Stock Index Futures Muted as Nvidia-Driven Rally Stalls

March S&P 500 E-Mini futures (ESH24) are down -0.06%, and March Nasdaq 100 E-Mini futures (NQH24) are down -0.17% this morning as market participants assessed the outlook for equities after the previous day’s strong rally in the wake of Nvidia’s blockbuster earnings.

In Thursday’s trading session, Wall Street’s major indexes closed higher, with the benchmark S&P 500 and blue-chip Dow notching new record highs and the tech-heavy Nasdaq 100 posting a 1-1/2 week high. NVIDIA Corporation (NVDA) soared over +16% and was the top percentage gainer on the S&P 500 and Nasdaq 100 after reporting better-than-expected Q4 results and offering above-consensus Q1 revenue guidance. Also, Moderna Inc (MRNA) climbed more than +13% after the COVID-19 vaccine maker posted upbeat Q4 results. In addition, Royal Caribbean Cruises Ltd (RCL) rose over +6% after raising its 2024 adjusted EPS forecast. On the bearish side, Etsy Inc (ETSY) plunged more than -8% and was the top percentage loser on the S&P 500 after the retailer posted mixed Q4 results and projected a low to mid-single-digit percentage decrease in Q1 gross merchandise sales. Also, Keurig Dr Pepper Inc (KDP) slid over -3% and was the top percentage loser on the Nasdaq 100 after reporting weaker-than-expected Q4 net sales and issuing soft FY24 guidance.

Economic data on Thursday showed that the U.S. S&P Global manufacturing PMI rose to a 17-month high of 51.5 in February, stronger than expectations of 50.5. Also, the U.S. February S&P Global services PMI cooled to a 3-month low of 51.3, weaker than expectations of 52.4. In addition, U.S. existing home sales rose +3.1% m/m to a 5-month high of 4.00M in January, stronger than expectations of 3.96M. Finally, the number of Americans filing for initial jobless claims in the past week unexpectedly fell -12K to a 5-week low of 201K, stronger than expectations of 217K. 

Fed Vice Chair Philip Jefferson said Thursday that the central bank needs to be on guard against cutting interest rates too far in response to declining inflation as “excessive easing can lead to a stalling or reversal in progress in restoring price stability.” Also, Philadelphia Fed President Patrick Harker said that it would probably be suitable to cut interest rates this year but stressed that reducing borrowing costs too early could unwind the progress made on inflation. “I believe that we may be in the position to see the rate decrease this year. But I would caution anyone from looking for it right now and right away. We have time to get this right, as we must,” Harker said. In addition, Fed Governor Lisa Cook said she would like to see more progress on inflation before cutting interest rates, emphasizing that the U.S. central bank “should continue to move carefully.” “I would like to have greater confidence that inflation is converging to 2% before beginning to cut the policy rate,” Cook said.

Meanwhile, U.S. rate futures have priced in a 2.5% chance of a 25 basis point rate cut at the next FOMC meeting in March and a 20.5% probability of a 25 basis point rate cut at the May meeting.

On the earnings front, global entertainment and media company Warner Bros. Discovery (WBD) is set to announce its Q4 earnings results today.

The U.S. economic data slate is empty on Friday.

In the bond markets, United States 10-year rates are at 4.347%, up +0.51%.

The Euro Stoxx 50 futures are up +0.06% this morning as investors digested mixed earnings reports and comments from European Central Bank policymakers. Automobile and bank stocks gained ground on Friday, while telecom stocks underperformed. A survey showed on Friday that German business sentiment brightened in February. Separately, final data released by the German Federal Statistical Office on Friday showed that the country’s GDP contracted by 0.3% q/q in the fourth quarter, in line with initial estimates. Meanwhile, the latest monthly ECB Consumer Expectations Survey indicated that median inflation expectations for the year ahead increased to 3.3% from 3.2%, while estimates for the following three years remained steady at 2.5%. In corporate news, Standard Chartered Plc (STAN.LN) surged over +8% after reporting better-than-expected Q4 earnings and unveiling a $1 billion share buyback. At the same time, Allianz Se (ALV.D.DX) fell more than -2% after the German insurer posted Q4 earnings in its property-casualty business that missed expectations.

ECB Governing Council member Joachim Nagel said on Friday that Eurozone inflation remains stubbornly high, so the central bank should refrain from an early interest rate cut, particularly before the release of crucial wage data in the second quarter. “We will only receive a more detailed picture of how domestic price pressures are unfolding during the second quarter. Then we can contemplate a cut in interest rates,” Nagel said.

ECB Executive Board member Isabel Schnabel said that Eurozone firms are beginning to absorb elevated wage pressures through their profits, and the risk of inflation expectations becoming de-anchored from the 2% target has receded. She also expressed increasing confidence that the Eurozone economy was heading towards a “soft landing.”

Germany’s GDP, Germany’s Ifo Business Climate Index, Germany’s Business Expectations, and Germany’s Current Assessment data were released today.

The German GDP has been reported at -0.3% q/q and -0.2% y/y in the fourth quarter, in line with expectations.

The German February Ifo Business Climate Index stood at 85.5, in line with expectations.

The German February Business Expectations arrived at 84.1, stronger than expectations of 84.0.

The German February Current Assessment came in at 86.9, stronger than expectations of 86.7.

China’s Shanghai Composite Index (SHCOMP) closed up +0.55%, while Japanese markets were closed for a public holiday.

China’s Shanghai Composite Index closed higher today, crossing the significant psychological threshold of 3000, a level last observed on December 12th. Media and automobile stocks outperformed on Friday. Mainland developers listed in Hong Kong also gained ground after China experienced a slower decline in home prices for both new and existing units in January, marking the first signs of improvement in 10 months. According to figures from the National Bureau of Statistics released on Friday, new-home prices in 70 cities, excluding state-subsidized housing, declined by 0.37% last month compared to December, when they fell by 0.45%. The second-hand market also saw improvement, with price declines narrowing to 0.68%. At the same time, the number of foreclosed properties for sale in China increased at a quicker rate in January from a year earlier, signaling the ongoing economic slowdown in the country, as outlined in a report by real estate agency China Index Holdings published on Thursday. Meanwhile, China’s government bonds rose on Friday as investors wagered on further monetary easing in the wake of the largest-ever cut in the mortgage rate. In corporate news, China Southern Pwr Grd Technology Co Ltd climbed about +17% after reporting that its full-year attributable profit soared by 36.7% year-over-year to 281.3 million yuan, and its operating income increased by 41.8% to 2.54 billion yuan.

Japan’s Nikkei Stock Index today was closed for the Emperor’s Birthday holiday. The markets will reopen on Monday.

Pre-Market U.S. Stock Movers

Carvana Co (CVNA) surged about +30% in pre-market trading after the used car company said it anticipates Q1 adjusted EBITDA to be “significantly” above $100M.

Block Inc (SQ) climbed over +12% in pre-market trading after the payment and fintech app company raised its FY24 adjusted EBITDA guidance.

Booking Holdings Inc (BKNG) plunged more than -8% in pre-market trading after reporting weaker-than-expected room reservations during the holiday season due to the ongoing conflict in the Middle East.

DraftKings Inc (DKNG) gained over +2% in pre-market trading after Barclays upgraded the stock to Overweight from Equal Weight with a price target of $50.

Fox Corp. (FOXA) rose more than +2% in pre-market trading after Citi upgraded the stock to Buy from Neutral with a price target of $35.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Friday - February 23rd

Warner Bros Discovery (WBD), Lamar (LAMR), Frontier Communications Parent (FYBR), Bloomin Brands (BLMN), Sunstone Hotel Investors (SHO), TransAlta Corp (TAC), Federal Agricultural Mortgage (AGM), HudBay Minerals (HBM), Northwest Natural Gas (NWN), Gray Television (GTN), Diana Shipping (DSX).

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