Morning Markets

March S&P 500 futures (ESH23) this morning are up +0.16%, and March Nasdaq 100 E-Mini futures (NQH23) are up +0.25%.

U.S. stock index futures this morning are moderately higher on some short covering ahead of this afternoon’s release of the minutes of the Jan 31-Feb 1 FOMC meeting.  The minutes will be scoured for clues of how many policymakers see the need for larger rate hikes and whether the FOMC members anticipated raising rates higher than previously thought to curb persistently-high inflation.

Stock indexes were also boosted this morning after T-note yields fell on dovish comments from St. Louis Fed President Bullard, who said, "consumers are trading down, and they are benefitting.  That is what I heard from Walmart Tuesday.  That is how disinflation is going to occur."  The 10-year T-note yield this morning fell back from a 3-1/4 month high of 3.966% and is down -1.0 bp at 3.943%. 

Some positive corporate earnings results today are supportive of stocks.  Palo Alto Networks is up more than +9% in pre-market trading after reporting stronger-than-expected Q2 billings. Also, Stellantis is up more than +3% after reporting a better-than-expected 2022 adjusted operating margin.  Alcoa and Nordson are up more than +1% after being upgraded.

On the negative side, Charles River Laboratories International sank more than -9% in pre-market trading after forecasting 2023 adjusted EPS well below the consensus.  Also, Keysight Technologies is down more than -8% after reporting weak Q1 orders.  ZipRecruiter plunged more than -15% after forecasting weaker-than-expected full-year revenue.

This quarterly earnings season has been disappointing, with only 68% of reporting S&P 500 companies having beaten expectations, compared with about 80% seen during recent quarters.

Stocks are also lower on negative carryover from a -0.20% decline in the Euro Stoxx 50 today to a 1-week low. Also, China’s Shanghai Composite stock index closed down -0.47%, and Japan’s Nikkei Stock index closed down -1.34%. 

The Euro Stoxx 50 index today fell to a 1-week low and is moderately lower on some disappointing earnings results.  European banking stocks are weaker, led by a -2% slide in Lloyds Banking Group Plc after reporting earnings and guidance below consensus. Also, mining stocks are under pressure, with Rio Tinto Plc down nearly -3% after reporting lower-than-expected quarterly profit and cutting its dividend due to weak demand for metals in China.  On the positive side was today’s news that German Feb business confidence rose to an 8-month high.

ECB Governing Council member de Galhau said, "there's been an excess of volatility on expectations for the terminal rate.  In other words, markets have overreacted" when placing bets for peak ECB interest rates. 

The German Feb IFO business confidence index rose +1.0 to an 8-month high of 91.1.

China’s Shanghai Composite today recovered from early losses and closed moderately higher.  Weakness in technology stocks, led by losses in artificial intelligence-related stocks, weighed on the overall market on concern authorities were looking to deal with illegal use of ChatGPT services provided by local apps.  Chinese internet stocks were also under pressure amid growing concerns about price wars.  The South China Morning Post reported Tuesday that JD.com was planning a 10 billion yuan ($1.5 billion) subsidy campaign to compete against rival PDD Holdings, and Meituan was embarking on a campaign to hire 10,000 people to compete against ByteDance in the Chinese food delivery market.

Japan’s Nikkei Stock Index tumbled to a 4-week low today on negative carryover from Tuesday’s sell-off in U.S. equity markets.  Japanese technology stocks moved lower and weighed on the overall market after U.S. Treasury yields rose to their highest for the year amid growing concerns the Federal Reserve would continue to raise interest rates.  Also, long liquidation in Japanese stocks weighed on the overall market ahead of Friday’s comments from BOJ Governor nominee Kazuo Ueda before the Japanese Parliament.  Concern about rising wage pressures in Japan may prompt the BOJ to exit its ultra-easy policies after Toyota Motor agreed to give the largest wage hikes in 20 years to its union members today, and Honda Motor said it would boost its wages by 5%, including the biggest increase in base pay in 30 years.

Pre-Market U.S. Stock Movers

Palo Alto Networks (PANW) jumped more than +9% in pre-market trading after reporting Q2 billings of $2.03 billion, stronger than the consensus of $1.96 billion and forecast Q3 billings of $2.20 billion-$2.25 billion, with the midpoint above the consensus of $2.22 billion.  

Stellantis (STLA) climbed more than +3% in pre-market trading after reporting 2022 adjusted operating margin of 13.0%, above the consensus of 12.5%. 

Realty Income (O) gained more than +1% in pre-market trading after reporting Q4 AFFO/share of $1.00, above the consensus of 97 cents and forecast full-year AFFO/share of $3.93-$4.03, with the midpoint above the consensus of $3.96.

Alcoa (AA) rose more than +1% in pre-market trading after Citigroup upgraded the stock to buy from neutral.

Nordson (NDSN) climbed more than +1% in pre-market trading after KeyBanc Capital Markets upgraded the stock to overweight from sector weight. 

Wix.com (WIX) rallied more than +9% in pre-market trading after reporting Q4 revenue of $355.0 million, better than the consensus of $452.3 million, and forecast Q1 revenue will climb at least +3% to $367 million-$371 million. 

CoStar Group (CSGP) slumped over -14% in pre-market trading after forecasting Q1 adjusted EPS of 25 cents-26 cents, well below the consensus of 36 cents.  Also, News Corp said it is no longer involved in discussions to sell its Move subsidiary to CoStar.

Keysight Technologies (KEYS) tumbled more than -8% in pre-market trading after reporting Q1 orders fell -13% y/y to $1.3 billion, and forecast Q2 adjusted EPS of $1.91-$1.97, with the midpoint below the consensus of $1.95. 

Occidental Petroleum (OXY) slipped more than -1% in pre-market trading after Evercore ISI downgraded the stock to underperform from inline.

Charles River Laboratories International (CRL) sank more than -9% in pre-market trading after forecasting 2023 adjusted EPS of $9.70-$10.90, well below the consensus of $$11.52. 

Overstock.com (OSTK) tumbled more than -8% in pre-market trading after reporting Q4 revenue of $404.9 million, weaker than the consensus of $446.5 million. 

ZipRecruiter (ZIP) plunged more than -15% in pre-market trading after forecasting full-year revenue of $770 million-$790 million, well below the consensus of $934.2 million.  B. Riley upgraded the stock to buy from neutral.

United Therapeutics (UTHR) tumbled more than -9% in pre-market trading after reporting Q4 revenue of $491.5 million, weaker than the consensus of $515.8 million. 

Today’s U.S. Earnings Reports (2/22/2023)

Allegion plc (ALLE), ANSYS Inc (ANSS), APA Corp (APA), Charles River Laboratories Int (CRL), Coterra Energy Inc (CTRA), DaVita Inc (DVA), eBay Inc (EBAY), Etsy Inc (ETSY), Garmin Ltd (GRMN), Mosaic Co/The (MOS), NetApp Inc (NTAP), NiSource Inc (NI), NVIDIA Corp (NVDA), Pioneer Natural Resources Co (PXD), Targa Resources Corp (TRGP), TJX Cos Inc/The (TJX).

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