Stocks Tread Water Before the Open as Investors Await Key U.S. GDP Data, Tesla Results Disappoint

Oleksandr Pylypenko - Barchart - Thu Jan 25, 4:35AM CST

March S&P 500 E-Mini futures (ESH24)are up +0.04%, and March Nasdaq 100 E-Mini futures (NQH24) are up +0.01% this morning as investors digested the latest earnings reports while gearing up for a slew of U.S. economic data and more corporate earnings results.

Tesla Inc (TSLA) slumped over -7% in pre-market trading after the electric vehicle maker reported weaker-than-expected Q4 results and warned that vehicle volume growth may be “notably” lower in 2024 than the level observed in 2023. Also, KGI Securities downgraded the stock to Neutral from Outperform with a price target of $213.

In Wednesday’s trading session, Wall Street’s major averages closed mixed, with the benchmark S&P 500 and tech-heavy Nasdaq 100 posting new record highs. Netflix Inc (NFLX) soared over +10% and was the top percentage gainer on the S&P 500 and Nasdaq 100 after the streaming giant topped Q4 subscriber growth expectations. Also, Advanced Micro Devices Inc (AMD) climbed more than +5% after New Street Research upgraded the stock to Buy from Neutral with a $215 price target. In addition, General Dynamics Corporation (GD) gained over +4% after the company posted upbeat Q4 results. On the bearish side, Dupont De Nemours Inc (DD) plunged more than -14% and was the top percentage loser on the S&P 500 after the chemical maker reported weaker-than-expected Q4 preliminary net sales and provided a downbeat Q1 outlook. Also, AT&T Inc (T) fell about -3% after issuing below-consensus FY24 adjusted EPS guidance.

Economic data on Wednesday showed that the U.S. S&P Global manufacturing PMI unexpectedly rose to a 15-month high of 50.3 in January, stronger than expectations of 47.9. Also, the U.S. January S&P Global services PMI climbed to 52.9, stronger than expectations of 51.0.

“Growth is up, and inflation is down. The former puts a ceiling on how many cuts the Federal Reserve will do, while the latter means the Fed still ends up cutting. A very good scenario for equity markets,” according to Renaissance Macro’s Neil Dutta.

Meanwhile, U.S. rate futures have priced in a 2.6% chance of a 25 basis point rate cut at the upcoming monetary policy meeting and a 42.4% probability of a 25 basis point rate cut at the March meeting.

On the earnings front, notable companies like Visa (V), Intel (INTC), Comcast (CMCSA), Union Pacific (UNP), T-Mobile US (TMUS), American Airlines Group (AAL), and Southwest Airlines (LUV) are slated to release their quarterly results today.

Today, all eyes are focused on the U.S. GDP preliminary reading in a couple of hours. Economists, on average, forecast that U.S. GDP will stand at +2.0% q/q in the fourth quarter, compared to the third-quarter value of +4.9% q/q.

Also, investors will likely focus on U.S. Core Durable Goods Orders data, which came in at +0.5% m/m in November. Economists foresee the new figure to be +0.2% m/m.

U.S. Durable Goods Orders data will come in today. Economists foresee this figure to stand at +1.1% m/m in December, compared to the previous value of +5.4% m/m.

The U.S. Building Permits and New Home Sales data will also be closely watched today. Economists forecast December Building Permits to be at 1.495M and December New Home Sales to come in at 645K.

U.S. Initial Jobless Claims data will be reported today as well. Economists estimate this figure to be 200K, compared to last week’s value of 187K.

In the bond markets, United States 10-year rates are at 4.165%, down -0.36%.

The Euro Stoxx 50 futures are down -0.11% this morning as a string of earnings reports added to investor caution ahead of the European Central Bank’s interest rate decision. A survey revealed on Thursday that German business sentiment unexpectedly worsened in January, marking the second consecutive monthly decline. Meanwhile, the European Central Bank is scheduled to announce its interest rate decision later in the session. While policymakers are anticipated to keep rates on hold, attention will be on the ECB statement and the post-meeting news conference for insights into the path forward. In corporate news, STMicroelectronics (STMPA.FP) fell over -3% after reporting mixed Q4 results and providing weak FY24 revenue guidance. Also, Bankinter Sa (BKT.E.DX) slumped more than -6% after its Q4 results revealed a slowdown in margins compared to the previous quarter. At the same time, Nokia Oyj (NOKIA.H.DX) climbed over +7% after the company announced a 600 million euro ($653 million) share buyback program.

Germany’s Ifo Business Climate Index, Germany’s Business Expectations, and Germany’s Current Assessment data were released today.

The German January Ifo Business Climate Index came in at 85.2, weaker than expectations of 86.7.

The German January Business Expectations stood at 83.5, weaker than expectations of 84.8.

The German January Current Assessment arrived at 87.0, weaker than expectations of 88.6.

Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +3.03%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.03%.

China’s Shanghai Composite Index closed sharply higher today as the latest stimulus measures from Beijing boosted investor sentiment. The People’s Bank of China on Wednesday announced a 50-basis point reduction in the reserve requirement ratio for all banks from February 5th, aiming to provide 1 trillion yuan ($139 billion) in long-term liquidity to the market. Also, Chinese regulators offered more financial support for developers by widening their access to certain commercial loans to help them repay other debt. Meanwhile, real estate, construction engineering, and communication stocks led the gains on Thursday. State-owned enterprise stocks also climbed following remarks from an official of the State-owned Assets Supervision and Administration Commission of the State Council, indicating that China will include the effectiveness of market value management within the assessment of leaders of central state-owned enterprises. At the same time, shares of Chinese electric-vehicle makers retreated following Tesla’s latest results and its 2024 outlook, which reinforced investor concerns about slowing demand in China. As a result, NIO Inc. slumped over -4%, Xpeng Inc. fell more than -3%, and Li Auto Inc. slid about -0.5%. In other news, foreign investors purchased a net 6.3 billion yuan ($879.18 million) worth of Chinese shares through the Stock Connect on Thursday.

“The latest PBOC announcements may be interpreted as the beginning of a policy pivot from previous reactive and piecemeal measures by investors, and they will continue to look for further signs and acts of policy support,” said Tao Wang, chief China economist at UBS Investment Bank.

Japan’s Nikkei 225 Stock Index erased early losses and closed just above the flatline today. Chip-related stocks outperformed on Thursday, tracking gains in U.S. peers overnight, with Lasertec Corporation climbing over +4%, Advantest Corp rising more than +1%, and Tokyo Electron Ltd advancing about +1%. Basic materials and utilities stocks also gained ground. Meanwhile, the yield on the benchmark 10-year government bond rose on Thursday after an auction of 40-year debt drew tepid demand from investors amid speculation that the Bank of Japan is nearing the conclusion of its negative interest rate policy. In corporate news, Nidec Corp slid over -3% after the electric motor maker cut its full-year operating profit forecast by 18% to 180 billion yen ($1.22 billion), citing uncertainties in demand and intensifying price competition in China’s electric vehicle market. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -1.98% to 19.33.

Pre-Market U.S. Stock Movers

International Business Machines (IBM) surged more than +7% in pre-market trading after the company reported upbeat Q4 results and delivered a positive full-year revenue outlook.

Las Vegas Sands Corp (LVS) rose over +2% in pre-market trading after reporting stronger-than-expected Q4 revenue.

Hexcel Corporation (HXL) plunged more than -8% in pre-market trading after the company posted downbeat Q4 results and issued weak FY24 guidance.

Hertz Global Holdings Inc (HTZ) fell over -2% in pre-market trading after JPMorgan downgraded the stock to Neutral from Overweight with a price target of $11.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Thursday - January 25th

Visa A (V), Intel (INTC), T-Mobile US (TMUS), Comcast (CMCSA), Union Pacific (UNP), Blackstone (BX), NextEra Energy (NEE), Marsh McLennan (MMC), KLA Corp (KLAC), Sherwin-Williams (SHW), Northrop Grumman (NOC), Arthur J Gallagher (AJG), Capital One Financial (COF), Humana (HUM), Valero Energy (VLO), L3Harris Technologies (LHX), Dow (DOW), Xcel Energy (XEL), Fair Isaac (FICO), Weyerhaeuser (WY), Mobileye Global (MBLY), Western Digital (WDC), Southwest Airlines (LUV), McCormick&Co (MKC), American Airlines (AAL), Old Republic (ORI), Western Alliance (WAL), Eagle Materials (EXP), Cullen/Frost Bankers (CFR), TAL Education (TAL), Applied Industrial Technologies (AIT), South State (SSB), Olin (OLN), Popular (BPOP), Murphy Oil (MUR), Valley National (VLY), Glacier (GBCI), Alaska Air (ALK), Ameris (ABCB), CNX Resources (CNX), Carpenter Technology (CRS), Associated Banc-Corp (ASB), Virtu Financial Inc (VIRT), Federated Investors B (FHI), WSFS (WSFS), Nextera Energy Partners LP (NEP), Seacoast Banking Florida (SBCF), Eastern Bankshares (EBC), First Financial Bancorp (FFBC), The Bancorp (TBBK), Hilltop (HTH), OSI Systems (OSIS), First Merchants (FRME), Banc of California (BANC), Xerox (XRX), Customers Bancorp (CUBI), Lakeland Financial (LKFN), Taro Pharma Industries (TARO), NetScout (NTCT), Bread Financial Holdings (BFH), RPC (RES), Provident (PFS), S&T Bancorp (STBA), Berkshire Hills Bancorp (BHLB), Byline Bancorp (BY), Lakeland Bancorp (LBAI), ConnectOne (CNOB), Amalgamated Bank (AMAL), MarineMax (HZO), Heritage Financial Co (HFWA), First Foundation Inc (FFWM), Midland States Banc (MSBI), Independent Bank Corp (IBCP), CVRx (CVRX), Kearny Financial (KRNY).

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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.