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Oleksandr Pylypenko

Stocks Set to Open Lower as Investors Await FOMC Minutes and Nvidia Earnings

March S&P 500 E-Mini futures (ESH24) are down -0.34%, and March Nasdaq 100 E-Mini futures (NQH24) are down -0.56% this morning as trading resumed after the Presidents’ Day holiday, with investors looking ahead to the release of the minutes of the Federal Reserve’s latest policy meeting as well as earnings from semiconductor stalwart Nvidia later in the week.

In Friday’s trading session, Wall Street’s major averages ended lower. Roku Inc (ROKU) slumped over -23% after the streaming service provider offered weaker-than-expected Q1 gross profit and adjusted EBITDA guidance. Also, DoorDash Inc (DASH) slid more than -8% and was the top percentage loser on the Nasdaq 100 after the food delivery company reported mixed Q4 results and gave a weak full-year marketplace gross order value forecast. In addition, Nike Inc (NKE) fell over -2% and was the top percentage loser on the Dow after Oppenheimer downgraded the stock to Perform from Outperform. On the bullish side, Applied Materials Inc (AMAT) gained over +6% and was the top percentage gainer on the S&P 500 after the semiconductor equipment supplier posted upbeat Q1 results and provided strong Q2 guidance.

Economic data on Friday showed the U.S. January producer price index came in at +0.3% m/m and +0.9% y/y, compared to a consensus of +0.1% m/m and +0.6% y/y. Also, the U.S. core PPI, which excludes food and energy, unexpectedly increased to +2.0% y/y in January from +1.7% y/y in December (revised from +1.8% y/y), stronger than expectations of +1.6% y/y. In addition, U.S. January housing starts unexpectedly fell -14.8% m/m to a 5-month low of 1.331M, and U.S. January building permits unexpectedly fell -1.5% m/m to 1.470M, weaker than expectations of 1.450M and 1.509M, respectively. Finally, the University of Michigan’s gauge of consumer sentiment rose to a 2-1/2 year high of 79.6 in February, although weaker than expectations of 80.0.

“It’s another data point that suggests the Fed has ‘very little reason’ to cut interest rates anytime soon,” said Clark Bellin at Bellwether Wealth.

San Francisco Fed President Mary Daly said Friday that the Federal Reserve should take its time before implementing interest rate cuts, citing the risks associated with the possibility that certain factors currently pushing down inflation could peter out or reverse. At the same time, she said an expectation of three rate cuts was a “reasonable baseline” for the monetary policy outlook this year. Also, Atlanta Fed President Raphael Bostic said he supports initiating rate cuts at some point this summer, but he indicated that more positive inflation data could warrant an earlier start. “A year ago, six months ago, I was in the fourth quarter. So, we’ve seen tremendous progress, and I’m hopeful that that continues. If that continues, I’ll be willing to pull it forward even further,” Bostic said in an interview on CNBC. In addition, Richmond Fed President Thomas Barkin stated that the latest inflation figures highlight why policymakers want to see more data before cutting interest rates.

Meanwhile, U.S. rate futures have priced in an 8.5% probability of a 25 basis point rate cut at the conclusion of the Fed’s March meeting and a 34.0% chance of a 25 basis point rate cut at the May FOMC meeting.

Fourth-quarter earnings season winds down, but several notable companies are due to report this week, including NVIDIA (NVDA), Walmart (WMT), Home Depot (HD), Palo Alto Networks (PANW), Medtronic (MDT), Analog Devices (ADI), Intuit (INTU), and Booking (BKNG).

Later in this holiday-shortened week, investors will be eyeing a spate of economic data releases, including the U.S. S&P Global Composite PMI (preliminary), S&P Global Manufacturing PMI (preliminary), S&P Global Services PMI (preliminary), Initial Jobless Claims, Existing Home Sales, and Crude Oil Inventories.

Also, market participants will closely monitor the release of the Federal Reserve’s minutes from the January meeting on Wednesday for any fresh insights into the trajectory of monetary policy.

In addition, several Fed officials will be making appearances this week, including Bostic, Bowman, Jefferson, Cook, Waller, and Kashkari.

Today, investors will likely focus on the U.S. Leading Index. Economists, on average, forecast that the January leading economic index will stand at -0.3% m/m, compared to the previous value of -0.1% m/m.

In the bond markets, United States 10-year rates are at 4.279%, down -0.32%.

The Euro Stoxx 50 futures are down -0.06% this morning as a cautious sentiment gripped global markets despite China’s recent efforts to bolster its struggling property market. Mining and technology stocks underperformed on Tuesday, while chemical stocks gained ground. Meanwhile, the long-awaited Eurozone fourth-quarter negotiated wages data revealed a reading of 4.46%, marking a decrease from the record high of 4.69% in the third quarter. In corporate news, Air Liquide (AI.FP) soared over +6% after reporting a full-year operating profit that exceeded expectations and announcing that it has already achieved its 2025 margin targets. Also, Barclays Plc (BARC.LN) climbed more than +4% following the announcement of a significant operational overhaul, which includes substantial cost cuts, asset sales, and a reorganization of its business divisions. At the same time, Anglo American Plc (AAL.LN) dropped over -2% after unveiling job cuts in its South African Amplats division due to declining metals prices.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.42%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.28%. 

China’s Shanghai Composite Index closed higher today, reversing its earlier losses following the biggest-ever cut in the nation’s mortgage reference rate. Semiconductor and securities stocks led the gains on Tuesday. China announced its largest-ever cut in the benchmark mortgage rate Tuesday, aiming to support the faltering property market and the broader economy. The five-year loan prime rate was cut by 25 basis points to 3.95%, while the one-year LPR remained steady at 3.45%. The five-year LPR was last lowered in May 2023. Meanwhile, the newly appointed head of the Chinese securities regulator conducted a two-day seminar starting on Saturday, reassuring market participants that the regulator will respond to market concerns in a timely manner to enhance the country’s capital markets. In other news, Reuters reported that major state-owned banks in China stepped in to sell dollars on Tuesday in their bid to curb the decline in the yuan following a reduction in the country’s key five-year LPR. In corporate news, Ningxia Zhongke Biotechnology Co Ltd climbed over +4% as the biotechnology firm plans to vote for a new chairman.

Japan’s Nikkei 225 Stock Index closed slightly lower today, pulling back further from the all-time high it reached over three decades ago. China’s unexpectedly large rate cut initially lifted Japanese stocks, but its effect was short-lived, and the Nikkei closed the day lower. Financial and energy stocks led the declines on Tuesday, while utilities and non-cyclical consumer stocks outperformed. In corporate news, Euglena Co Ltd fell over -1% despite reporting a slightly narrower 2023 loss attributable to owners and a 4.7% increase in net sales. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -2.16% to 19.45.

Pre-Market U.S. Stock Movers

Discover Financial Services (DFS) surged about +13% in pre-market trading after Capital One agreed to buy the company in a stock-based deal valued at $35.3 billion.

Intel Corporation (INTC) climbed over +4% in pre-market trading following a Bloomberg report indicating that the company is in talks with the Biden administration to secure subsidies exceeding $10 billion for building semiconductors.

Tesla Inc (TSLA) fell more than -1% in pre-market trading after Phillip Securities downgraded the stock to Neutral from Accumulate with a $175 price target.

Caterpillar Inc (CAT) dropped over -2% in pre-market trading after Evercore ISI downgraded the stock to In Line from Outperform with a price target of $338.

Southwest Airlines Company (LUV) gained more than +1% in pre-market trading after Bernstein upgraded the stock to Market Perform from Underperform with a price target of $32.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Tuesday - February 20th

Walmart (WMT), Home Depot (HD), Palo Alto Networks (PANW), Medtronic (MDT), Public Storage (PSA), Realty Income (O), CoStar (CSGP), Diamondback (FANG), Keysight Technologies (KEYS), IFF (IFF), Westlake Chemical (WLK), Expeditors Washington (EXPD), CenterPoint Energy (CNP), Sun (SUI), Celanese (CE), Gfl Environmental (GFL), Toll Brothers (TOL), Chesapeake Energy (CHK), WillScot A (WSC), Caesars (CZR), Middleby Corp (MIDD), Graphic Packaging (GPK), KBR (KBR), Globus Medical (GMED), Ufp Industries (UFPI), Fluor (FLR), Matador (MTDR), Choice Hotels (CHH), Element Solutions (ESI), Flowserve (FLS), Workiva Inc (WK), SolarEdge Technologies Inc (SEDG), Halozyme (HALO), Armstrong World Industries (AWI), Equitrans Midstream (ETRN), Axsome Therapeutics Inc (AXSM), Sprout Social (SPT), Digitalbridge Group (DBRG), Instructure Holdings (INST), CVR Energy (CVI), Teladoc Inc (TDOC), Enpro Industries (NPO), Allete (ALE), TRI Pointe Homes (TPH), Visteon (VC), John Bean Tech (JBT), LGI Homes (LGIH), Ringcentral Inc (RNG), Empire State Realty (ESRT), Osisko Gold Ro (OR), Cushman & Wakefield (CWK), National Health Investors (NHI), Stepan (SCL), Enovix (ENVX), Siriuspoint (SPNT), Dana (DAN), NeoGenomics (NEO), The Andersons (ANDE), Donnelley Financial Solutions (DFIN), Amplitude (AMPL), La-Z-Boy (LZB), Owens&Minor (OMI), JBG SMITH Properties (JBGS), Abcellera Biologics (ABCL), Openlane (KAR), Claros Mortgage Trust (CMTG), Skyward Specialty Insurance (SKWD), Beyond (BYON), Brookdale Senior Living (BKD), BlueLinx (BXC), Select Energy Services (WTTR), Avanos Medical (AVNS), Centerspace (CSR).

More Stock Market News from Barchart

On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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