Pre-Market Brief: Stocks Mostly Lower As Mixed Earnings Weigh On Sentiment

Oleksandr Pylypenko - Barchart - Wed Jan 25, 2023

March S&P 500 futures (ESH23) are trending down -0.85% this morning after three major U.S. benchmark indices finished the regular session mixed as earnings season kicked into full gear and provided clues into the state of the U.S. economy. The S&P 500 and Nasdaq indices were weighted down primarily by losses in the Healthcare, Technology, and Oil & Gas sectors, while the Dow ended higher mainly due to gains in the Telecoms, Utilities, and Industrials sectors.

In Tuesday’s trading session, the Dow notched a third-straight day of gains, while the S&P 500 and Nasdaq closed lower as bellwethers including 3M (MMM), Johnson & Johnson (JNJ), Verizon (VZ), and General Electric Company (GE) reported mixed results. At the same time, PACCAR (PCAR) climbed over +8% after the truck manufacturing company reported upbeat Q4 results. Also, shares of Microsoft Corporation (MSFT) gave up their +4% gains posted in after-hours trade as the software giant topped EPS estimates but narrowly missed revenue expectations, with revenue growing at the slowest rate in any quarter since 2016.

Data on Tuesday showed that Manufacturing PMI and Services PMI contracted at a slower-than-expected pace in the first weeks of the year. However, Richmond Manufacturing Index dropped to a 2-1/2 year low of -11 in January, weaker than expectations of -5.

Fourth-quarter earnings season, meanwhile, is in full swing, with investors awaiting new earnings results from major global companies, including Tesla (TSLA), Abbott Laboratories (ABT), AT&T (T), International Business Machines (IBM), and Boeing (BA). Analysts expect year-over-year earnings from S&P 500 companies to decline 2.9% for the quarter, compared with an expected drop of 1.6% at the start of the year.

“Earnings don’t make a bull or bear case for the market yet, but there’s an anxiousness among investors to be long when the Fed is done raising rates. We’re hitting a ramp in the earnings cycle, and by next week we’ll have a lot more information on the direction of the market,” said Joseph Sroka, a chief investment officer at NovaPoint in Atlanta.

Today, all eyes are focused on the U.S. Crude Oil Inventories data in a couple of hours. Economists, on average, forecast that Crude Oil Inventories will stand at +0.971M, compared to last week’s value of +8.408M.

Also, investors are likely to focus on the Bank of Canada’s interest rate decision. The BoC is expected to hike the key interest rate by 25 basis points to 4.50%.

In the bond markets, United States 10-Year rates are at 3.434%, down -0.94%.

The Euro Stoxx 50 futures are down -0.89% this morning as investors digested new corporate earnings and the latest economic data out of Germany. At the same time, the recent improvement in the region’s economic activity reinforced expectations that the European Central Bank would continue to hike rates to tackle inflation. In corporate news, shares of Asml Holding NV (ASML.A.DX) fell over -1% even after the company topped Q4 earnings estimates and forecast sales growth of more than 25% in 2023.

U.K. PPI Input, Germany’s Business Expectations, Germany’s Ifo Business Climate Index, and Germany’s Current Assessment data were released today.

U.K. December PPI Input has been reported at -1.1% m/m and +16.5% y/y, weaker than expectations of -0.6% m/m and +18.0% y/y.

The German January Business Expectations stood at 86.4, stronger than expectations of 85.0.

The German January Ifo Business Climate Index came in at 90.2, in line with expectations.

The German January Current Assessment was at 94.1, weaker than expectations of 95.0.

Asian stock markets today closed in the green. Japan’s Nikkei 225 Stock Index (NIK) closed up +0.35%, while the Chinese market was closed for the Lunar New Year holiday.

Japan’s Nikkei 225 Stock Index hit a new 1-month high today amid continued bets on a Chinese economic recovery this year. Markets are anticipating that a week-long holiday will boost economic growth in China, especially after the country lifted most anti-COVID curbs. The index’s upward momentum was fueled by gains in the Communication, Machinery, and Transportation Equipment sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 0.91% to 17.69.

Pre-Market U.S. Stock Movers

eHealth Inc (EHTH) surged over +19% in pre-market trading after the company announced positive preliminary Q4 and FY22 revenue.

Precigen Inc (PGEN) plunged about -18% in pre-market trading after the company reported results from the Phase 1 PRGN-2012 study and announced a $75M common stock offering.

Intuitive Surgical Inc (ISRG) slid more than -9% in pre-market trading after the company reported downbeat Q4 results.

Philip Morris International Inc (PM) rose about +1% in pre-market trading after Goldman Sachs upgraded the stock to buy from neutral with a price target of $120, up from $95.

Kopin Corporation (KOPN) dropped over -1% in pre-market trading after the company announced its intentions to offer shares of its common stock and warrants in an underwritten public offering.

Microsoft Corporation (MSFT) fell more than -2% in pre-market trading after the company warned about the deceleration of revenue growth in its Azure cloud-computing business.

Spotify Technology SA (SPOT) dropped about -2% in pre-market trading after Barclays lowered the firm’s price target on the stock to $131 from $135.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Wednesday - January 25th

Tesla (TSLA), ASML ADR (ASML), Abbott Labs (ABT), NextEra Energy (NEE), AT&T (T), IBM (IBM), Boeing (BA), Elevance Health (ELV), ADP (ADP), ServiceNow Inc (NOW), Progressive (PGR), U.S. Bancorp (USB), CSX (CSX), Lam Research (LRCX), General Dynamics (GD), Freeport-McMoran (FCX), Crown Castle (CCI), Norfolk Southern (NSC), Amphenol (APH), Hess (HES), Kimberly-Clark (KMB), Las Vegas Sands (LVS), TE Connectivity (TEL), Lonza Group AG (LZAGY), Ameriprise Financial (AMP), Nasdaq Inc (NDAQ), Hyundai Motor DRC (HYMTF), Hyundai Motor ADR (HYMLY), United Rentals (URI), Raymond James Financial (RJF), Teledyne Technologies (TDY), Steel Dynamics (STLD), POSCO (PKX), Teradyne (TER), Textron (TXT), Aspen (AZPN), Seagate (STX), MarketAxesss (MKTX), Packaging America (PKG), Flex (FLEX), Wynn Resorts (WYNN), Alstom PK (ALSMY), Tata Motors ADR (TTM), Wolfspeed (WOLF), Knight Transportation (KNX), United Utilities ADR (UUGRY), Dr. Reddy’s Labs ADR (RDY), SEI (SEIC), Hess Midstream Partners (HESM), Qualtrics International (XM), CACI (CACI), Stifel (SF), BOK Financial (BOKF), Prosperity Bancshares (PB), Levi Strauss A (LEVI), Nextera Energy Partners LP (NEP), Axalta Coating Systems (AXTA), RLI (RLI), Hexcel (HXL), Popular (BPOP), Axis Capital (AXS), Arcelik ADR (ACKAY), Calix (CALX), Cohen Steers (CNS), CVB Financial (CVBF), Plexus (PLXS), Cathay (CATY), Group 1 Automotive (GPI), Liberty Oilfield (LBRT), Extreme (EXTR), SL Green (SLG), Novagold (NG), Boot Barn Holdings (BOOT), Lakeland Financial (LKFN), RPC (RES), Celestica Inc. (CLS), Stellar Bancorp (STEL), First Bancorp (FBNC), Monro Muffler Brake (MNRO), Live Oak Bancshares Inc (LOB), Triumph Bancorp (TFIN), Pathward Financial (CASH), Costamare (CMRE), Origin Bancorp (OBNK), Capitol Federal (CFFN), LendingClub Corp (LC), Brookline Bancorp (BRKL), Customers Bancorp (CUBI).

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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.