Nasdaq Futures Climb as Chipmakers Rally, U.S. Economic Data and ECB Minutes in Focus

Oleksandr Pylypenko - Barchart - Thu Jan 18, 4:33AM CST

March Nasdaq 100 E-Mini futures (NQH24) are trending up +0.77% this morning as market participants shifted their focus to corporate news and awaited a new round of U.S. economic data.

Chipmakers gained ground in pre-market trading following Taiwan Semiconductor Manufacturing Co.’s upbeat Q4 results and a projection of more than 20% revenue growth in 2024, driven by demand for advanced chips used in artificial intelligence applications. As a result, Advanced Micro Devices Inc (AMD), Microchip Technology Inc (MCHP), and ON Semiconductor Corporation (ON) rose more than +2%.

In Wednesday’s trading session, the benchmark S&P 500 and tech-heavy Nasdaq 100 dropped to 1-week lows, and the blue-chip Dow fell to a 3-1/2 week low. CrowdStrike Holdings Inc (CRWD) plunged over -3% and was the top percentage loser on the Nasdaq 100 after WestPark Capital downgraded the stock to Hold from Buy. Also, Tesla Inc (TSLA) slid about -2% after the electric vehicle maker slashed prices of its Model Y cars in Germany, France, Norway, and the Netherlands. In addition, Morgan Stanley (MS) fell more than -1% after JPMorgan Chase downgraded the stock to Neutral from Overweight with a price target of $87. On the bullish side, Boeing Co (BA) rose over +1% following the Federal Aviation Administration’s announcement that it had completed preliminary inspections on 40 Boeing 737 Max 9 airplanes, a key step toward lifting the aircraft’s grounding.

Economic data on Wednesday showed that U.S. retail sales rose +0.6% m/m in December, stronger than expectations of +0.4% m/m. Also, U.S. December core retail sales increased +0.4% m/m, higher than the consensus estimate of +0.2% m/m. In addition, U.S. industrial production rose +0.1% m/m in December, stronger than expectations of no change.

Meanwhile, U.S. rate futures have priced in a 2.6% chance of a 25 basis point rate cut at January’s monetary policy meeting and a 61.4% chance of a 25 basis point rate cut at the conclusion of the Fed’s March meeting.

In other news, the Federal Reserve said Wednesday in its Beige Book survey of regional business contacts that resilient consumer spending played a key role in driving the U.S. economy in recent weeks, offsetting weaknesses observed in other sectors such as manufacturing. “Consumers delivered some seasonal relief over the holidays by meeting expectations in most Districts and by exceeding expectations in three Districts, including in New York,” according to the report released Wednesday. Most of the Federal Reserve districts reported “little or no change” in economic activity during the period. In addition, despite almost all districts noting one or more signs of a cooling labor market, over half reported little to no net change in overall employment levels.

On the earnings front, notable companies like Truist Financial (TFC), KeyCorp (KEY), and Fastenal Company (FAST) are slated to release their quarterly results today.

Today, all eyes are focused on the U.S. Philadelphia Fed manufacturing index in a couple of hours. Economists, on average, forecast that the January Philadelphia Fed manufacturing index will stand at -7.0, compared to the previous value of -10.5.

Also, investors are likely to focus on U.S. Initial Jobless Claims data, which came in at 202K last week. Economists anticipate the new figure to be 207K.

The U.S. Building Permits preliminary data will be reported today. Economists foresee this figure to stand at 1.480M in December, compared to the previous figure of 1.467M.

U.S. Housing Starts data will come in today. Economists expect December’s figure to be 1.426M, compared to the previous value of 1.560M.

U.S. Crude Oil Inventories data will be reported today as well. Economists estimate this figure to be -0.313M, compared to last week’s value of +1.338M.

In addition, market participants will likely concentrate on a speech from Atlanta Fed President Raphael Bostic.

In the bond markets, United States 10-year rates are at 4.081%, down -0.64%.

The Euro Stoxx 50 futures are up +0.41% this morning as investors digested positive earnings reports and looked ahead to the release of the European Central Bank’s policy meeting minutes later in the day. Technology stocks gained ground on Thursday after Taiwan Semiconductor Manufacturing Co. said it anticipates a return to solid growth in the current quarter, with Asm International N.V. (ASM.NA) gaining over +4% and Asml Holding (ASML.NA) rising more than +1%. Meanwhile, investors are awaiting the minutes from the ECB’s December meeting for insights into the central bank’s interest rate trajectory. In corporate news, Cie Financiere Richemont Sa (CFR.Z.IX) soared over +9% after the Cartier jewelry owner posted better-than-expected Q3 sales, fueled by a substantial increase in sales in China. Also, Flutter Entertainment Plc (FLTR.LN) climbed more than +11% after posting a surge in Q4 revenue.

The European economic data slate is mainly empty on Thursday.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.43%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.03%.

China’s Shanghai Composite Index closed higher today, staging a recovery from earlier losses, driven by a surge in ETF trading indicating the involvement of state funds. Daily turnover of Huatai-PB CSI 300 ETF soared to 15 billion yuan ($2.1 billion) on Thursday, marking the highest level since 2015 and indicating support from state-backed funds. Consumer-related stocks led the gains on Thursday. Tech giants and mainland developers listed in Hong Kong also gained ground. Meanwhile, sentiment was also boosted by the announcement of financial talks between U.S. Treasury officials and their Chinese counterparts, set for later this week in Beijing. In other news, UBS Investment Bank raised its China 2024 growth projection to 4.6%, up from the previous estimate of 4.4%. “In the coming months, we expect property activities and property market to stabilize, helping to underpin household confidence. That should support continued post-Covid consumption recovery along with the economy and labor market, though at a slower pace,” UBS said in a note. In corporate news, AVIC Shenyang Aircraft climbed over +3% after the Chinese civilian and military aircraft manufacturer posted a 30.5% year-over-year increase in profit in 2023.

Japan’s Nikkei 225 Stock Index relinquished early gains to finish nearly flat today as concerns mounted over the potential overheating of stocks following a robust start to the year. Utilities and industrial stocks led the declines on Thursday. At the same time, automobile stocks outperformed, with Toyota Motor Corp rising over +2% and Honda Motor Co Ltd gaining more than +1%. Data showed on Thursday that Japan’s core machinery orders fell far more than anticipated in November, highlighting uncertainty regarding the economic outlook. Separately, data indicated that Japan’s industrial production declined by -0.9% in November compared to October, unchanged from the preliminary reading. Meanwhile, Japanese government bond yields increased for the third consecutive day on Thursday, driven by lackluster demand in the first auction for 20-year bonds this year. In other news, data from the Tokyo Stock Exchange on Thursday revealed that foreign investors purchased a net 956 billion yen ($6.5 billion) of Japanese stocks last week, their largest purchase since early June. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -1.02% to 20.45.

The Japanese November Core Machinery Orders arrived at -4.9% m/m and -5.0% y/y, weaker than expectations of -0.8% m/m and +0.2% y/y.

The Japanese November Industrial Production came in at -0.9% m/m, in line with expectations.

Pre-Market U.S. Stock Movers

Discover Financial Services (DFS) slumped over -10% in pre-market trading following the company’s announcement of weaker-than-expected Q4 earnings and guidance for FY24 loan growth to be “relatively flat.”

Hertz Global Holdings Inc (HTZ) climbed more than +5% in pre-market trading after Morgan Stanley upgraded the stock to Overweight from Equal Weight with a price target of $15.

Plug Power Inc (PLUG) tumbled over -16% in pre-market trading, extending yesterday’s losses after revealing in an SEC filing on Wednesday that it has entered into an at-market sales agreement with B. Riley, allowing the company to offer and sell shares to raise up to $1 billion.

Microsoft Corporation (MSFT) gained about +1% in pre-market trading after Exane BNP Paribas upgraded the stock to Outperform from Neutral with a $471 price target.

Playtika Holding Corp (PLTK) slid more than -4% in pre-market trading after BofA downgraded the stock to Underperform from Neutral with a price target of $8.

Analog Devices Inc (ADI) rose over +2% in pre-market trading after Wolfe Research upgraded the stock to Outperform from Peer Perform with a $225 price target.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Thursday - January 18th

Truist Financial Corp (TFC), Fastenal (FAST), PPG Industries (PPG), M&T Bank (MTB), JB Hunt (JBHT), Northern Trust (NTRS), KeyCorp (KEY), First Horizon National (FHN), Bank Ozk (OZK), Home BancShares (HOMB), FNB (FNB), WNS Holdings (WNS), Texas Capital (TCBI), Independent Bank (INDB), Banner (BANR), 1st Source (SRCE), OceanFirst (OCFC), Insteel Industries (IIIN), Metropolitan Bank (MCB), Five Point (FPH), Sify (SIFY).

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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.