Stocks Set to Open Higher as Investors Await Key U.S. Inflation Data and Fed Speak

Oleksandr Pylypenko - Barchart - Mon Feb 26, 4:35AM CST

March S&P 500 E-Mini futures (ESH24)are up +0.11%, and March Nasdaq 100 E-Mini futures (NQH24) are up +0.16% this morning as market participants looked ahead to remarks from a host of Federal Reserve officials and the release of the Fed’s favorite inflation gauge later in the week.

In Friday’s trading session, Wall Street’s major averages closed mixed. Carvana Co (CVNA) soared over +32% after the used car company reported better-than-expected Q4 gross profit and said it anticipates Q1 adjusted EBITDA to be “significantly” above $100M. Also, Block Inc (SQ) climbed more than +16% after the company raised its FY24 adjusted EBITDA forecast. On the bearish side, Booking Holdings Inc (BKNG) slumped over -10% and was the top percentage loser on the S&P 500 after giving a weaker-than-expected full-year gross bookings forecast. In addition, Warner Bros Discovery Inc (WBD) plunged more than -9% after the media conglomerate posted downbeat Q4 results.

New York Fed President John Williams said Friday that the U.S. economy is headed in the right direction and suggested that it would probably be suitable to reduce interest rates later this year. “At some point, I think it will be appropriate to pull back on restrictive monetary policy, likely later this year. But it’s really about reading that data and looking for consistent signs that inflation is not only coming down but is moving towards that 2% longer-run goal,” Williams said in the interview published Friday.

Meanwhile, U.S. rate futures have priced in a 2.5% chance of a 25 basis point rate cut at the March FOMC meeting and a 20.9% chance of a 25 basis point rate cut at the May meeting.

On the earnings front, several prominent companies like Salesforce (CRM), Snowflake (SNOW), Zoom Video Communications (ZM), HP (HPQ), and Dell Technologies (DELL), along with retailers including Lowe’s (LOW), TJX (TJX), Macy’s Inc (M), and Best Buy (BBY), are scheduled to release their quarterly results this week.

On the economic data front, the January reading of the U.S. core personal consumption expenditures price index, the Fed’s preferred inflation gauge, will be the main highlight in the coming week. Also, market participants will be eyeing a spate of other economic data releases, including the U.S. CB Consumer Confidence, Durable Goods Orders, Core Durable Goods Orders, S&P/CS HPI Composite - 20 n.s.a., Richmond Manufacturing Index, GDP (preliminary), GDP Price Index (preliminary), Wholesale Inventories (preliminary), Crude Oil Inventories, Initial Jobless Claims, Personal Income, Personal Spending, Chicago PMI, Pending Home Sales, S&P Global Manufacturing PMI, Construction Spending, ISM Manufacturing PMI, and Michigan Consumer Sentiment.

In addition, a slew of Fed officials will be making appearances this week, including Barr, Bostic, Collins, Williams, Goolsbee, Mester, Waller, and Daly.

Today, all eyes are focused on U.S. New Home Sales data in a couple of hours. Economists, on average, forecast that January New Home Sales will stand at 680K, compared to the previous value of 664K.

The U.S. Building Permits data will be reported today as well. Economists expect January’s figure to be 1.470M, compared to the previous number of 1.493M.

In the bond markets, United States 10-year rates are at 4.237%, down -0.54%.

The Euro Stoxx 50 futures are down -0.20% this morning as investors braced for a busy week of economic data, including the region’s inflation reading along with the Fed’s favored measure of inflation. Losses in mining and energy stocks are leading the overall market lower. Meanwhile, this week, market participants will be monitoring the Eurozone consumer confidence print, business activity data, and figures on the region’s consumer prices for February. In corporate news, Tele2 Ab (TEL2B.S.DX) climbed over +8% after French investor Xavier Niel and his Iliad telecoms group agreed to acquire a 19.8% stake in the Swedish telecoms operator for 13 billion crowns ($1.26 billion). Also, Zealand Pharma A/S (ZEAL.C.DX) soared more than +30% after an experimental obesity treatment it is co-developing with Boehringer Ingelheim yielded Phase II trial results described as “groundbreaking” in the treatment of fatty liver.

The European economic data slate is mainly empty on Monday.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.93% and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.35%.

China’s Shanghai Composite Index closed lower today, snapping a nine-session winning streak as the positive sentiment over last week’s slew of economic measures waned. Concerns regarding China took center stage after 11 Chinese companies lost their credit ratings on Friday at Moody’s Investors Service, which withdrew the scores in an unusual flurry that highlights the repercussions of record defaults. Ten out of the eleven firms were defaulted Chinese property developers, including Logan Group Co., Ronshine China Holdings, and Zhenro Properties Group, with the remaining firm being one of the country’s major bad-debt managers, China Great Wall Asset Management. Meanwhile, investors are now observing whether the government will introduce further stimulus measures following President Xi Jinping’s call on Friday to bolster the sales of traditional consumer products, including cars and home appliances. In corporate news, Zhuzhou CRRC Times Electric Co Ltd climbed about +6% after the Chinese train manufacturer reported that its 2023 attributable profit soared by 21.5% year-over-year to 3.11 billion yuan. Investor attention this week is primarily on purchasing managers’ data for February, which is anticipated to provide further insights into the economic recovery in Asia’s largest economy.

Japan’s Nikkei 225 Stock Index closed higher today and hit a new record high. Healthcare stocks outperformed on Monday, with Chugai Pharmaceutical Co Ltd climbing over +6% and Daiichi Sankyo Co Ltd rising more than +3%. Japan trading house stocks also gained ground following Warren Buffett’s statement in his annual shareholder letter that these companies adhere to investor-friendly policies, which he considers “much superior” to those practiced in the U.S. Meanwhile, data from the Bank of Japan on Monday indicated that Japan’s business-to-business service prices increased by 2.1% year-on-year in January, slowing from a 2.4% annual rise in December. Investors are now eagerly awaiting the country’s latest inflation data, scheduled for release on Tuesday. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +9.46% to 21.41.

“The overall market is in an uptrend, but within this uptrend ... there’s a sense that traders are picking out the shares that are running behind and haven’t been bought as much,” said Hiroshi Namioka, chief strategist at T&D Asset Management.

Pre-Market U.S. Stock Movers

Li Auto Inc (LI) surged about +13% in pre-market trading after the company reported stronger-than-expected Q4 results.

Berkshire Hathaway Cl B (BRK.B) climbed over +5% in pre-market trading after the investment titan posted a 28% increase in Q4 operating earnings compared to the previous year, thanks to significant gains in its insurance business.

Amer Sports Inc (AS) gained more than +7% in pre-market trading after Goldman Sachs initiated coverage of the stock with a Buy rating and a $21 price target.

Moderna Inc (MRNA) fell over -2% in pre-market trading after HSBC downgraded the stock to Reduce from Hold with a price target of $86.

National Health Investors Inc (NHI) rose more than +3% in pre-market trading after Wells Fargo upgraded the stock to Overweight from Equal Weight with a price target of $63.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Monday - February 26th

Workday (WDAY), ONEOK (OKE), Fidelity National Info (FIS), Li Auto (LI), Public Service Enterprise (PEG), Heico (HEI), SBA Communications (SBAC), Zoom Video (ZM), Erie Indemnity (ERIE), Domino’s Pizza Inc (DPZ), Unity Software (U), The AES (AES), Trex (TREX), Elanco Animal Health (ELAN), Pilgrims Pride (PPC), FS KKR Capital (FSK), Alpha Metallurgical Resources (AMR), Revolution Med (RVMD), Freshpet Inc (FRPT), Surgery Partners Inc (SGRY), PowerSchool Holdings (PWSC), Itron (ITRI), Krystal Biotech (KRYS), Albany (AIN), Kosmos Energy (KOS), TransMedics (TMDX), Sterling Construction (STRL), CarGurus (CARG), Playtika (PLTK), Dorman (DORM), Innovative Industrial Properties (IIPR), Primoris (PRIM), Enlight Energy (ENLT), Hims Hers Health (HIMS), Helix (HLX), STAAR Surgical (STAA), Archer Aviation (ACHR), Helios Tech (HLIO), Addus (ADUS), New Mountain Finance (NMFC), BioCryst (BCRX), Everbridge (EVBG), Fresh Del Monte Produce (FDP), MidCap Financial Investment (MFIC), Clear Channel (CCO), Air Transport Services (ATSG), Pubmatic (PUBM), Ellington Financial (EFC), Crossamerica Partners LP (CAPL), Si-Bone (SIBN), Carlyle Secured Lending (CGBD).

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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.