Morning Markets

March E-Mini S&P 500 futures (ESH24) are down -0.03%, and March Nasdaq 100 E-Mini futures (NQH24) are up +0.07%. 

Stock index futures this morning are little changed after mixed corporate news and lower T-note yields.  Tesla is up more than +1% in pre-market trading after forecasting full-year capital expenditures above consensus.  Also, Dollar Tree, Builders FirstSource, and Zim Integrated Shipping Services are up more than +1% after being upgraded.  T-note yields are lower today, giving equity markets a boost on positive carryover from a decline in European government bond yields on dovish ECB comments.

On the negative side, IRobot plunged more than -17% in pre-market trading after Amazon.com abandoned its planned $1.4 billion acquisition of the company when European Union regulators threatened to block the deal.  Also, Warner Bros Discovery and Albemarle are down more than -1% after being downgraded.

The markets are awaiting earnings reports from Apple, Alphabet, Amazon.com, and Microsoft this week. Also, the results of central bank meetings this week could move the markets, with the 2-day FOMC meeting beginning tomorrow and the Bank of England (BOE) meeting on Thursday.

The markets are discounting the chances for a -25 bp rate cut at 3% at the next FOMC meeting on Jan 30-31 and 47% for that same -25 bp rate cut for the following meeting on March 19-20.

U.S. and European government bond yields today are lower.  The 10-year T-note yield is down -4.0 bp at 4.097%.  The 10-year German bund yield fell to a 1-/2 week low of 2.229% and is down -5.7 bp at 2.242%.  The 10-year UK gilt yield is down -5.5 bp at 3.909%.  

Overseas stock markets are mixed.  The Euro Stoxx 50 is down -0.28%.  China’s Shanghai Composite Index closed down -0.92%.  Japan’s Nikkei Stock Index closed up +0.77%.

The Euro Stoxx 50 is moderately lower as it consolidates below last Friday’s 23-year high. Some negative corporate news is weighing on European stocks, with Royal Phillips NV falling 6% after saying it suspended sales of sleep apnea devices and ventilators in the U.S. after reaching an agreement with the U.S. FDA over its faulty medical equipment.  Also, Ryanair Holdings Plc fell more than -3% after cutting its full-year earnings forecast.  Losses in equities were limited as European government bond yields fell, with the 10-year German bund yield falling to a 1-1/2 week low on dovish ECB comments that bolstered speculation the ECB could start cutting interest rates as soon as April.  

ECB Vice President Guindos said, "There has been good news regarding the evolution of inflation, and that, sooner or later, will end up being reflected in the monetary policy."

ECB Governing Council member Kazimir said June is more likely than April for the first ECB interest rate cut as "acting hastily based on short-term surprises without having more clarity about the medium term would be risky."

ECB Governing Council member Centeno said the ECB should lower interest rates sooner rather than later as he sees "a lot of evidence that inflation is falling in a sustained way."

Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 26% for its next meeting on March 7 and have fully priced in (+101% chance) for that rate cut at the following meeting on April 11.

China’s Shanghai Composite Index today closed moderately lower.  Chinese property stocks erased an early gain and moved lower after China Evergrande Group fell to a record low and dampened market sentiment after it was ordered to liquidate by a Hong Kong court.  China Evergrande Group, which has amassed more than $300 billion of liabilities, is the largest collapse of China’s property developers, has undercut China’s economic growth, and has led to record defaults by developers.  Chinese brokerage firms also retreated today after the country’s securities regulator halted the lending of certain shares for short selling, a move that analysts say will weigh on their earnings.   Chinese property developers initially rose today after Guangzhou eased home-buying restrictions, and local media reported that more Chinese cities will probably relax their housing policy further.

China Dec industrial profits fell -2.3% year-to-date y/y.

Japan’s Nikkei Stock Index today closed moderately higher.  Japanese defense stocks rallied today after North Korea test-fired multiple cruise missiles on Sunday.  Also, energy producer stocks climbed today after crude oil prices rallied to a 2-month high.  In addition, Japanese exporter stocks moved higher, despite strength in the yen, after better-than-expected news last week showed the U.S. economy on solid footing, which should boost growth prospects for exporters. 

Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 34% for its next meeting on March 19 and at 69% for the following meeting on April 26.

Pre-market U.S. Stock Movers

Archer-Daniels-Midland (ADM) climbed more than +2% in pre-market trading after saying it would delay performance bonuses to some executives until its financial statements were completed and audited. 

Tesla (TSLA) rose more than +1% in pre-market trading after forecasting full-year capital expenditures above $10.00 billion, stronger than the consensus of $9.78 billion. 

Dollar Tree (DLTR) rose more than +1% in pre-market trading after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $157. 

Advanced Micro Devices (ADM) gained more than +1% in pre-market trading after Susquehanna Financial raised its price target on the stock to $210 from $170. 

SoFi Technologies (SOFI) jumped more than +8% in pre-market trading after reporting Q4 net income of $48 million, well above the consensus of $9.9 million and the company's first profit since going public in 2021. 

Zim Integrated Shipping Services (ZIM) rallied more than +7% in pre-market trading after Jeffries upgraded the stock to buy from hold with a price target of $20. 

ZoomInfo Technologies (ZI) climbed more than +5% in pre-market trading even after Bank of America Global Research upgraded the stock to buy from neutral.   

Builders FirstSource (BLDR) rose more than +1% in pre-market trading after Bank of America Global Research upgraded the stock to buy from neutral.   

IRobot (IRBT) plunged more than -17% in pre-market trading after Amazon.com abandoned its planned $1.4 billion acquisition of the company when European Union regulators threatened to block the deal.  The company then said that CEO Angle was stepping down and it would implement an operational restructuring plan and cut about 31% of its workforce.

Warner Bros Discovery (WBD) slid more than -1% in pre-market trading after Wells Fargo Securities downgraded the stock to equal weight from overweight. 

Vera Therapeutics Snap (VERA) slumped more than 8% in pre-market trading after it said it planned to issue and sell $200 million of class A shares. 

Phillips NV (PHG) tumbled more than -6% in pre-market trading after it said it suspended sales of sleep apnea devices and ventilators in the U.S. following an agreement with the FDA.

Albemarle (ALB) fell more than -1% in pre-market trading after Cowen downgraded the stock to market perform from outperform. 

Earnings Reports (1/29/2024)

Alexandria Real Estate Equitie (ARE), Cleveland-Cliffs Inc (CLF), Crane Co (CR), Equity LifeStyle Properties In (ELS), F5 Inc (FFIV), Franklin Resources Inc (BEN), Graco Inc (GGG), Nucor Corp (NUE), SoFi Technologies Inc (SOFI), Whirlpool Corp WHR), Woodward Inc (WWD).

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