Stocks Set To Open Higher As Dovish Powell Comments Boost Sentiment, ECB Decision In Focus

Oleksandr Pylypenko - Barchart - Thu Feb 2, 2023

March S&P 500 futures (ESH23) are trending up +0.47% this morning after three major U.S. benchmark indices staged a rebound on Wednesday after the Federal Reserve announced a further slowdown in the pace of interest rate hikes and a more dovish-than-expected message from Fed Chairman Jerome Powell boosted hopes of an economic soft landing. Three major U.S. stock indexes were fueled primarily by gains in the Technology, Consumer Services, and Consumer Goods sectors.

The Federal Reserve raised interest rates by 25 basis points to a range of 4.50% to 4.75% on Wednesday, marking a slowdown from the previous increases of 50 or 75 basis points undertaken at recent meetings. Also, Powell’s comments encouraged investors after the Fed Chair said that the “disinflation process has started.” At the same time, Jerome Powell continued to stress the need for further interest rate increases to bring inflation firmly under control.

“The positive market reaction reflected relief from market participants that there wasn’t a hawkish push-back on the recent loosening in financial conditions,” ANZ Research said.

Data on Wednesday showed that ADP Nonfarm Employment Change rose at the slowest pace in 2 years to 106K, while JOLTS job openings unexpectedly rose to a 5-month high of 11.012M in December. At the same time, manufacturing activity contracted for a third successive month as higher rates cooled demand for goods.

“Without a substantial reduction in labor demand, the Fed will not be comfortable pausing, let alone cutting rates,” Jefferies said in a note.

On the earnings front, shares of Meta Platforms Inc (META) jumped over +18% in pre-market trading after Facebook’s parent company reported better-than-expected fourth-quarter revenue and announced a new $40 billion share buyback. Also, Piper Sandler upgraded the stock to overweight from neutral with a price target of $215, up from $136.

Fourth-quarter earnings season continues to roll on, with investors awaiting new reports from major global companies, including Apple (AAPL), Alphabet (GOOG), Amazon.com (AMZN), Merck & Company Inc (MRK), ConocoPhillips (COP), and Ford Motor Company (F).

Today, all eyes are focused on the U.S. Initial Jobless Claims data in a couple of hours. Economists, on average, forecast that Initial Jobless Claims will stand at 200K, compared to last week’s value of 186K.

Also, investors are likely to focus on the U.S. Nonfarm Productivity preliminary data, which was at +0.8% q/q in the third quarter. Economists foresee the new figure to be +2.4% q/q.

U.S. Unit Labor Costs preliminary data will come in today. Economists foresee this figure to stand at +1.5% q/q in the fourth quarter, compared to the previous number of +2.4% q/q.

U.S. Factory Orders data will be reported today as well. Economists estimate this figure to be +2.3% m/m in December, compared to November’s value of -1.8% m/m.

In the bond markets, United States 10-Year rates are at 3.413%, up +0.44%.

The Euro Stoxx 50 futures are up +1.22% this morning as investors digested the latest Federal Reserve policy decision, looking ahead to more decisions by central banks in Europe. The focus now turns to interest rate decisions from the European Central Bank and the Bank of England due later in the session, with both central banks expected to hike rates by 50 basis points. In addition, market participants will be closely watching ECB President Lagarde’s press conference for clues on the path of future rate hikes this year. In corporate news, shares of Shell Plc (SHEL.LN) rose over +2% after the British oil and gas company reported better-than-expected fourth-quarter income.

Germany’s Trade Balance and Spain’s Unemployment Change data were released today.

The German December Trade Balance has been reported at 10.0B, stronger than expectations of 9.2B.

The Spanish January Unemployment Change came in at +70.7K, weaker than expectations of -15.2K.

Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.02%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.20%.

China’s Shanghai Composite today lagged its Asian peers and closed slightly higher amid remaining uncertainty over an economic rebound in the country this year. The Chinese government and private PMI readings released this week gave a mixed picture of the economy after Beijing eased most anti-COVID curbs earlier this year.

At the same time, Japan’s Nikkei 225 Stock Index closed higher, fueled by gains in the Mining, Gas & Water, and Insurance sector. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 2.39% to 17.55.

Pre-Market U.S. Stock Movers

Tenax Therapeutics Inc (TENX) spiked about +176% in pre-market trading after the company received a Notice of Allowance from the United States Patent and Trademark Office for levosimendan in the treatment of PH-HFpEF.

Align Technology Inc (ALGN) surged over +14% in pre-market trading after the company reported upbeat Q4 results.

ELF Beauty Inc (ELF) gained about +17% in pre-market trading after the company delivered better-than-expected Q3 results.

CH Robinson Worldwide Inc (CHRW) slid over -1% in pre-market trading after the company reported downbeat Q4 results.

Alphabet Inc Class A (GOOGL) and Amazon.com Inc (AMZN) gained about +4% in pre-market trading following Meta’s Q4 results.

FedEx Corporation (FDX) rose about +2% in pre-market trading after Citi upgraded the stock to buy from neutral.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Thursday - February 2nd

Apple (AAPL), Alphabet C (GOOG), Alphabet A (GOOGL), Amazon.com (AMZN), Eli Lilly (LLY), Roche Holding ADR (RHHBY), Merck&Co (MRK), Bristol-Myers Squibb (BMY), Qualcomm (QCOM), ConocoPhillips (COP), Honeywell (HON), Starbucks (SBUX), Sony ADR (SONY), Gilead (GILD), Estee Lauder (EL), Mitsubishi UFJ Financial ADR (MUFG), Illinois Tool Works (ITW), Becton Dickinson (BDX), Air Products (APD), KDDI Corp PK (KDDIY), ABB ADR (ABB), Siemens Healthineers ADR (SMMNY), ICE (ICE), Santander ADR (SAN), Ford Motor (F), ING ADR (ING), Dassault Systemes SA (DASTY), Takeda Pharma ADR (TAK), Infineon ADR (IFNNY), Hershey Co (HSY), Ferrari NV (RACE), Microchip (MCHP), BCE Inc (BCE), Parker-Hannifin (PH), Trane Technologies (TT), Banco Santander Brasil ADR (BSBR), Mizuho Financial ADR (MFG), DSV ADR (DSDVY), Cognizant A (CTSH), Ametek (AME), Aptiv (APTV), WW Grainger (GWW), WEC Energy (WEC), Chunghwa Telecom (CHT), Rogers Communications (RCI), Hartford (HIG), CNH Industrial NV (CNHI), Sirius XM (SIRI), Cardinal Health (CAH), LPL Financial (LPLA), Broadridge (BR), Publicis Groupe SA (PUBGY), CMS Energy (CMS), Ball (BALL), Danske Bank A/S ADR (DNKEY), Clorox (CLX), Tradeweb Markets (TW), Quest Diagnostics (DGX), OMV AG PK (OMVKY), Brookfield Infrastructure Partners (BIP), Gen Digital (GEN), Avery Dennison (AVY), Telenor ASA ADR (TELNY), Camden Property (CPT), Stanley Black Decker (SWK), Snap-On (SNA), Alfa Laval ADR (ALFVY), Bill Com (BILL), Bio-Techne (TECH), Paylocity Holdng (PCTY), Deckers Outdoor (DECK), Magellan (MMP), Keppel Corporation (KPELY), Reinsurance of America (RGA), Open Text (OTEX), ADS (WMS), Manhattan Associates (MANH), Santander Mexico B ADR (BSMX), AB SKF (SKFRY), Dolby Labs (DLB), Skechers (SKX), Berry Global (BERY), Arrow Electronics (ARW), Omega Healthcare (OHI), United States Steel (X), Harley-Davidson (HOG), Boyd Gaming (BYD), WWE (WWE), Brunswick (BC), Columbia Sportswear (COLM), Selective (SIGI), Post (POST), PENN Entertainment (PENN), Lancaster Colony (LANC), Exponent (EXPO), The Ensign (ENSG), Cirrus (CRUS), Synaptics (SYNA), Asbury Automotive (ABG), Electrolux B ADR (ELUXY), Schneider National (SNDR), MACOM Tech (MTSI), NewJersey Resources (NJR), ATI Inc (ATI), Janus Henderson (JHG), Kemper (KMPR), PennyMac Financial (PFSI), Lazard (LAZ), Methanex (MEOH), Prestige Brand (PBH), Euronav (EURN), Hanesbrands (HBI), CONMED (CNMD), MicroStrategy (MSTR), Hub Group (HUBG), Leslies (LESL), Viavi Solutions (VIAV), Cavco (CVCO), Minerals Technologies (MTX), CSW Industrials Inc (CSWI), Mueller Water Products (MWA), Adtalem Education (ATGE), Sally Beauty (SBH), Standex (SXI), PennyMac Mortgage (PMT), Digi (DGII), Wabash National (WNC), SkyWest (SKYW).

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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.