MARKET WRAPS
Watch For:
Earnings from Cadence Design Systems, FirstEnergy, Palantir Technologies
Today's Top Headlines/Must Reads:
- Inflation Is Falling, and Where It Lands Depends on These Three Things
- Junk-Loan Market Shrugs Off Economic Worries
- New SEC Rules Target Corporate Insider Trading
- Investors Are Exiting U.S. Stock Funds During 2023 Rally
- EU Lifts Forecasts for Eurozone Growth as Inflation Eases
- From Apple to VW, CEOs Gradually Returning to China After Its Reopening
Follow WSJ market coverage here
Opening Call:
Stock futures were muted on Monday as investors remained wary about the prospects for more interest rate hikes by the Federal Reserve as they await the January CPI report due tomorrow.
The S&P 500 last week fell 1.1%, its biggest five-session drop since mid December, as traders noted a tick up in bond yields that suggested the central bank may have to increase borrowing costs by more than recently thought.
That caution was carrying through into the new week as futures pointed to the Fed taking borrowing costs to 5.2% by August.
"Given the hawkish tone to last week's Fedspeak, all eyes will be on Tuesday's CPI report for January. Traders will think a more robust CPI print would look less like a one-off and more like part of a trend, which could have a more pronounced impact on the market's view of the terminal," SPI Asset Management said.
Investors are also continuing to absorb the fallout from the ongoing fourth quarter earnings season. So far, 69% of the S&P 500 have delivered their results and the outcome is lackluster, Factset noted.
"Of these companies, 69% have reported actual EPS above the mean EPS estimate, which is below the 5-year average of 77% and below the 10- year average of 73%. In aggregate, earnings have exceeded estimates by 1.1%, which is also below the 5-year average of 8.6% and below the 10-year average of 6.4%."
Some analysts expressed concern about the technical condition of the market after its latest relapse.
"The SPX [S&P 500] broke out above 4,100 in early February, but closed below it last week. That creates the potential for a 'false breakout'," BTIG said.
"This comes as momentum is rolling over, rates and the dollar are breaking out, we are entering a seasonally weak period, and sentiment/positioning has come a long way from late December. Coming into this year we thought one of the key themes would be market's focus shifting from inflation and the Fed to a weakening economy. At this point that view looks to be premature with yields attempting to breakout, commodities resilient, and stocks breaking lower," BTIG added.
Stocks to Watch
Berkshire Grey confirmed it has received a non-binding takeover offer from SoftBank Group to acquire all outstanding stock for $1.30 per share in cash. Shares rose 3.1% in after-hours trading.
Blue Apron Holdings filed to offer and sell up to $70 million of stock through an at-the-market equity offering program.Shares dropped 19% in after-hours trading.
Caterpillar fell 1.3% as shares were downgraded to Neutral from Outperform at Baird.
Check Point Software Technologies reported fourth-quarter adjusted earnings of $2.45 a share, beating analysts' forecasts of $2.36. The company's board also authorized a $2 billion expansion of Check Point's stock buyback program.
Fidelity National Information Services was up 2.1% in premarket trading after Reuters reported the company was preparing to break up and plans to pursue a tax-free spinoff of its merchant business.
Five Below rose 1.2% after shares were upgraded to Buy from Neutral at Roth MKM.
Shares of Meta were rising 0.9% following a report from the Financial Times that said the parent company of Facebook has delayed finalizing multiple teams' budgets while it prepares a fresh round of job cuts.
Nikola gained 1.2% as the company has started work on hydrogen plants, WSJ reported .
Zivo Bioscience said its candidate for treating coccidiosis in broiler chickens resulted in a higher mortality rate than a typical study. Shares declined 27% in after-hours trading.
Forex:
The dollar could fall if tomorrow's inflation data are lower than expected but any declines will be short-lived, Commerzbank said.
A sustained dollar depreciation would require more than one set of data that illustrate a pronounced economic slowdown caused by past interest rate hikes, which might dampen the Federal Reserve's hopes for a soft economic landing, Commerzbank said.
"Only at that stage would it be justified in my view for the market to increasingly rely on the Fed moving in its direction, which would then put pressure on the dollar," it added, noting market expectations for rate cuts later this year.
Read Dollar Could Benefit From Potentially Strong US Data
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The euro should appreciate against the dollar over the course of 2023 but a rebound looks unlikely this week, ING said.
A rather low U.S. inflation figure tomrrow would be required to send EUR/USD sustainably back above 1.0800-1.0850, ING said.
"We see a greater chance of the pair [EUR/USD] coming under some additional pressure, and a strong U.S. consumer price index read could mean the 1.0500 support (1.0490 is the 2023 low) is tested."
Energy:
Oil prices edged lower in Europe as investors awaited the U.S inflation report.
Metals:
Base metals prices were mixed, while gold was flat in early London trading, as markets looked to tomorrow's CPI print.
An upside surprise could be a "wrecking ball" for risk assets like commodities after a slowdown in inflation provided investors with some optimism of a soft landing, SPI Asset Management said.
Gold Outlook
Gold prices are likely to remain volatile in the near-term, according to ANZ Research, with changes in Fed policy likely to cause price fluctuations for the precious metal.
ANZ pointed out that unemployment is historically low, and inflation remains above the Fed's target range.
"This could keep the Fed hawkish."
If the economic backdrop is to improve, that could mean further rate hikes which would be a strong headwind for gold and would create "short-term ripples" in the market, ANZ said.
ANZ added that prices falling below $1,800 a troy ounce in the short term might be likely because of this, with prices today at $1,874 an ounce.
TODAY'S TOP HEADLINES
New Toyota Chief Says He Will Accelerate Shift in EV Strategy
TOKYO-Toyota Motor Corp.'s new chief executive said he was looking to accelerate the auto maker's push into electric vehicles by introducing new EV-optimized parts and manufacturing methods.
Toyota will develop new EVs for its luxury Lexus brand by 2026, and everything in those models will be optimized for EVs including the battery and the manufacturing platform, Koji Sato said at a briefing Monday. Mr. Sato, 53, is set to become chief executive in April, taking over from longtime leader Akio Toyoda.
Nissan Motor, Renault to Invest $600 Million in India
Nissan Motor Co. and Renault S.A. plan to invest about $600 million in India to produce six new models, including two electric-vehicle models, the companies said Monday.
The six new models will comprise of three for each company on common platforms and will be engineered and built in Chennai, India, the French and Japanese auto makers said.
From Apple to VW, CEOs Gradually Returning to China After Its Reopening
BEIJING-Top executives from multinational companies are trickling back into China with the country's reopening, even as U.S.-China tensions grow following the appearance of a suspected Chinese surveillance balloon over the continental U.S.
Volkswagen AG's chief executive visited China from late January to early February, the company said, while Apple Inc. CEO Tim Cook and Pfizer Inc. CEO Albert Bourla are expected to visit next month, people familiar with the matter said. Ola Källenius, Mercedes-Benz Group AG's chairman, also plans a visit to China, the company said.
TikTok's Parent Takes On Meta in Battle for Virtual-Reality Market
ByteDance Ltd., the China-based owner of TikTok, is starting to snare market share in the virtual-reality headset space that Meta Platforms Inc. has identified as critical to its future.
Two years ago, ByteDance bought Pico, a Chinese startup that makes VR headsets. That launched a new front in the Chinese company's competition with Meta, whose Instagram and Facebook services have been battling for users and advertising dollars against TikTok as the short-video app soared in popularity.
Louis Vuitton's Formula for World Domination
PARIS-Louis Vuitton constructed a vast makeshift warehouse in the courtyard of the Louvre to house its recent menswear show. Hundreds of K-pop fans trying to get a glimpse of star Jung Hoseok, better known as J-Hope from BTS, lined the streets.
The guest list was designed to attract global attention: Hong Kong pop singer Jackson Wang, Los Angeles rapper Tyga and Mia Khalifa, a Lebanese-born pornographic actress turned social-media influencer. J-Hope, Usher and "Emily in Paris" actor Lucien Laviscount took their front-row seats not far from Bernard Arnault, the chairman and chief executive of LVMH Moët Hennessy Louis Vuitton SA, together with his wife and four of his five children, all of whom work for the company.
Nikola Constructs Hydrogen Fuel Network to Power Zero-Emissions Trucks
Nikola Corp. has started work on hydrogen plants, part of a fueling network the company intends to underpin its push to compete in the nascent zero-emissions truck market.
The seven-year-old manufacturer has also signed up a handful of hydrogen producers that have agreed to supply hydrogen for Nikola vehicles in parts of the U.S. and Canada, as the company seeks to have enough fuel for about 7,500 heavy-duty trucks by 2026.
U.S. Blacklists Chinese Companies It Links to Balloon Program
(MORE TO FOLLOW) Dow Jones Newswires
02-13-23 0626ET
