OPENING CALL
Stock futures held near record highs on Tuesday ahead of crucial earnings from Microsoft.
Equity bulls will want to see that Microsoft's results and forecasts justify the recent market optimism, particularly given it has the biggest weighting in the S&P 500, currently 7.3%.
Four other of the Magnificent 7 stocks - Alphabet on Tuesday, Apple, Amazon and Meta on Thursday - will also publish earnings in the next few days.
"The price reaction to 5 of the "Mag 7" reports...[is] critical for overall market direction," Evercore ISI said.
Helping to underpin sentiment were softer Treasury yields. The benchmark 10-year yield has dipped back toward the 4% mark after the Treasury on Monday said it would need to borrow less in the first quarter than the market had feared.
The Federal Reserve will begin its two-day policy meeting on Tuesday, though it is not expected to change interest rates this month.
Overseas Markets
Chinese stocks remained under pressure from Evergrande's liquidation order and broader concerns over China's economy, with the Hang Seng Index closing down 2.3%.
Premarket Movers
Calix was falling 26% after swinging to a loss in the fourth quarter and forecasting first-quarter revenue of $225 million to $231 million, down from $250 million a year earlier and below analysts' estimates of $267.5 million.
Cleveland-Cliffs reported a fourth-quarter loss that narrowed from a year earlier but revenue of $5.11 billion that missed estimates. It said it expects first-quarter adjusted earnings before interest, taxes, depreciation, and amortization to "meaningfully exceed" adjusted Ebitda in the fourth quarter of $279 million. Shares were down 2.5%.
Diageo reported a drop in half-year profit, dragged down by falling sales in Latin America and the Caribbean. Its shares fell in London trading and premarket in the U.S.
F5's fiscal first-quarter adjusted earnings of $3.43 a share topped analysts' estimates and the company posted revenue of $693 million that also beat forecasts. The stock was rising 8%.
Sanmina forecast second-quarter results ahead of expectations and said it was expecting improvements in the second half of the year. Its shares rose 17%.
Whirlpool reported fourth-quarter adjusted earnings that topped analysts' estimates but said it anticipates adjusted earnings in 2024 of $13 to $15 a share and sales of $16.9 billion, down 13% from a year earlier. Shares declined 4.9%.
Monday's Post-Close Movers
Arcus Biosciences said Gilead Sciences is investing $320 million in the company as they amend their collaboration agreement. Arcus shares rose 11%.
Cidara Therapeutics said the U.K.'s Medicines and Healthcare Products Regulatory Agency approved Rezzayo to treat invasive candidiasis. Its shares rose 16%.
Super Micro Computer fiscal second-quarter earnings beat expectations and the company said it expects fiscal third-quarter revenue of $3.7 billion to $4.1 billion and adjusted earnings in the period of $5.20 to $6.01 a share, both well ahead of forecasts. Shares rose 10%.
Watch For:
S&P CoreLogic Case-Shiller Home Prices Index for November; Conference Board -- Consumer Confidence for January; FOMC Meeting; earnings from Alphabet, General Motors, Microsoft, Mondelez, Advanced Micro Devices, Pfizer, Starbucks, UPS, JetBlue Airways, Danaher
Today's Top Headlines/Must Reads:
- The Fed Meeting Isn't Just About Rate Cuts. Why the Balance Sheet Might Matter More for Stocks.
- What Investors Need to Know About the U.S. Government's Borrowing Plans
- Why Oil Prices Rose After Shrugging Off a Crisis
- Why Defense Contractors Are Saying No to Their Biggest Customer: The Pentagon
MARKET WRAPS
Forex:
After the recent correction higher, the dollar doesn't look cheap nor oversold and its strength may fade soon, TD Securities said.
"Now the dollar is overbought and expensive, increasing the appeal of shorts [short positions] into the Fed meeting," it said.
MUFG said the dollar could strengthen if upcoming jobs data-including JOLTs on Wednesday and non-farm payrolls figures on Friday-suggest the Fed is unlikely to cut interest rates in March.
"Without evidence of further weakness in the U.S. labor market in the coming months, we are not convinced yet that the Fed will cut rates as soon as in March in light of the resilience of the U.S. economy to higher rates," MUFG said.
This partly supports MUFG's expectation the dollar will rebound in 1Q.
The euro weakened further as investors bet on early ECB rate cuts, with money markets pricing a high chance of this in April.
Comments from Peter Kazimir, governor of the National Bank of Slovakia, on Monday that the rate-cut debate is now premature got less attention and markets instead focused on Bank of France Governor Francois Villeroy de Galhau who effectively implied that any next meeting is a place for key policy decisions, KBC Bank said.
Bonds:
The outlook for fixed income looks better as inflation, while still above central bank targets, has moderated significantly and as a slowing but still-resilient economic growth has fueled optimism for a soft landing, Nuveen said.
The recent increase in bond yields has created an opportunity for investors to benefit from several rate cuts expected this year, Nuveen added.
It favors extending the duration in fixed income portfolios and added that investment grade corporate bonds, given their higher relative quality, could provide a cushion if the economy weakens more than expected.
Emerging markets' economic growth levels and rate cuts by some EM central banks are pluses for EM debt, Nuveen said.
Energy:
Oil was broadly flat after falling more than 1% in the previous session, as prices continue to be supported by growing concerns around a conflict escalation in the Middle East.
Aramco said it had been ordered by the Saudi government to keep its oil production capacity at 12 million barrels a day. The company said it received the instruction while it was working to increase its production capacity to 13 million barrels a day.
Citi said Saudi Arabia's move to have Aramco halt its maximum production capacity increase can be seen as OPEC+ starting to recognize the size of the capacity overhang in oil markets and the need for the country to give way to competitors.
Metals:
Base metals were mixed as a court order to liquidate Evergrande brings back China's property sector into the spotlight and as investors await the Fed's policy meeting on Wednesday.
TODAY'S TOP HEADLINES
TikTok Pledged to Protect U.S. Data. $1.5 Billion Later, It's Still Struggling.
TikTok says it has spent $1.5 billion building an operation intended to convince U.S. lawmakers that the popular video-sharing app is safe.
TikTok executives publicly promised to voluntarily wall-off American user data and bring in engineers and third parties to certify the app's algorithm delivered content without interference from China, where its parent company, ByteDance, is located.
Boeing Withdraws Safety Exemption Request for MAX 7
Boeing is withdrawing a request for a safety exemption for a new MAX series jet that would have allowed U.S. regulators to speed up its approval, a decision that comes as the plane maker faces heightened scrutiny in the wake of a midair accident earlier this month.
Boeing confirmed Tuesday that it would withdraw the request, made last year to the Federal Aviation Administration, related to the new 737 MAX 7 jet's de-icing system.
Key China Bond Yield Hits Lowest in Over Two Decades as Easing Hopes Rise
The yield on China's benchmark government bond dropped to its lowest level in over two decades on growing expectations that Beijing will deliver more monetary policy easing to help bolster its economy.
China's 10-year bond yield slid below the psychologically-important 2.5% level early on Tuesday, touching 2.47%-its lowest since about 2002. It then clawed back some ground and was last at 2.51%.
Global Deal Activity on Course to Rebound This Year
SYDNEY-A downturn in global mergers and acquisitions is on track to reverse in 2024 as market participants get more certainty on interest rates, but dealmaking in corners of Australia's energy and resources sector faces uncertainty as the prices of some commodities slump.
In 2023, the total global M&A market dropped 15% to US$3.2 trillion, the lowest level in a decade, according to advisory firm Bain & Co. in a new report. The value of strategic deals-in which a company buys or sells all or part of another company-fell by 6%, with the Americas market holding steady but Europe and Asia faltering. Across sectors, deals in energy and natural resources jumped, while tech deals slowed.
Haley Taps Wall Street and Main Street to Keep Anti-Trump Bid Funded
Fueled by defiant donors, Nikki Haley appears to be putting enough in the bank to finance her long-shot bid to slow Donald Trump from claiming the 2024 Republican presidential nomination through at least the Feb. 24 South Carolina primary and perhaps beyond.
The former South Carolina governor and United Nations ambassador has seen a burst in online fundraising-more than $4 million-since more fully framing herself as Trump's nemesis after losing to him in last week's New Hampshire primary. There are also signs that her large-dollar donors, many of whom have harbored a distaste for Trump, are remaining supportive of the last major candidate standing in his way.
Three Ways the U.S. Could Punish Iran After Fatal Drone Attack
WASHINGTON-The U.S. range of options for responding to Sunday's deadly Iranian-backed militia attack includes a direct strike against Iran, hitting the regime's proxy groups or personnel abroad, and ratcheting up financial pressure on Tehran's battered economy.
(MORE TO FOLLOW) Dow Jones Newswires
01-30-24 0611ET
