OPENING CALL
Stock index futures rose on Thursday ahead of earnings from three of the Magnificent 7: Apple, Amazon.com and Meta Platforms.
"[M]ost investors have been waiting in ambush for the slightest misstep to take advantage of selling the overstretched tech rally," Swissquote Bank said.
Apple, Amazon and Meta's results "better blow investors' minds. Otherwise, the tech selloff is poised to gather momentum."
Traders will also be keeping a wary eye on the regional banking sector after shares in New York Community Bancorp plunged 38% on Wednesday as the lender highlighted difficulties in commercial real estate. Shares edged up premarket.
Meanwhile, investors continue to consider the timetable for when the Federal Reserve may begin lowering borrowing costs. Jerome Powell said that a rate cut in March was "not the most likely case or the base case."
Stocks expressed disappointment at this push back, but fixed income futures markets now see an even greater certainty of rates falling at the subsequent Fed meeting in May, and indeed traders also still see around 150 basis points of cuts occurring this year.
It's very much a case of train delayed, not cancelled, at this point," Hargreaves Lansdown said. "But investors are likely to be less forgiving if we see any data emerging suggesting that the economy still has scope to keep inflation bubbling away."
To that end, the market will be keen to see the nonfarm payrolls report on Friday, hoping for signs that wage growth is not picking up speed.
Overseas Markets
Several global bank stocks were under pressure. In Japan, Aozora Bank tumbled more than 20% after it warned of losses on its U.S. office loan portfolio. In Europe, BNP Paribas and ING both tumbled after disappointing earnings reports. Deutsche Bank shares rose after the it unveiled job cuts and higher payouts.
Premarket Movers
Align Technology was rising 12% after it said it expected first-quarter sales of $960 million to $980 million, better than analysts' forecasts of $947 million. Fourth-quarter profit and sales topped estimates following strong demand for its Invisalign product for adults and teens.
MaxLinear forecast another decline in revenue in the first quarter. Shares fell 14%.
Nextracker reported fiscal third-quarter adjusted earnings and sales that topped Wall Street estimates and the solar company raised guidance for the fiscal year. The stock rose 28%.
Qorvo reported better-than-expected fiscal third-quarter adjusted earnings and said it was planning to acquire microchip-maker Anokiwave for an undisclosed fee. Qorvo shares rose 5.3%.
Qualcomm reported fiscal first-quarter earnings and revenue that were better than expected and provided an optimistic vision for artificial-intelligence features on phones this year. For the fiscal second quarter, Qualcomm said it expects revenue of $8.9 billion to $9.7 billion. At the midpoint, the company's revenue forecast roughly was in line with analysts' estimates of $9.3 billion. The stock fell 0.7%.
U.S.-listed shares of Shell rose 1.9% after the company's annual profit declined but still topped analysts' estimates. Shell also said it would buy back $3.5 billion of its stock in the first quarter and raised its fourth-quarter dividend by 20%.
Wednesday's Post-Close Movers
Cimpress reported a swing to a profit in the latest quarter. Shares of the company climbed 13% to $85.00 in after-hours trading.
Volcon on Wednesday announced a 1-for-45 reverse stock split, with shares slated to trade on a post-split basis on Monday. Shares of the maker of electric off-road vehicles dropped 20% to 11 cents in after-hours trading.
Watch For:
Weekly Jobless Claims; Preliminary Productivity and Costs for 4Q; ISM Report on Business Manufacturing PMI for January; Earnings from Amazon.com, Apple, Merck & Co., Meta
Today's Top Headlines/Must Reads:
- What's the Right Interest Rate for the Fed Anyway?
- Powell Navigates 'Toxic' Politics of Rate Cuts as Election Nears
- Amazon Could Soon Be on Hook for Safety of Third-Party Products It Sells and Ships
- One of America's Hottest Commodities is Probably in Your Trash
MARKET WRAPS
Forex:
Sterling fell against a broadly stronger dollar and traded steady against the euro.
"It is likely too soon for the BOE to send a strong signal that the first cut will be delivered in May," leading to potential modest gains for the pound, MUFG said.
The BOE should be more confident that rates have peaked, however, with updated forecasts likely showing near-term inflation significantly lower while those policymakers who previously voted to raise rates are likely to drop that vote, it said.
Energy:
Oil prices have bounced as Middle Eastern supply concerns persisted and Red Sea military action heats up.
That said, any gains were still being tempered by caution ahead of the next OPEC+ meeting, a strong dollar after the Fed said it wouldn't race to cut rates, and weak economic data from China, analysts said.
"Middle East tensions and disruptions in the Red Sea appear to be among the driving factors here but there is also the fact that countries continue to resiliently cope with high interest rates, which may soon fall," Oanda said.
Metals:
Base metals prices were mixed, while gold was lower, under pressure from a rise in the dollar after the Fed downplayed the chances of interest-rate cuts any time soon.
Prices of most industrial metals have also continued to take a downbeat turn following weak China data and supply concerns, analysts say.
Capital Economics said global lithium demand could roughly double by 2025 versus 2022 levels, outpacing supply increases and driving up prices, predicting lithium carbonate will increase from roughly $14 a kilogram now to $20 a kilo in 2024 and $30 a kilo in 2025.
"We suspect that prices are now close to their trough and expect some recovery in 2024-25," it said, adding: "We are at the high end of forecasts for lithium prices, probably reflecting our caution on supply."
TODAY'S TOP HEADLINES
Elon Musk Announces Tesla Vote on Texas Move After Pay Rejection
Elon Musk said Tesla would hold a shareholder vote to decide whether to move its state of incorporation to the Lone Star State after a Delaware court ordered him to give up a compensation package valued at $55.8 billion.
"The public vote is unequivocally in favor of Texas," Musk said Thursday in a post on X. "Tesla will move immediately to hold a shareholder vote, " he said after conducting a poll on the platform.
Aviation Industry to Tackle GPS Security Concerns
Aviation companies and European regulators say they will increase documentation and alert procedures about GPS tampering after a recent uptick in incidents near war zones.
Commercial airlines raised concerns after an increase in so-called GPS jamming, when geopositioning signals are blocked so a flight location isn't shown, and spoofing, when a GPS shows a false location, in particular in the Middle East and around Ukraine and Russia.
Beijing Pledges More Fiscal Support as Economy Stumbles
China's finance ministry promised more proactive government spending this year, as Beijing doubles down on boosting the economy amid a deepening property slump, while wary economists say bolder moves are needed to rejuvenate growth.
Fiscal expenditure in 2024 will be maintained at the necessary intensity and fiscal transfers to local governments will remain at certain levels, officials from the Ministry of Finance said at a press conference on Thursday, signaling more financial support from Beijing to local governments struggling with piling debt.
Fed Signals Cuts Are Possible but Not Imminent as It Holds Rates Steady
The Federal Reserve signaled it was thinking about when to lower interest rates but hinted a cut wasn't imminent when it held rates steady at its first policy meeting of the year on Wednesday.
The central bank held its benchmark federal-funds rate steady in a range between 5.25% and 5.5%, the highest level in more than two decades, as it awaits more convincing evidence that a sharp downturn in inflation at the end of last year will endure.
U.S. Hits Houthi Drone Station in Yemen, Citing Threat to Ships
U.S. forces struck targets belonging to Yemen's Houthi rebels on Thursday, continuing its effort to degrade the Iran-backed group's military capabilities without triggering a broader war in the region.
U.S. Central Command, which is responsible for U.S. military operations in the Middle East, said it struck a Houthi drone ground control station as well as several of the group's drones after determining they presented an "imminent threat" to merchant vessels and U.S. Navy ships in the region. It said the attack was in self-defense.
U.S. Drug-Price Negotiations Start Now
The long-awaited and hotly contested drug-price negotiations between the U.S. government and pharmaceutical companies are finally kicking off.
Under a new U.S. law, the federal government on Thursday is sending its initial offers of how much it is willing to pay for Medicare patients' use of an initial batch of 10 cancer, diabetes and other drugs to Johnson & Johnson, Merck and other big companies.
Donald Trump's Wealth Under Siege From Civil Lawsuits
Donald Trump has strategically sought to leverage his courtroom appearances for fundraising and to rally his base, but civil litigation against the former president is casting an increasingly dark cloud over his finances.
A pair of civil cases in New York-one accusing Trump of smearing an ex-advice columnist and the other of exaggerating his wealth to lenders-could end up costing Trump and his family real-estate conglomerate as much as half a billion dollars and complicate his affairs as he seeks the presidency.
Write to ina.kreutz@wsj.com
TODAY IN CANADA
Earnings:
Canada Goose 3Q
Open Text 2Q
Real Matters 1Q
Rogers Commun 4Q
Economic Indicators (ET):
0930 Jan Manufacturing PMI
Stocks to Watch:
(MORE TO FOLLOW) Dow Jones Newswires
02-01-24 0627ET
