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Stocks Set to Open Lower as Investors Weigh Powell’s Remarks, Earnings and Fed Speak in Focus

Barchart - Mon Feb 5, 4:37AM CST

March S&P 500 E-Mini futures (ESH24)are down -0.24%, and March Nasdaq 100 E-Mini futures (NQH24) are down -0.12% this morning as U.S. Treasury yields climbed on relatively hawkish comments from Federal Reserve Chair Jerome Powell while investors looked ahead to more corporate earnings reports and speeches from other Fed officials.

Federal Reserve Chair Jerome Powell said that Americans might need to wait beyond March for the central bank to cut interest rates as officials await further economic data to confirm the trajectory of inflation towards 2%. “The danger of moving too soon is that the job’s not quite done and that the really good readings we’ve had for the last six months somehow turn out not to be a true indicator of where inflation’s heading,” Powell said in an interview conducted Thursday with CBS’s 60 Minutes that aired Sunday evening.

In Friday’s trading session, Wall Street’s major averages ended in the green, with the benchmark S&P 500, blue-chip Dow, and tech-heavy Nasdaq 100 notching record highs. Meta Platforms Inc (META) soared over +20% and was the top percentage gainer on the S&P 500 and Nasdaq 100 after reporting better-than-expected Q4 results and offering above-consensus Q1 revenue guidance. The social media giant also announced its first-ever quarterly dividend of $0.50 a share and authorized an additional $50 billion in buybacks. Also, Edwards Lifesciences Corp (EW) climbed more than +9% following an FDA approval for its Evoque heart valve device and an upgrade by Wells Fargo. In addition, Inc (AMZN) gained over +7% after the Seattle-based e-commerce giant posted upbeat Q4 results. On the bearish side, Charter Communications Inc (CHTR) tumbled more than -16% and was the top percentage loser on the S&P 500 and Nasdaq 100 after the company missed Q4 profit expectations and said its internet subscribers fell by 61,000 in the quarter.

The U.S. Labor Department’s report on Friday showed that nonfarm payrolls rose by 353K jobs last month, swamping the 187K expected figure and increasing from the 333K (revised from 216K) jobs added in December. Also, the U.S. January unemployment rate was unchanged at 3.7%, stronger than expectations of 3.8%. In addition, U.S. average hourly earnings came in at +0.6% m/m and +4.5% y/y in January, stronger than expectations of +0.3% m/m and +4.1% y/y. Finally, the U.S. January consumer sentiment index from the University of Michigan was revised upward to a 2-1/2 year high of 79.0, stronger than expectations of 78.8.

“I think we can officially kiss a March rate-cut goodbye - and more than likely a May,” said Alex McGrath at NorthEnd Private Wealth.

Meanwhile, U.S. rate futures have priced in a 15.5% chance of a 25 basis point rate cut at the next central bank meeting in March and a 53.8% chance of a 25 basis point rate cut at May’s monetary policy meeting.

Fourth-quarter earnings season rolls on, and investors await new reports from notable companies this week, including McDonald’s (MCD), Caterpillar (CAT), Eli Lilly (LLY), Ford Motor (F), Amgen (AMGN), Disney (DIS), Uber Technologies (UBER), PayPal (PYPL), CVS Health (CVS), Philip Morris (PM), ConocoPhillips (COP), and PepsiCo (PEP). Analysts project a year-over-year growth of 7.8% for the aggregate S&P 500 earnings in Q4, surpassing the anticipated increase of 4.7% at the end of the quarter.

Investors will also be monitoring a spate of economic data releases this week, including U.S. Exports, Imports, Trade Balance, Crude Oil Inventories, Consumer Credit, Initial Jobless Claims, and Wholesale Inventories.

In addition, several Fed officials will be making appearances this week, including Bostic, Mester, Harker, Barkin, and Bowman.

Today, all eyes are focused on the U.S. ISM Non-Manufacturing PMI in a couple of hours. Economists, on average, forecast that January ISM Non-Manufacturing PMI will come in at 52.0, compared to the previous value of 50.6.

Also, investors will likely focus on the U.S. S&P Global Composite PMI, which stood at 50.9 in December. Economists foresee the January figure to be 52.3.

The U.S. S&P Global Services PMI will be reported today as well. Economists expect January’s figure to be 52.9, compared to 51.4 in December.

In the bond markets, United States 10-year rates are at 4.099%, up +1.59%.

The Euro Stoxx 50 futures are up +0.09% this morning as broader sentiment remained subdued due to investors reassessing their expectations for interest rate cuts. A survey released on Monday indicated that the Eurozone economy showed tentative signs of recovery at the start of the year, concurrently highlighting increasing inflationary pressures and supporting the European Central Bank’s case for maintaining interest rates at historic highs. Meanwhile, markets are currently pricing in a reduction of approximately 125 basis points from the European Central Bank this year, compared to around 140 basis points in the previous week. In corporate news, Unicredit Spa (UCG.M.DX) surged over +10% after Italy’s second-biggest lender reported stronger-than-expected Q4 net profit and said it would boost shareholder returns. Also, Lotus Bakeries (LOTB.BB) soared more than +14% after the Belgian biscuits producer posted its annual results.

France’s Composite PMI, France’s Services PMI, Germany’s Composite PMI, Germany’s Services PMI, Eurozone’s Composite PMI, Eurozone’s Services PMI, Eurozone’s Sentix Investor Confidence Index, and Eurozone’s PPI data were released today.

The French January Composite PMI stood at 44.6, stronger than expectations of 44.2.

The French January Services PMI was at 45.4, stronger than expectations of 45.0.

The German January Composite PMI came in at 47.0, weaker than expectations of 47.1.

The German January Services PMI has been reported at 47.7, stronger than expectations of 47.6.

Eurozone January Composite PMI arrived at 47.9, in line with expectations.

Eurozone January Services PMI stood at 48.4, in line with expectations.

Eurozone February Sentix Investor Confidence Index was at -12.9, stronger than expectations of -15.0.

Eurozone December PPI has been reported at -0.8% m/m and -10.6% y/y, compared to expectations of -0.8% m/m and -10.5% y/y.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -1.02% and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.54%.

China’s Shanghai Composite Index closed lower today, marking its sixth consecutive session of decline, although losses were limited by renewed assurances from regulators to stabilize the market.In a statement on Sunday, the China Securities Regulatory Commission announced its intention to prevent abnormal market fluctuations, guide more medium- and long-term funds into the market, and take action against illegal activities, including malicious short selling and insider trading. Also, China’s securities regulator issued another statement on Monday, saying it would closely monitor and take forceful measures to prevent the risks from pledged shares. Meanwhile, a private-sector survey revealed on Monday that China’s services activity expanded at a slightly slower pace in January, affected by a slowdown in new order growth. In other news, the International Monetary Fund projected on Friday that China’s economic growth would decelerate to 4.6% in 2024 and further decline in the medium term, with growth of about 3.5% forecasted in 2028. In corporate news, Shanghai Ya Tong Co Ltd slid -10% after the Chinese engineering services provider announced the completion of the public listing and sale of a 70% stake in Shanghai Weiyin Construction Engineering for 50.4 million yuan.

The Chinese January Caixin Services PMI came in at 52.7, weaker than expectations of 53.0.

Japan’s Nikkei 225 Stock Index closed higher today, propelled by a softer yen and gains on Wall Street at the end of last week. Real estate and financial stocks led the gains on Monday. Export-heavy automobile stocks also advanced in the wake of the yen’s slide against the dollar since Friday, with Nissan Motor Co Ltd climbing over +3%, Honda Motor Co Ltd gaining nearly +3%, and Toyota Motor Corp rising over +1%. Meanwhile, a business survey on Monday indicated that Japan’s service activity in January expanded at the strongest pace since September, driven by a steeper increase in new business inflows and higher international demand. In corporate news, Mitsui Fudosan surged over +6% following a Financial Times report stating that U.S. activist fund Elliott Management has urged Japan’s largest property group to launch a 1 trillion yen ($6.74 billion) buyback. At the same time, Sumitomo Chemical Co Ltd plunged more than -7% after the company swung to an attributable loss in the fiscal nine months ended December 31st, 2023. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +2.99% to 19.97.

The Japanese January au Jibun Bank Japan Services PMI stood at 53.1, stronger than expectations of 52.7.

Pre-Market U.S. Stock Movers

4D Molecular Therapeutics Inc (FDMT) surged about +23% in pre-market trading after presenting positive interim data from the Randomized Phase 2 PRISM trial.

Boeing Co (BA) fell over -2% in pre-market trading after announcing on Sunday that it would need to perform additional work on around 50 undelivered 737 MAX airplanes, potentially delaying some near-term deliveries. This decision came after its supplier, Spirit AeroSystems, identified two mis-drilled holes on certain fuselages.

Mattel Inc (MAT) slid more than -3% in pre-market trading after JPMorgan downgraded the stock to Neutral from Overweight with a price target of $19.

Bigcommerce Holdings Inc (BIGC) slumped over -4% in pre-market trading after Goldman Sachs downgraded the stock to Neutral from Buy with a price target of $9.50.

Apellis Pharmaceuticals Inc (APLS) rose more than +2% in pre-market trading after Jefferies upgraded the stock to Buy from Hold with a price target of $80.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Monday - February 5th

McDonald’s (MCD), Caterpillar (CAT), Vertex (VRTX), Itau Unibanco (ITUB), Air Products (APD), NXP (NXPI), Simon Property (SPG), Estee Lauder (EL), IDEXX Labs (IDXX), Palantir (PLTR), ON Semiconductor (ON), Symbotic (SYM), Tyson Foods (TSN), Loews (L), Aecom Technology (ACM), CNA Financial (CNA), Crown (CCK), Fabrinet (FN), Simpson Manufacturing (SSD), Amkor (AMKR), FMC (FMC), Bellring (BRBR), Rambus (RMBS), Coherent (COHR), Timken (TKR), Affiliated Managers (AMG), Varonis Systems (VRNS), Kilroy (KRC), Skyline (SKY), ChampionX Corp (CHX), Cabot Corp (CBT), Hillenbrand (HI), J & J Snack Foods (JJSF), Bowlero (BOWL), Allegiant (ALGT), NAPCO (NSSC), Kforce (KFRC), Sphere Entertainment (SPHR), Chegg Inc (CHGG), Kimball Electronics (KE), Mesa Labs (MLAB), Gladstone Capital (GLAD), Graham (GHM).

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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.

Provided Content: Content provided by Barchart. The Globe and Mail was not involved, and material was not reviewed prior to publication.

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