Pre-Market Brief: Stocks Mostly Lower As Hawkish Fed Remarks Weigh On Sentiment, Powell Speech In Focus

Oleksandr Pylypenko - Barchart - Tue Jan 10, 2023

March S&P 500 futures (ESH23) are trending down -0.08% this morning after three major U.S. benchmark indices endedthe regular session mixed following hawkish remarks from two U.S. Federal Reserve officials, with market participants turning cautious ahead of crucial inflation data. The Dow Jones Industrial Average and S&P 500 indices were weighted down primarily by losses in the Healthcare, Telecoms, and Oil & Gas sectors, while the NASDAQ Composite index ended in the green mainly due to gains in the Technology, Basic Materials, and Utilities sectors.

In Monday’s trading session, mega-cap growth stocks Apple Inc (AAPL), Alphabet (GOOGL) Inc, and Microsoft Corp (MSFT) led the gains in tech as the U.S. 10-year Treasury yield fell to its lowest level in three weeks. Also, NVIDIA (NVDA) gained about +5% following a series of positive remarks from Wall Street. However, weakness in consumer defensive and healthcare sectors weighed on the broader market.

San Francisco Fed President Mary Daly said on Monday it is “really too soon to declare victory” on inflation. Daly added that the benchmark rate would need to surpass 5% to bring inflation down, dampening hopes for a rate cut this year. At the same time, Atlanta Fed Bank President Raphael Bostic said Monday that fresh inflation data would help Fed policymakers decide the pace of interest rate hikes at their upcoming meeting.

“Traders are bringing back talk of a ‘soft landing,’ which could support risk equities. If the data show lower U.S. inflation, another dovish wave may hit markets, helped by easing recession fears,” said Anderson Alves of ActivTrades in a report.

Meanwhile, U.S. rate futures have priced in a 77.2% chance of a 25 basis point rate increase and a 22.8% chance of a 50 basis point hike at February’s monetary policy meeting.

The U.S. economic data slate is largely empty on Tuesday. However, investors will likely focus on a speech from Federal Reserve Chairman Jerome Powell at Sweden’s Sveriges Riksbank International Symposium on Central Bank Independence.

In the bond markets, United States 10-Year rates are at 3.549%, up +0.90%.

The Euro Stoxx 50 futures are down -0.64% this morning, retreating from eight-month highs as hawkish comments from Fed officials weighed on risk sentiment ahead of a widely-expected speech by Federal Reserve chief Jerome Powell. European stocks rose to their highest level since May 2022 on growing hopes that the region will only face a shallow recession in the new year. However, hawkish comments from Fed officials weighed on sentiment and turned the focus on Fed Chair Jerome Powell's speech as investors look for more clarity on the pace of future rate hikes.

U.K. BRC Retail Sales Monitor and France’s Industrial Production data were released today.

U.K. December BRC Retail Sales came in at +6.5% y/y, stronger than expectations of +2.4% y/y.

The French November Industrial Production has been reported at +2.0% m/m, stronger than expectations of +0.8% m/m.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.21%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.78%.

China’s Shanghai Composite today closed lower as a recent rally fueled by optimism over a Chinese reopening faded. But losses were limited as heavyweight technology stocks gained ground on reports that Beijing will end its regulation campaign against the country’s biggest internet companies. Investors also grew cautious over the near-term economic recovery in China amid the worst-yet COVID-19 outbreak in the country. At the same time, Chinese stocks traded close to multi-month highs, demonstrating a stellar recovery in December as investors priced in a reopening in the world’s second-largest economy.

Japan’s Nikkei 225 Stock Index closed higher in catch-up trade after a long weekend. The index’s upward momentum was fueled by gains in the Mining, Transport, and Precision Instruments sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 3.80% to 18.21.

The Japanese Tokyo Core CPI has been reported at +4.0% y/y in December, stronger than expectations of +3.8% y/y, pointing to more economic pain for the country.

Pre-Market U.S. Stock Movers

Oak Street Health Inc (OSH) spiked over +34% in pre-market trading on a report that CVS is exploring a $10B+ acquisition of the company.

Vyne Therapeutics Inc (VYNE) climbed about +72% in pre-market trading after the company announced that the first patient had been dosed in the Phase 1a/b clinical trial of VYN201.

Frontline Ltd (FRO) gained over +20% in pre-market trading after the company terminated the combination pact with Euronav.

Berkeley Lights Inc (BLI) dropped more than -4% in pre-market trading after the company announced revenue for the full year 2022 is expected to be in the range of $78.0M to $78.5M, compared to a consensus of $85.36M.

Wolverine World Wide Inc (WWW) rose about +3% in pre-market trading after the company updated Q4 and FY22 guidance.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Tuesday - January 10th

Albertsons (ACI), Synnex (SNX), Eaton Vance TaxManaged Global Diver (EXG), Oramed (ORMP), Saratoga Investment Corp (SAR), Blade Air Mobility (BLDE), Lifecore Biomedical (LFCR), Byrna Technologies (BYRN), Bed Bath & Beyond (BBBY), Inotiv (NOTV).

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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.