Stocks Rise Before the Open With Earnings in Focus, U.S. Economic Data and Fed Speak on Tap

June S&P 500 E-Mini futures (ESM24) are up +0.23%, and June Nasdaq 100 E-Mini futures (NQM24) are up +0.28% this morning as investors awaited a new round of U.S. economic data, comments from Federal Reserve officials, as well as corporate earnings reports, with the spotlight on results from streaming giant Netflix.

In yesterday’s trading session, Wall Street’s major averages closed in the red, with the benchmark S&P 500 and tech-heavy Nasdaq 100 dropping to 1-3/4 month lows and the blue-chip Dow falling to a 2-3/4 month low. JB Hunt Transport Services (JBHT) plunged over -8% and was the top percentage loser on the S&P 500 after the trucking company reported weaker-than-expected Q1 results. Also, Travelers Cos (TRV) slumped more than -7% and was the top percentage loser on the Dow after the insurer missed quarterly profit estimates. In addition, U.S. Bancorp (USB) slid over -3% after cutting its full-year net interest income guidance. On the bullish side, United Airlines (UAL) surged more than +17% and was the top percentage gainer on the S&P 500 after the U.S. airline posted better-than-feared Q1 results and provided above-consensus Q2 adjusted EPS guidance.

“The combination of geopolitical uncertainty, rising interest rates, Fed hawkishness, and inflation frustration have combined to put bears temporarily in charge,” said Mark Hackett at Nationwide.

Cleveland Fed President Loretta Mester stated Wednesday that monetary policy is in a good place, emphasizing that the central bank should not rush to lower interest rates. Mester pointed out that the Fed has room to exercise patience with policy due to a strong economy and robust labor market. “I still am expecting inflation to come down but I do think that we need to be watching and gathering more information before we take action,” she said. At the same time, Fed Governor Michelle Bowman remarked that progress on inflation may have stalled and questioned the extent to which monetary policy is constraining the economy. “There is a lot of financial market activity and a lot of continued growth that we wouldn’t have expected if the policy was sufficiently tight. I think it is restrictive. I think time will tell whether it is sufficiently restrictive,” Bowman said. 

Meanwhile, U.S. rate futures have priced in a 4.1% chance of a 25 basis point rate cut at May’s monetary policy meeting and a 16.3% probability of a 25 basis point rate cut at the June FOMC meeting.

In other news, the Federal Reserve said Wednesday in its Beige Book survey of regional business contacts that overall U.S. economic activity  “expanded slightly” since late February.  Some 10 out of 12 districts experienced either slight or modest economic growth, an increase from eight in the previous report, while two reported no changes in activity. “Consumer spending barely increased overall, but reports were quite mixed across Districts and spending categories,” according to the Beige Book. “Several reports mentioned weakness in discretionary spending, as consumers’ price sensitivity remained elevated,” the report said.

First-quarter earnings season gathers steam, and investors await new reports from notable companies today, including Netflix (NFLX), Blackstone (BX), Ally Financial (ALLY), Elevance Health (ELV), Intuitive Surgical (ISRG), and DR Horton (DHI).

On the economic data front, all eyes are focused on the U.S. Philadelphia Fed manufacturing index in a couple of hours. Economists, on average, forecast that the April Philadelphia Fed manufacturing index will stand at 1.5, compared to the previous value of 3.2.

Also, investors will likely focus on U.S. Existing Home Sales data, which came in at 4.38M in February. Economists foresee the March figure to be 4.20M.

The U.S. Conference Board Leading Index will come in today. Economists expect March’s figure to be -0.1% m/m, compared to the previous number of +0.1% m/m.

U.S. Initial Jobless Claims data will be reported today as well. Economists estimate this figure to be 215K, compared to last week’s value of 211K.

In addition, market participants will be looking toward speeches from Fed Governor Michelle Bowman, New York Fed President John Williams, and Atlanta Fed President Raphael Bostic.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.573%, down -0.26%.

The Euro Stoxx 50 futures are up +0.25% this morning as investors digested the latest corporate earnings as well as remarks from European Central Bank officials. Industrial and utilities stocks gained ground on Thursday, while energy and healthcare stocks underperformed. Meanwhile, ECB policymaker Bostjan Vasle stated on Wednesday that if disinflation continues as anticipated, the ECB deposit rate should be “much closer” to 3% by the end of the year, down from its current record high of 4%. Also, ECB Vice President Luis de Guindos stated on Thursday that Eurozone inflation is poised to decrease further, and the central bank might lower interest rates if its price growth conditions are met. In corporate news, Abb Ltd (ABBN.Z.IX) climbed over +5% after the Swiss engineering company reported stronger-than-expected Q1 profit and boosted its 2024 profitability guidance. At the same time, Sartorius Ag (SRT3.D.DX) plunged more than -11% after reporting weaker-than-expected Q1 order intake and revenue.

The European economic data slate is mainly empty on Thursday.

Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.09%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.31%.

China’s Shanghai Composite Index closed just above the flatline today, tracking other Asian markets higher. Insurance and bank stocks outperformed on Thursday, while energy and semiconductor stocks retreated. Meanwhile, the offshore yuan was steady on Thursday following the People’s Bank of China’s reaffirmation of its intention to prevent the risk of the exchange rate overshooting, according to a statement posted on WeChat. In other news, China’s central bank warned on Thursday against a “one-sided” pursuit of credit expansion following data indicating a slowdown in bank lending. In corporate news, Hytera Communications climbed over +6% following the acceptance of its appeal against a product ban by the U.S. Court of Appeals for the Seventh Circuit.

Japan’s Nikkei 225 Stock Index closed slightly higher today as some bargain-hunting emerged following three consecutive sessions of losses. Financial and chip-related stocks led the gains on Thursday. The Ministry of Economy, Trade, and Industry revealed that Japan’s tertiary industry index rose 2.5% year-on-year to 102.1 in February, boosted primarily by the finance and insurance sector. Meanwhile, the yen was steady on Thursday after a joint statement from U.S. Treasury Secretary Janet Yellen and the finance ministers of Japan and South Korea expressed “serious concerns” over the recent sharp weakness of the Japanese yen and the Korean won. In other news, Bank of Japan board member Asahi Noguchi stated on Thursday that the pace of future rate hikes by the BOJ would likely be slow, differing from the rapid adjustments seen in other major central banks. In corporate news, Kushikatsu Tanaka Holdings gained nearly +2% following the company’s announcement of an almost 82% surge in profit attributable to owners for the fiscal first quarter. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -5.62% to 21.49.

Pre-Market U.S. Stock Movers

Duolingo (DUOL) climbed over +6% in pre-market trading after the S&P Dow Jones Indices announced that the company would replace Cable One in the S&P MidCap 400 index on April 22nd.

Tesla (TSLA) slid more than -2% in pre-market trading after Deutsche Bank downgraded the stock to Hold from Buy with a price target of $123.

Alcoa (AA) gained about +3% in pre-market trading after the aluminum company reported better-than-expected Q1 revenue.

CSX Corporation (CSX) rose more than +2% in pre-market trading after the transportation operator reported stronger-than-expected Q1 results.

Equifax (EFX) slumped over -8% in pre-market trading after the company posted mixed Q1 results and offered below-consensus Q2 guidance.

Match Group (MTCH) fell more than -2% in pre-market trading after Morgan Stanley downgraded the stock to Equal Weight from Overweight with a price target of $37.

Zscaler (ZS) advanced over +2% in pre-market trading after KeyBanc upgraded the stock to Overweight from Sector Weight with a $220 price target.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Thursday - April 18th

Netflix (NFLX), Blackstone (BX), Intuitive Surgical (ISRG), Elevance Health (ELV), Marsh McLennan (MMC), DR Horton (DHI), PPG Industries (PPG), Genuine Parts (GPC), Snap-On (SNA), KeyCorp (KEY), Ally Financial (ALLY), Comerica (CMA), Western Alliance (WAL), Alaska Air (ALK), Home BancShares (HOMB), Badger Meter (BMI), Glacier (GBCI), ManpowerGroup (MAN), Iridium (IRDM), Texas Capital (TCBI), Hilltop (HTH), Forestar (FOR), OFG Bancorp (OFG), Apogee (APOG), S&T Bancorp (STBA), Provident (PFS), Berkshire Hills Bancorp (BHLB), OceanFirst (OCFC), Five Point (FPH), Metropolitan Bank (MCB).

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