Stocks Set To Open Mixed As Investors Await Powell Testimony

Oleksandr Pylypenko - Barchart - Mon Mar 6, 2023

March S&P 500 futures (ESH23) are down -0.11%, and March Nasdaq 100 E-Mini futures (NQH23) are up +0.02% this morning as market participants awaited testimony from Federal Reserve Chair Jerome Powell and looked ahead to Friday’s U.S. payrolls report.

In Friday’s trading session, the benchmark S&P 500, the tech-heavy Nasdaq Composite, and the blue-chip Dow notched 2-1/2 week highs as Treasury yields retreated from key levels, with the 10-year Treasury yield pulling back below the crucial 4% level. A decline in Treasury yields bolstered a rally in interest rate-sensitive sectors, including consumer discretionary and technology.

Data on Friday showed the ISM Non-Manufacturing PMI stood at 55.1 in February, stronger than expectations of 54.5, with new orders and employment climbing to over 1-year highs. Also, U.S. Services PMI came in at 50.6 in February, above expectations of 50.5, returning to growth for the first time in eight months.

“Investors saw what they wanted in the ISM data, which was basically healthy growth with slowing prices. It suggests they are willing to stay on the plane as they are less worried about the landing,” said Robert Pavlik, a senior portfolio manager at Dakota Wealth.

Boston Federal Reserve President Susan Collins said Friday the U.S. central bank needs to keep raising interest rates to combat high inflation. “I do believe that we will need to do some additional rate increases, and exactly what the right amount really needs to be dependent on a holistic review of the information we receive,” Collins said. Also, Federal Reserve Bank of San Francisco President Mary Daly said on Saturday that the Fed would likely need to raise interest rates higher and keep them there longer. “In order to put this episode of high inflation behind us, further policy tightening, maintained for a longer time, will likely be necessary,” Daly said.

In the coming week, U.S. non-farm payrolls report for February will be the main highlight as investors look for more clues on the strength of the labor market after January’s red-hot report. In addition, market participants will be eyeing a spate of economic data, including the U.S. ADP Nonfarm Employment Change, Exports, Imports, Trade Balance, JOLTs Job Openings, Crude Oil Inventories, Initial Jobless Claims, Continuing Jobless Claims, Average Hourly Earnings, Private Nonfarm Payrolls, Unemployment Rate, and Federal Budget Balance.

Also, investors will focus on Congressional testimony from Federal Reserve Chairman Jerome Powell for fresh insights on the Fed’s rate hike path. Mr. Powell will be testifying before the Senate on Tuesday and the House of Representatives on Wednesday.

Today, all eyes are focused on the U.S. Factory Orders data in a couple of hours. Economists, on average, forecast that January Factory Orders will stand at -1.8% m/m, compared to the previous value of +1.8% m/m.

In the bond markets, United States 10-Year rates are at 3.919%, down -1.12%.

The Euro Stoxx 50 futures are down -0.39% this morning as investors digested China’s conservative annual growth target as well as Eurozone retail sales data. Also, European Central Bank President Christine Lagarde said in an interview released over the weekend that it was “very likely” the ECB would raise interest rates by 50 basis points this month, signaling further interest rate hikes to fight the inflation ‘monster.’ In corporate news, shares of Telecom Italia (TIT.M.DX) climbed over +2% after Italian state investor CDP and Australian fund Macquarie made a joint bid for the fixed-line network of the former phone monopoly.

U.K.’s Construction PMI and Eurozone’s Retail Sales data were released today.

U.K. February Construction PMI has been reported at 54.6, stronger than expectations of 49.1.

Eurozone January Retail Sales stood at +0.3% m/m and -2.3% y/y, weaker than expectations of +1.0% m/m and -1.8% y/y.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.19%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.11%.

China’s Shanghai Composite today closed lower after the country’s leadership set a weaker-than-expected target for economic growth of “around 5%” for 2023. Analysts expected China to set a GDP target above 5.5% for 2023 as the country emerges from three years of COVID-19 disruptions. Investors are now awaiting the Chinese February inflation and trade data due later this week, which is expected to throw more light on the world’s second-largest economy.

At the same time, Japan’s Nikkei 225 Stock Index closed higher and hit a new 3-month high as market participants continued to bet that the Bank of Japan would keep its ultra-accommodative policy unchanged in the near term. The BOJ is widely anticipated to keep interest rates unchanged at its meeting later this week. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 1.89% to 16.19.

Pre-Market U.S. Stock Movers

Euronav (EURN) slid more than -2% in pre-market trading after Deutsche Bank downgraded the stock to hold from buy.

Esperion Therapeutics Inc (ESPR) plunged over -20% in pre-market trading after the company announced full results from the landmark CLEAR outcomes trial.

Apple Inc (AAPL) rose about +1% in pre-market trading after Goldman Sachs initiated coverage of the stock with a buy rating and $199 price target.

Perrigo Company PLC (PRGO) gained over +1% in pre-market trading after Raymond James raised the firm’s price target on the stock to $43 from $42 and kept an outperform rating.

Nextracker Inc (NXT) rose about +2% in pre-market trading after Barclays initiated coverage of the stock with an overweight rating.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Monday - March 6th

Ciena Corp (CIEN), Nutanix (NTNX), Guidewire (GWRE), Industrias Penoles (IPOAF), Yamana Gold (AUY), Sprott Physical Gold and Silver Trust (CEF), Grupo Financiero Galicia ADR (GGAL), Cvent Holding (CVT), Highpeak Energy Acquisition (HPK), EVO Payments (EVOP), Curaleaf (CURLF), AeroVironment (AVAV), Pactiv Evergreen (PTVE), Resolute Forest Products (RFP), Day One Biopharmaceuticals (DAWN), P10 Inc (PX), AerSale (ASLE), BELLUS Health Inc. (BLU), National Western Life Insurance (NWLI), Purecycle Technologies Holdings (PCT), UFP (UFPT), LivePerson (LPSN), Proterra (PTRA), Aris Water Solutions (ARIS), Orthofix (OFIX), Coherus BioSciences (CHRS), CTi Biopharma (CTIC), Indus Realty Trust (INDT), Calavo Growers (CVGW), Cara Therapeutic (CARA), CECO Environmental (CECO), Azul (AZUL), Zynex (ZYXI), Anika (ANIK), Lordstown Motors (RIDE).

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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.