Stocks Open Higher as Investors Await Fed Meeting

June S&P 500 E-Mini futures (ESM24) are up +0.37%, and June Nasdaq 100 E-Mini futures (NQM24) are up +0.64% this morning as market participants looked ahead to the Federal Reserve’s second monetary policy committee decision of the year due later in the week.

In Friday’s trading session, Wall Street’s major averages ended lower, with the tech-heavy Nasdaq 100 dropping to a 3-week low. Jabil Circuit (JBL) plunged over -16% and was the top percentage loser on the S&P 500 after the manufacturing solutions provider cut its FY24 core EPS and revenue guidance. Also, Adobe (ADBE) slumped more than -13% and was the top percentage loser on the Nasdaq 100 after the Photoshop maker issued below-consensus Q2 revenue guidance. In addition, Ulta Beauty Inc (ULTA) fell over -5% after the beauty retailer reported weaker-than-expected Q4 comparable sales and provided conservative full-year EPS guidance. On the bullish side, Rivian Automotive Inc (RIVN) rose more than +3% after Piper Sandler upgraded the stock to Overweight from Neutral with a $21 price target.

Economic data on Friday showed that the University of Michigan’s U.S. consumer sentiment index unexpectedly fell to 76.5 in March from 76.9 in February, weaker than expectations of 77.1. Also, U.S. February industrial production inched up +0.1% m/m, stronger than expectations of 0.0% m/m. In addition, U.S. manufacturing production rose +0.8% m/m in February, stronger than expectations of +0.3% m/m and the biggest increase in 10 months. Finally, the U.S. NY Empire State manufacturing index came in at -20.90 in March, weaker than expectations of -7.00. 

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 expected to hold interest rates steady for the fifth straight meeting on Wednesday, with the primary attention directed towards the central bank’s quarterly “dot plot” in its Summary of Economic Projections. U.S. rate futures have priced in an 8.1% chance of a 25 basis point rate cut at the May meeting and a 52.7% probability of a 25 basis point rate cut at the conclusion of the Fed’s June meeting.

“We think that the Fed is still likely to ease at mid-year (June or July), but the FOMC meeting will keep us squarely in the wait-and-see period by another one or two meeting cycles, with Jay Powell repeating that he needs a “little bit more” evidence that disinflation is sustainable before he would cut the Fed Funds rate target,” analysts at Macquarie said in a note.

Market participants will also be monitoring a spate of economic data releases this week, including the U.S. Philadelphia Fed Manufacturing Index, Housing Starts, Building Permits (preliminary), Crude Oil Inventories, Initial Jobless Claims, Current Account, S&P Global Manufacturing PMI (preliminary), S&P Global Composite PMI (preliminary), S&P Global Services PMI (preliminary), Existing Home Sales, and Leading Index.

On the earnings front, notable companies like FedEx (FDX), Nike (NKE), Micron Technology (MU), Accenture (ACN), Lululemon Athletica (LULU), Chewy (CHWY), and General Mills (GIS) are scheduled to release their quarterly results this week.

Meanwhile, investors are focusing on chipmaker Nvidia’s GTC developer conference scheduled from March 18th to 21st, which will be closely watched for AI-related announcements.

The U.S. economic data slate is mainly empty on Monday.

In the bond markets, United States 10-year rates are at 4.306%, up +0.05%.

The Euro Stoxx 50 futures are up +0.06% this morning as investors digested Eurozone inflation data and geared up for a week packed with interest-rate decisions from major central banks. Technology and consumer-products stocks gained ground on Monday, while insurance stocks underperformed. Eurostat said Monday that the Eurozone annual inflation rate cooled to 2.6% in February from 2.8% in January, confirming preliminary data. Meanwhile, investors will be closely monitoring policy decisions from the Bank of Japan on Tuesday, the Federal Reserve on Wednesday, and the Bank of England on Thursday. In corporate news, Logitech International Sa (LOGN.Z.IX) slid over -6% following the announcement of the departure of the computer equipment maker’s CFO, Charles Boynton, in May.

European Central Bank policymaker Pablo Hernandez de Cos said in an interview published on Sunday that the ECB might begin reducing interest rates in June following a decline in Eurozone inflation. “If our macroeconomic forecasts are met in the coming months, it is normal that we will start cutting rates soon, and June could be a good date to start,” De Cos told Spanish newspaper El Periodico.

Eurozone’s CPI and Eurozone’s Core CPI data were released today.

Eurozone February CPI has been reported at +0.6% m/m and +2.6% y/y, in line with expectations.

Eurozone February Core CPI came in at +0.7% m/m and +3.1% y/y, in line with expectations.

Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.99%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +2.67%.

China’s Shanghai Composite Index closed higher today after the country reported stronger-than-expected factory output and fixed-asset investment growth. Automobile, information technology, and new energy stocks outperformed on Monday. Tech giants listed in Hong Kong also advanced. Data released by the National Bureau of Statistics showed on Monday that China’s industrial output and fixed-asset investment growth topped economist estimates in January-February, while retail sales saw an increase roughly in line with projections. At the same time, official data showed that China’s new home sales by value and floor area slumped in the first two months of the year. New home sales by value plunged 32.7% in the January to February period, while new home sales by floor area dropped 24.8% in the first two months of the year. Meanwhile, the China Securities Regulatory Commission unveiled a series of rules on Friday aimed at intensifying oversight of stock listings, public companies, and underwriters as part of regulators’ increased efforts to revive investor confidence. In corporate news, Xiamen Amoytop Biotech gained over +5% following the approval from China’s drug regulator to market its flagship product, Pegbin, designed for treating chronic hepatitis B.

“January-February activity data came in stronger than market expectations. We believe China’s sequential growth momentum remained solid in Q1 despite notable divergence across sectors. However, to secure the ambitious ‘around 5%’ growth target this year, more policy easing is still necessary, especially on the demand side,” Goldman Sachs said in a note.

The Chinese January-February Industrial Production stood at +7.0% y/y, stronger than expectations of +5.3% y/y.

The Chinese January-February Retail Sales came in at +5.5% y/y, weaker than expectations of +5.6% y/y.

The Chinese January-February Fixed Asset Investment arrived at +4.2% y/y, stronger than expectations of +3.2% y/y.

The Chinese February Unemployment Rate was at 5.3%, weaker than expectations of 5.1%.

Japan’s Nikkei 225 Stock Index closed sharply higher today, climbing above the 39,000 mark for the first time in 10 days, ahead of the Bank of Japan’s policy outcome due Tuesday. Electronics and real estate stocks led the gains on Monday. Data released Monday by the Cabinet Office showed that Japan’s core machinery orders experienced a larger-than-anticipated decline in January due to a weak manufacturing sector. Also, the government revised its view of machinery orders for the first time since November 2022, shifting from “stalling” to “showing some weakness.” Meanwhile, investors are awaiting the BOJ’s policy decision on Tuesday, with approximately 90% of BOJ watchers expressing the possibility of authorities ending the ultralow interest rate policy. Speculation of a move has increased following the announcement by Japan’s largest union group of the strongest wage deals in more than three decades. In corporate news, Nissan Motor climbed about +4%, and Honda Motor rose over +2% following their announcement on Friday of a collaboration on electric vehicles, core parts, and software, aiming to compete with rivals in China and the U.S. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -0.49% to 20.23.

“Japanese stocks are rising, driven by the weakness of the yen, and expectations that the currency won’t strengthen even if the central bank hikes,” said Charu Chanana, a strategist at Saxo Capital Markets based in Singapore.

The Japanese January Core Machinery Orders came in at -1.7% m/m and -10.9% y/y, compared to expectations of -1.0% m/m and -11.2% y/y.

Pre-Market U.S. Stock Movers

Alphabet (GOOGL) climbed over +5% in pre-market trading following a report from Bloomberg indicating that Apple is in talks to build Google’s Gemini artificial intelligence engine into the iPhone.

Tesla Inc (TSLA) rose more than +3% in pre-market trading following its announcement late Friday that it would raise prices for all Model Y cars in the United States by $1,000 starting April 1st. Also, on Saturday, the company stated that Model Y prices would increase by about 2,000 euros ($2,177) across several European countries on March 22nd.

Boeing Co (BA) fell about -1% in pre-market trading after Bloomberg News reported that a Federal grand jury in Seattle had issued a subpoena to the planemaker regarding the January 5th midair blowout.

Micron Technology Inc (MU) advanced over +2% in pre-market trading after Cantor Fitzgerald raised its price target on the stock to $120 from $100.

PepsiCo (PEP) rose more than +1% in pre-market trading after Morgan Stanley upgraded the stock to Overweight from Equal Weight with a $190 price target.

Charter Communications Inc (CHTR) gained about +1% in pre-market trading after Bernstein upgraded the stock to Outperform from Market Perform with a $370 price target.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Monday - March 18th

Science Applications (SAIC), StoneCo (STNE), Dlocal (DLO), Alpine Immune Sciences (ALPN), FinVolution Group (FINV), Comtech (CMTL).

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