S&P Futures Fall On Jitters Ahead of Fed Meeting

Oleksandr Pylypenko - Barchart - Tue Jan 31, 2023

March S&P 500 futures (ESH23) are trending down -0.33% this morning after three major U.S. benchmark indices ended the regular session in the red as investors braced for a busy week of central bank meetings, a slew of quarterly earnings reports, and crucial U.S. economic data. Three major U.S. stock indexes were weighed down primarily by losses in the Oil & Gas, Technology, and Consumer Goods sectors.

In Monday’s trading session, major U.S. stock indexes closed lower as higher bond yields weighed on technology and other rate-sensitive megacap stocks. U.S. Treasury yields gained ground ahead of the central bank meetings and a host of important U.S. economic data later this week, with the 10-year yield climbing for a third straight session.

“The market has had a big run, and the trading is a bit more cautious heading into a week which likely will be an inflection point for the overall market,” said Keith Lerner, a co-chief investment officer at Truist Advisory Services.

The Federal Reserve kicks off its two-day meeting today, with investors widely anticipating the Fed to lift rates by 25 basis points on Wednesday. At the same time,market participants expect Fed Chair Jerome Powell to signal more hikes ahead and push back on expectations that the central bank could cut rates later this year. Meanwhile, the European Central Bank and the Bank of England are expected to increase interest rates by 50 basis points on Thursday.

Fourth-quarter corporate earnings season, meanwhile, rolls on, and investors await new reports from major global companies today, including Exxon Mobil (XOM), Pfizer (PFE), McDonald’s (MCD), and AMD (AMD). Analysts expect aggregate S&P 500 earnings to notch a 3% year-over-year decline for the quarter, weaker than the anticipated fall of 1.6% at the start of the year.

Today, all eyes are focused on the U.S. CB Consumer Confidence data in a couple of hours. Economists, on average, forecast that January CB Consumer Confidence will stand at 109.0, compared to the previous value of 108.3.

Also, investors are likely to focus on the U.S. Chicago PMI data, which was at 45.1 in December. Economists foresee the fresh figure to be 45.1.

U.S. S&P/CS HPI Composite - 20 n.s.a. will be reported today. Economists foresee this figure to stand at +6.8% y/y in November, compared to the previous number of +8.6% y/y.

U.S. Employment Cost Index will come in today as well. Economists expect this figure to be +1.1% q/q in Q4, compared to +1.2% q/q in Q3.

In the bond markets, United States 10-Year rates are at 3.523%, down -0.77%.

The Euro Stoxx 50 futures are down -0.58% this morning, dropping for a second day as investors digested a series of corporate earnings and important regional economic data. German retail sales unexpectedly fell by -5.3% m/m in December, weaker than expectations of +0.2% m/m, weighed down by high inflation and the energy crisis. On the positive side, France’s economy unexpectedly grew by +0.1% q/q between the third and fourth quarters, driven by foreign trade as imports fell notably, reflecting weakening demand. In corporate news, UBS Group Ag (UBSG.Z.IX) slid over -3% after the Swiss lender reported a decrease in trading fees and transaction income at its wealth management business.

France’s Consumer Spending, France’s CPI (preliminary), Germany’s Unemployment Change, Germany’s Unemployment Rate, Italy's GDP (preliminary), and Eurozone GDP (preliminary) data were also released today.

The French December Consumer Spending has been reported at -1.3% m/m, weaker than expectations of +0.2% m/m.

The French January CPI was at +0.4% m/m and +6.0% y/y, weaker than expectations of +0.5% m/m and +6.1% y/y.

The German January Unemployment Change came in at -15K, stronger than expectations of +5K.

The German January Unemployment Rate remained steady at 5.5%.

The Italian GDP stood at -0.1% q/q and +1.7% y/y in the fourth quarter, stronger than expectations of -0.2% q/q and +1.6% y/y.

Eurozone GDP has been reported at +0.1% q/q and +1.9% y/y in the fourth quarter, compared to expectations of -0.1% q/q and +2.2% y/y.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.42%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.39%.

China’s Shanghai Composite today closed lower even after data showed that Chinese manufacturing and services activity rebounded sharply in January. Chinese manufacturing PMI rose to 50.1 in January, returning to expansion territory for the first time since September 2022. At the same time, non-manufacturing PMI rebounded to 54.4, up from 41.6 in December, indicating a rapid rebound in economic activity after the relaxation of anti-COVID curbs.

At the same time, Japan’s Nikkei 225 Stock Index closed lower, but better-than-expected retail sales data helped limit losses. The index’s downward momentum was fueled by losses in the Steel, Chemical, Petroleum & Plastic, and Insurance sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 0.18% and hit a new 1-month low of 16.97.

The Japanese December Retail Sales stood at +3.8% y/y, stronger than expectations of +3.0% y/y.

Pre-Market U.S. Stock Movers

Harmonic Inc (HLIT) plunged about -12% in pre-market trading after the company reported upbeat Q4 results but issued weak FY23 guidance.

NXP Semiconductors NV (NXPI) slid more than -4% in pre-market trading after the company reported mixed Q4 results and released below-consensus Q1 guidance.

Comstock Resources Inc (CRK) climbed about +6% in pre-market trading after the company entered S&P SmallCap 600.

Whirlpool Corporation (WHR) rose over +1% in pre-market trading after the company reported mixed Q4 results but posted above-consensus FY23 guidance.

InVitae Corp (NVTA) fell more than -6% in pre-market trading after Goldman Sachs downgraded the stock to sell from neutral with a $2 price target.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Tuesday - January 31st

Exxon Mobil (XOM), Pfizer (PFE), McDonald’s (MCD), United Parcel Service (UPS), Caterpillar (CAT), Amgen (AMGN), AMD (AMD), Stryker (SYK), Chubb (CB), Mondelez (MDLZ), Canadian Pacific Railway (CP), UBS Group (UBS), Marathon Petroleum (MPC), Moody’s (MCO), Southern Copper (SCCO), General Motors (GM), Phillips 66 (PSX), Edwards Lifesciences (EW), MSCI (MSCI), Hoya Corp (HOCPY), Sysco (SYY), Electronic Arts (EA), MPLX LP (MPLX), Imperial Oil (IMO), Corning (GLW), Fujitsu ADR (FJTSY), Komatsu (KMTUY), Swedbank AB (SWDBY), Dover (DOV), Spotify Tech (SPOT), Snap (SNAP), IDEX (IEX), Ajinomoto ADR (AJINY), Howmet Aerospace Pref (HWM_p), Match Group (MTCH), Western Digital (WDC), International Paper (IP), TDK ADR (TTDKY), Advantest DRC (ATEYY), Koninklijke ADR (KKPNY), Boston Properties (BXP), Stora Enso Oyj PK (SEOAY), Hubbell (HUBB), PulteGroup (PHM), Entegris (ENTG), Amdocs (DOX), Ono Pharmaceutical Co (OPHLY), Banco De Chile (BCH), Juniper (JNPR), West Japan Railway ADR (WJRYY), AO Smith (AOS), Lennox (LII), Renaissancere (RNR), Pentair (PNR), Unum (UNM), Makita (MKTAY), Sensata Tech (ST), National Instruments (NATI), Houlihan Lokey Inc (HLI), Lufax (LU), NewYork Community Bancorp (NYCB), Oshkosh (OSK), Toto (TOTDY), Allegro (ALGM), Polaris Industries (PII), Credit Acceptance (CACC), Ashland Global (ASH), Evoqua Water (AQUA), Seiko Epson ADR (SEKEY), Akbank Turk Anonim Sirketi (AKBTY), ManpowerGroup (MAN), Hamilton Lane (HLNE), Kirby (KEX), Super Micro Computer (SMCI), Mueller Industries (MLI), NewMarket (NEU), MakeMyTrip (MMYT), CorVel (CRVL), O-I Glass (OI), Mercury (MRCY), CommVault (CVLT), MDC (MDC), Griffon (GFF), Central Garden&Pet (CENT), Central Garden&Pet A (CENTA), Alps Electric (APELY), Varex Imaging (VREX), Hawaiian (HA).

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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.