on the U.S. Producer Price Index in a couple of hours. Economists, on average, forecast that the U.S. January PPI will stand at +0.1% m/m and +0.6% y/y, compared to the previous values of -0.1% m/m and +1.0% y/y.
Also, investors will likely focus on the U.S. Core PPI, which came in at 0.0% m/m and +1.8% y/y in December. Economists foresee January’s figures to be +0.1% m/m and +1.6% y/y.
The U.S. Michigan Consumer Sentiment preliminary reading will be reported today. Economists foresee this figure to stand at 80.0 in February, compared to the previous figure of 79.0.
The U.S. Building Permits and Housing Starts data for January will also be closely watched today. Economists forecast Building Permits to be 1.509M and Housing Starts to be 1.450M.
In addition, market participants will be anticipating speeches from San Francisco Fed President Mary Daly and Fed Vice Chair for Supervision Michael Barr.
In the bond markets, United States 10-year rates are at 4.268%, up +0.71%.
The Euro Stoxx 50 futures are up +0.63% this morning, on track to end a data-heavy week on an upbeat note. Gains in mining stocks are leading the overall market higher amid optimism regarding a rebound in Chinese demand for metals. Data from the Office for National Statistics indicated on Friday that U.K. retail sales grew at their quickest rate in almost three years in January from December. Separately, the annual inflation rate in France was confirmed at 3.1% in January, marking the lowest reading since January 2022. Meanwhile, European Central Bank Governing Council member Francois Villeroy de Galhau emphasized the importance of avoiding prolonged delays in rate cuts, asserting that the central bank would retain flexibility regarding the pace and degree of policy easing following the initial adjustment. In corporate news, Metso Oyj (METSO.H.DX) climbed over +10% after the Finnish mining equipment maker posted a better-than-expected Q4 profit and offered an optimistic outlook for its aggregates unit. Also, Natwest Group Plc (NWG.LN) rose about +5% after the lender reported a 20% increase in full-year pre-tax profit, and executives said the bank has no exposure to the Financial Conduct Authority’s ongoing review into historic auto lending practices.
U.K.’s Retail Sales, U.K.’s Core Retail Sales, and France’s CPI data were released today.
U.K. January Retail Sales came in at +3.4% m/m and +0.7% y/y, stronger than expectations of +1.5% m/m and -1.4% y/y.
U.K. January Core Retail Sales stood at +3.2% m/m and +0.7% y/y, stronger than expectations of +1.7% m/m and -1.6% y/y.
The French January CPI has been reported at -0.3% m/m and +3.1% y/y, compared to expectations of -0.2% m/m and +3.1% y/y.
Japan’s Nikkei 225 Stock Index (NIK) closed up +0.86%, while mainland Chinese markets were closed for the week-long Lunar New Year holiday.
Mainland Chinese markets will reopen on Monday, February 19th.
Japan’s Nikkei 225 Stock Index closed higher and hit a fresh 34-year high today as sentiment was buoyed by overnight gains on Wall Street. Energy, real estate, and healthcare stocks led the gains on Friday. Meanwhile, Bank of Japan Governor Kazuo Ueda told Japan’s parliament on Friday that the central bank will assess whether to maintain its diverse monetary easing measures, including negative interest rates, when its 2% inflation target comes into sight. In other news, the International Monetary Fund said on Thursday that its 2023 economic growth forecast for Japan remained unchanged at 1.9%, despite the release of weak October-December gross domestic product data. In corporate news, Tokyo Rope Mfg Co Ltd climbed over +5% following the disclosure of its completion of a 200 million yen buyback program. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +10.32% to 21.60.
According to data from Japanese exchanges, foreign investors accumulated a net 817.43 billion yen ($5.44 billion) of local stocks during the week ending February 9th, representing their largest weekly net purchase since January 12th.
Pre-Market U.S. Stock Movers
Applied Materials Inc (AMAT) climbed over +12% in pre-market trading after the company reported upbeat Q1 results and provided strong Q2 guidance.
The Trade Desk (TTD) soared about +19% in pre-market trading after the ad tech company posted stronger-than-expected Q4 revenue and issued an above-consensus Q1 revenue forecast.
Coinbase Global Inc (COIN) gained more than +12% in pre-market trading following the cryptocurrency exchange’s return to profitability in Q4, marking its first profitable quarter in three years.
DoorDash Inc (DASH) plunged over -6% in pre-market trading after the food delivery company posted mixed Q4 results.
DraftKings Inc (DKNG) fell more than -3% in pre-market trading after reporting weaker-than-expected Q4 revenue.
Wayfair Inc (W) advanced over +5% in pre-market trading after Raymond James double-upgraded the stock to Strong Buy from Market Perform with a $65 price target.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Friday - February 16th
TC Energy (TRP), Vulcan Materials (VMC), PPL (PPL), Healthcare RT (HR), DT Midstream (DTM), Balchem (BCPC), Portland General Electric (POR), United States Cellular (USM), Arbor (ABR), Treehouse Foods (THS), Telephone&Data Systems (TDS), Cinemark (CNK), Barnes (B), Marcus & Millichap (MMI), American Axle&Manufacturing (AXL), AdvanSix (ASIX).
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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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