Stocks Set to Open Higher as Investors Await Key U.S. Inflation Data and Big Tech Earnings

Oleksandr Pylypenko - Barchart - Mon Apr 22, 4:36AM CDT

June S&P 500 E-Mini futures (ESM24)are up +0.48%, and June Nasdaq 100 E-Mini futures (NQM24) are up +0.58% this morning as market participants looked ahead to earnings reports from some of the biggest tech heavyweights as well as the release of the Fed’s favorite inflation gauge later in the week.

In Friday’s trading session, Wall Street’s major averages closed mixed, with the benchmark S&P 500 dropping to a 1-3/4 month low and the tech-heavy Nasdaq 100 falling to a 3-month low. Netflix (NFLX) plunged over -9% after the streaming giant provided weaker-than-expected Q2 revenue guidance and said it would stop reporting quarterly subscriber data. Also, chip stocks retreated after Taiwan Semiconductor Manufacturing Co. lowered its 2024 revenue growth outlook for the chip industry, with Advanced Micro Devices (AMD) falling more than -5% and Micron Technology (MU) sliding over -4%. In addition, Ulta Beauty (ULTA) dropped more than -2% after Jefferies downgraded the stock to Hold from Buy with a price target of $438. On the bullish side, Paramount Global (PARA) climbed more than +13% and was the top percentage gainer on the S&P 500 following a New York Times report indicating that Sony’s movie studio division is in discussions with Apollo Global Management about making a joint takeover bid for the company. Also, American Express (AXP) rose over +6% and was the top percentage gainer on the Dow after the credit card issuer topped quarterly profit estimates.

Chicago Fed President Austan Goolsbee remarked on Friday that progress on inflation has stalled, meriting a pause to permit incoming data to offer further clarity on how the economy evolves. “You never want to make too much of any one month’s data, especially inflation, which is a noisy series, but after three months of this, it can’t be dismissed. Right now, it makes sense to wait and get more clarity before moving,” Goolsbee said.

Meanwhile, U.S. rate futures have priced in a 1.9% chance of a 25 basis point rate cut at May’s monetary policy meeting and a 15.0% probability of a 25 basis point rate cut at the conclusion of the Fed’s June meeting.

In other news, market participants and observers perceive higher-than-expected interest rates in the face of persistent inflation as the most significant threat to financial stability, the Fed said in its semiannual Financial Stability Report published Friday.

First-quarter earnings season kicks into full gear, and investors await fresh reports from major global companies this week, including Tesla (TSLA), Meta Platforms (META), Microsoft (MSFT), Alphabet (GOOGL), Boeing (BA), PepsiCo (PEP), Visa (V), Intel (INTC), Texas Instruments (TXN), IBM (IBM), UPS (UPS), General Motors (GM), Ford Motor (F), Caterpillar (CAT), Exxon Mobil (XOM), and Abbvie (ABBV). According to LSEG data, analysts estimate aggregate S&P 500 earnings to grow 2.9% year-over-year in Q1, compared with an expected rise of 5.1% on April 1st.

On the economic data front, the March reading of the U.S. core personal consumption expenditures price index, the Fed’s preferred inflation gauge, will be the main highlight in the coming week. Also, market participants will be eyeing a spate of other economic data releases, including the U.S. GDP (preliminary), S&P Global Manufacturing PMI (preliminary), S&P Global Services PMI (preliminary), Building Permits, New Home Sales, Richmond Manufacturing Index, Durable Goods Orders, Core Durable Goods Orders, Crude Oil Inventories, Initial Jobless Claims, Wholesale Inventories (preliminary), Pending Home Sales, Personal Spending, Personal Income, and Michigan Consumer Sentiment.

The U.S. economic data slate is largely empty on Monday.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.655%, up +0.85%.

The Euro Stoxx 50 futures are up +0.25% this morning, tracking gains in Asia as investors took comfort in the lack of further escalation from Iran after Israel’s retaliatory strike. Retail and bank stocks gained ground on Monday, while automobile stocks underperformed. Meanwhile, investors are anticipating Eurozone’s April consumer confidence data and remarks from European Central Bank President Christine Lagarde scheduled for later in the day. In addition, market participants will keep their eyes peeled for European bank earnings, with BNP Paribas, Deutsche Bank, Barclays, and Lloyds set to report their quarterly figures this week. In corporate news, Galp Energia-Nom (GALP.PL) soared over +17% following the announcement from the Portuguese oil company indicating that the Mopane field, located off the coast of Namibia, might possess at least 10 billion barrels of oil.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.67% and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.00%.

China’s Shanghai Composite Index closed lower today despite most Asian peers notching gains. Oil and coal stocks led the declines on Monday. China kept benchmark lending rates unchanged at a monthly fixing on Monday, in line with expectations. The one-year loan prime rate remained steady at 3.45%, while the five-year rate was unchanged at 3.95%, said the People’s Bank of China. Meanwhile, the China Securities Regulatory Commission said late Friday that it will facilitate initial public offerings by leading Chinese companies in Hong Kong as well as loosen regulations on stock trading links between the city and mainland exchanges. Under the measures, the investment link between mainland China and Hong Kong will expand to encompass real estate investment trusts and yuan-denominated stocks listed in Hong Kong, while the bar for exchange-traded funds under Stock Connect will be lowered. In corporate news, Pingdingshan Tianan Coal Mining slumped over -7% after the company’s chairman, Li Yanhe, resigned due to job changes.

Japan’s Nikkei 225 Stock Index closed higher today, recouping some of Friday’s sharp losses triggered by Israel’s strike against Iran. Financial and food stocks outperformed on Monday, while chip-related stocks lost ground. Meanwhile, investors’ attention this week is primarily on the Bank of Japan’s rate decision as well as the release of fresh quarterly growth and inflation forecasts due on Friday. In corporate news, Nissan Motor slid nearly -2% after the automaker cut its full-year operating profit guidance by 14.5% on Friday, attributing it to lower-than-expected vehicle sales and other factors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -11.26% to 21.68.

“The Nikkei fell so much on Friday that it was natural for investors to buy back stocks today. Overall, the market was firm except for the chip-related stocks, which tracked their U.S. peers’ declines at the end of last week,” said Shuji Hosoi, a senior strategist at Daiwa Securities.

Pre-Market U.S. Stock Movers

Tesla (TSLA) fell over -2% in pre-market trading after the EV maker cut prices across several key markets, including China and Germany, following price cuts in the United States late last week.

Salesforce (CRM) rose more than +3% in pre-market trading following a report by the Wall Street Journal indicating that talks between the company and data-management software firm Informatica regarding a potential acquisition fizzled due to a failure to reach an agreement on terms.

Alcoa (AA) gained over +1% in pre-market trading after Morgan Stanley upgraded the stock to Equal Weight from Underweight with a price target of $36.50.

Western Digital (WDC) fell more than -1% in pre-market trading after Raymond James downgraded the stock to Market Perform from Outperform.

CNH Industrial (CNHI) slid over -3% in pre-market trading after BofA downgraded the stock to Neutral from Buy with a price target of $13.20.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Monday - April 22nd

Verizon (VZ), Cadence Design (CDNS), Truist Financial Corp (TFC), Nucor (NUE), Ameriprise Financial (AMP), Brown&Brown (BRO), Packaging America (PKG), Equity Lifestyle (ELS), Albertsons (ACI), Medpace Holdings (MEDP), Cleveland-Cliffs (CLF), Simpson Manufacturing (SSD), Crane (CR), RLI (RLI), AGNC Invest (AGNC), Globe Life (GL), Pinnacle (PNFP), Zions (ZION), Hexcel (HXL), Cadence Bancorp (CADE), ServisFirst Bancshares (SFBS), Cathay (CATY), Bank of Hawaii (BOH), Calix (CALX), AZZ (AZZ), Independent Bank Group (IBTX), NBT Bancorp (NBTB), HealthStream (HSTM), Dynex Capital (DX), Hbt Fin (HBT).

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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.