OPENING CALL
Stock futures rose on Thursday after Jerome Powell said he still expects interest rates to be cut this year-but not anytime soon-and as Wall Street turned its attention to more key jobs data.
"There's still several important data releases between now and June that will help determine the [Fed] decision," Deutsche Bank said.
"Indeed, we've seen how expectations for rate cuts have shifted a lot already this year, and up until early February, investors were still pricing in a strong probability of a cut in March."
Bond market moves early Thursday were relatively muted, with the 10-year Treasury yield up just 1.5 basis points to 4.370% and traders pricing in a 57.5% chance the Fed will cut interest rates by 25 basis points by June.
Premarket Movers
Amazon.com was up 0.5%, having closed on Wednesday with a record high market cap of $1.895 trillion, the first time it has done so since July 8, 2021. It said it plans to cut several hundred jobs in sales, marketing and global services from its cloud-computing business.
BlackBerry reported a fiscal fourth quarter adjusted profit of 3 cents a share, compared with a loss of 4 cents that was expected by Wall Street. The stock rose 5%.
Disney said shareholders voted to elect its entire slate of board nominees, defeating activist investor Nelson Peltz in his battle to join the entertainment company's board. Disney shares fell 3.1% on Wednesday, the largest percentage decrease since Sept. 19, 2023, and were down 0.4% in premarket trading.
Shares of Intuitive Machines rose 6.2% after NASA awarded it one of three contracts to develop a new lunar terrain vehicle.
Levi Strauss reported fiscal first-quarter adjusted earnings that beat analysts' estimates and raised its fiscal-year outlook. The stock rose 8.5%.
Paramount Global was up 0.8% after the stock rose 15% on Wednesday following a report from the Wall Street Journal that said members of Paramount's board agreed to enter exclusive merger discussions with Skydance Media.
Simulations Plus reported fiscal second-quarter revenue rose 16% to $18.3 million and beat analysts' expectations. The stock rose 8.7%.
Watch For:
Trade for February; Weekly Jobless Claims; Canada Trade for February; earnings from Conagra Brands, Lamb Weston, RPM International, Simply Good Foods
Today's Headlines/Must Reads:
- How Disney's Bob Iger Vanquished Wall Street Agitator Nelson Peltz
- Apple Isn't Making an EV, but Chinese Phone Makers Are Showing They Can
- What's Wrong With the Economy? It's You, Not the Data
- This Small-Cap Stock Index Has Some Jumbo-Size Tenants
MARKET WRAPS
Forex:
The euro rose to a 9-day high against a broadly weaker dollar, but the European Central Bank's account of the March meeting [due at 7.30am] could cap its gains, Brown Brothers Harriman said.
"The ECB March meeting account...will likely show broad agreement to cut rates in June [85% priced-in] and limit euro relief rallies."
Weak U.S. economic data could keep the Federal Reserve on track to cut interest rates and cause the dollar to fall, ING said.
Differing U.S. economic data have caused volatility in the dollar this week. The currency dropped after Wednesday's weaker-than-expected U.S. services ISM data, having previously jumped to a multi-week high against a basket of currencies due to Monday's strong manufacturing ISM data.
"The U.S. data is volatile at present and investors will just have to react to data when they see it," ING said.
However, it expects 105 could mark a peak in the DXY dollar index.
Swissquote said the Federal Reserve may not feel in a hurry to cut rates, but investors think that it should be if it doesn't want to be part of November's election story.
Either the Fed will cut by early summer and take the risk of seeing inflation pick up further into the year end, or it will wait until after the election and take the risk of imposing an otherwise unnecessary pressure on the economy, Swissquote said.
Bonds:
Pimco said expectations for the European Central Bank's interest-rate cuts and the level of 10-year eurozone government bond yields are broadly fair versus the U.S..
"Yet we see the balance of risks as leaning toward weaker economic performance and more easing from the ECB."
The 10-year Treasury-Bund yield spread is trading just below 200 basis points, a level it briefly rose above on Wednesday, driven by diverging paths, ING said.
"That will re-tighten eventually, but for now it's only wider."
That level was last breached for a short period in autumn last year. Expectations for upcoming key U.S. jobs and CPI releases are enough to put pressure for a rise towards 4.5% for the Treasury yield, ING said.
These developments contrast with eurozone rates where inflation expectations cemented market expectations for a June interest-rate cut by the European Central Bank.
Energy:
Crude futures continued to trade at their highest levels since October on supply concerns, due to mounting geopolitical risks and OPEC+ output cuts.
OPEC+ kept its output policy unchanged on Wednesday and turned its focus on compliance, saying that members who oversupplied in the first quarter will soon present compensation plans.
"While this was widely expected, it provides some assurance that the recent rise in tension in the Middle East has not altered the group's view on the market," ANZ said.
Metals:
Base metals were higher again, with speculative activity on the LME surging, which-combined with expectations of a relaxed monetary policy outlook in Europe-has sent prices to their highest levels in several months, Sucden Financial, said.
Gold and silver futures also made solid gains.
"We expect the forthcoming months to be favorable for precious metals, given the potential onset of monetary easing by major central banks and the increasing uncertainty surrounding the outcome of the U.S. elections, " Sucden said.
OCBC said gold prices may have further room to run in the medium term, citing factors such as expectations of a global easing cycle, central banks' continued purchases of bullion and a play-up of the precious metal's role as a geopolitical hedge.
COMEX gold futures' bullish momentum remains in play on the daily chart, given price action overnight together with the relative strength index indicator trending upwards, RHB said.
The 20-day and 50-day simple moving averages are still moving upward, suggesting the underlying trend remains bullish, and futures could extend the trend toward $2,400/oz followed by $2,500/oz, RHB said.
Despite Wednesday's break beyond the $2,300/oz resistance level, however, RHB doesn't rule out possibility of the precious metal undergoing profit-taking. It pegs support at $2,250/oz.
Iron Ore
Support looms for iron-ore prices after their recent decline, UBS said.
Iron-ore prices have fallen to $100/ton recently on weak Chinese steel output, high inventories and demand concerns, despite strong steel exports. UBS said construction should begin to recover from a slow period after the Lunar New Holiday and improve through April and May.
It sees iron-ore prices having cost support around $90-$100/ton in the near term. Still, UBS acknowledges the risk that Chinese steel output stays weak.
TODAY'S TOP HEADLINES
Musk Says Tesla Is Boosting Engineer Pay in AI Talent War
Tesla is raising compensation for its artificial intelligence engineers in a bid to ward off poaching from the likes of OpenAI, according to Chief Executive Elon Musk.
Musk said in a series of posts on social-media platform X late Wednesday that his electric vehicle company is boosting pay at a time when AI startup OpenAI has been "aggressively recruiting Tesla engineers with massive compensation offers," and succeeding "in a few cases."
Big Pharma Stocks Need a Rethink. Investors Keep Making the Same Mistake.
Understanding the products from pharmaceutical companies could be the most arduous task on Wall Street. But the business itself? It's rather simple: Big Pharma is essentially a series of lucrative exclusives balanced by angst over when those monopolies run out.
At Pfizer, that angst has overwhelmed just about everything else over the past five years, including a world-saving Covid-19 vaccine. Pfizer is staring down a barrage of patent expirations that will allow competitors to clone a long list of its products, stripping what Pfizer says will be $17 billion in annual revenue by the end of the decade.
Airbus's Stratospheric Drone Business Is Open to IPO, CEO Says
An Airbus unit developing high-altitude drones that offer mobile connectivity and Earth observation services is open to an initial public offering after it launches commercial operations in the coming years, its chief executive told The Wall Street Journal.
Based in Farnborough just outside London, Aalto HAPS makes solar-powered, fixed-wing drones that operate above 60,000 feet. Known as Zephyr, these high-altitude platform stations, or HAPS, can be fitted with payloads that provide 5G connectivity as well as services such as wildfire prevention and border control via Earth observation.
Eurozone Activity Begins to Recover as Services Drive Growth, PMIs Show
The eurozone's private-sector activity returned to growth last month, according to a revised purchasing managers' survey published Thursday, pointing the way to recovery from stagnation in the wider economy.
The HCOB Flash Eurozone Composite PMI Output Index-a gauge of activity in the manufacturing and services sectors across the 20 nations that use the euro-rose to 50.3 in March, moving back above the threshold between expansion and contraction for the first time since May last year. This revised a previous estimate for the month that suggested activity was still contracting.
The British Are Coming for Your White-Collar Job
(MORE TO FOLLOW) Dow Jones Newswires
04-04-24 0614ET
