Stocks Set To Open Lower As Investors Await FOMC Minutes

Oleksandr Pylypenko - Barchart - Tue Feb 21, 2023

March S&P 500 futures (ESH23) are trending down -0.72% this morning after three major U.S. benchmark indices closed mixed on Friday as the prospect of further monetary tightening from the Fed weighed on sentiment, with investors looking to the minutes of the latest Federal Reserve meeting for more clues about the path of U.S. monetary policy.

In Friday’s trading session, the S&P 500 fell to a 2-week low, and the Dow hit a 3-week low as hawkish comments from Fed officials continued to weigh on sentiment. Also, Goldman Sachs (GS) and Bank of America (BAC) said they expect the Federal Reserve to hike interest rates three more times by a quarter of a percentage point each time, lifting their estimates after data pointed to persistent inflation and tight labor market.

Federal Reserve Governor Michelle Bowman said Friday the U.S. central bank would need to keep raising interest rates to reduce stubborn inflation. She said, “I don’t think we’re seeing what we need to be seeing, especially with inflation.” At the same time, Richmond Fed President Thomas Barkin said he “supports quarter-point hikes” as it gives the central bank flexibility.

In the coming week, market participants will be waiting for the release of the FOMC’s meeting minutes and the spate of economic data, including U.S. GDP, GDP Price Index, Initial Jobless Claims, Crude Oil Inventories, Core PCE Price Index, PCE Price index, Personal Income, Personal Spending, Michigan Consumer Sentiment, Michigan Consumer Expectations, and New Home Sales.

On the earnings front, major retail heavyweights Walmart Inc (WMT) and Home Depot Inc (HD) are set to report quarterly results today.

Today, all eyes are focused on the U.S. Existing Home Sales data in a couple of hours. Economists, on average, forecast that January Existing Home Sales will stand at 4.10M, compared to the previous value of 4.02M.

Also, investors are likely to focus on the U.S. S&P Global Composite PMI preliminary data, which was at 46.8 in January. Economists foresee the new figure to be 47.5.

U.S. Manufacturing PMI preliminary data will be reported today. Economists foresee this figure to stand at 47.1 in February, compared to the previous number of 46.9.

U.S. Services PMI preliminary reading will come in today as well. Economists estimate this figure to be 47.2 in February, compared to the previous value of 46.8.

In the bond markets, United States 10-Year rates are at 3.875%, up +1.22%.

The Euro Stoxx 50 futures are down -0.82% this morning as investors digested important economic data and more corporate earnings. Eurozone Composite PMI increased to 52.3 in February from 50.3 in January, indicating the strongest expansion of business activity since last May. However, Eurozone Manufacturing PMI decreased to 48.5 in February from 48.8 in January, disappointing investors after the Eurozone economy unexpectedly grew in the fourth quarter of 2022. In corporate news, shares of Bhp Group Plc (BHP.LN) fell over -2% after the Anglo-Australian miner reported a sharp decline in its half-year profit.

France’s Manufacturing PMI (preliminary), France’s Services PMI (preliminary), Germany’s Manufacturing PMI (preliminary), Germany’s Services PMI (preliminary), Eurozone’s S&P Global Composite PMI (preliminary), Eurozone’s Manufacturing PMI (preliminary), Eurozone’s Services PMI (preliminary), U.K.’s Composite PMI (preliminary), U.K.’s Manufacturing PMI (preliminary), U.K.’s Services PMI (preliminary), Germany’s ZEW Current Conditions, Germany’s ZEW Economic Sentiment, and Eurozone’s ZEW Economic Sentiment data were released today.

The French February Manufacturing PMI stood at 47.9, weaker than expectations of 50.9.

The French February Services PMI came in at 52.8, stronger than expectations of 49.9.

The German February Manufacturing PMI has been reported at 46.5, weaker than expectations of 47.8.

The German February Services PMI was at 51.3, stronger than expectations of 51.0.

Eurozone February S&P Global Composite PMI came in at 52.3, stronger than expectations of 50.6.

Eurozone February Manufacturing PMI stood at 48.5, weaker than expectations of 49.3.

Eurozone February Services PMI came in at 53.0, stronger than expectations of 51.0.

U.K. February Composite PMI has been reported at 53.0, stronger than expectations of 49.0.

U.K. February Manufacturing PMI stood at 49.2, stronger than expectations of 47.5.

U.K. February Services PMI was at 53.3, stronger than expectations of 49.2.

The German February ZEW Current Conditions came in at -45.1, stronger than expectations of -50.0.

The German February ZEW Economic Sentiment stood at 28.1, stronger than expectations of 22.0.

Eurozone February ZEW Economic Sentiment has been reported at 29.7, stronger than expectations of 22.3.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.49%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.21%.

China’s Shanghai Composite today closed higher as optimism over more government spending measures continued to boost sentiment. The People’s Bank of China on Monday kept its key mortgage lending rates at historic lows, indicating that the country strives to support local growth. However, investors remain cautious after recent economic data presented a mixed picture of a potential recovery this year.

At the same time, Japan’s Nikkei 225 Stock Index closed lower, weighed down by losses in the Precision Instruments, Electrical/Machinery, and Chemical, Petroleum & Plastic sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 1.75% to 15.67.

Pre-Market U.S. Stock Movers

Sigma Lithium Resources Corp (SGML) climbed over +24% in pre-market trading after Bloomberg reported that Tesla (TSLA) has been considering a takeover of the company.

Telefonica SA ADR (TEF) fell over -1% in pre-market trading after Deutsche Bank downgraded the stock to hold from buy.

Vir Biotechnology Inc (VIR) gained about +5% in pre-market trading after Goldman Sachs upgraded the stock to buy from neutral with a price target of $53, up from $41.

CF Industries Holdings Inc (CF) dropped over -1% in pre-market trading after HSBC downgraded the stock to hold from buy.

Biomarin Pharmaceutical Inc (BMRN) slid more than -2% in pre-market trading after Citi initiated coverage of the stock with a neutral rating.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Tuesday - February 21st

Walmart (WMT), Home Depot (HD), Medtronic (MDT), Public Storage (PSA), Palo Alto Networks (PANW), Realty Income (O), Engie ADR (ENGIY), Keysight Technologies (KEYS), CoStar (CSGP), Public Service Enterprise (PEG), SBA Communications (SBAC), Diamondback (FANG), Ingersoll Rand (IR), Teck Resources B (TECK), Antofagasta (ANFGF), Avangrid Inc (AGR), Westlake Chemical (WLK), Santos (STOSF), Coinbase Global (COIN), Smith&Nephew SNATS (SNN), InterContinental ADR (IHG), Caesars (CZR), Molson Coors Brewing B (TAP), Molson Coors Brewing B (TAP), WillScot A (WSC), Chesapeake Energy (CHK), Gfl Environmental (GFL), Lincoln Electrics (LECO), Middleby Corp (MIDD), Matador (MTDR), Dillards (DDS), Halozyme (HALO), Curtiss-Wright (CW), Toll Brothers (TOL), Elanco Animal Health (ELAN), Globus Medical (GMED), Sasol ADR (SSL), Huntsman (HUN), Univar Inc (UNVR), IAA (IAA), Valaris (VAL), Ufp Industries (UFPI), Fluor (FLR), Transocean (RIG), Element Solutions (ESI), Flowserve (FLS), Louisiana-Pacific (LPX), Workiva Inc (WK), Alight (ALIT), Apple Hospitality REIT (APLE), Armstrong World Industries (AWI), Clearwater Analytics Holdings (CWAN), John Bean Tech (JBT), STAAR Surgical (STAA), Sprout Social (SPT), Black Stone Minerals (BSM), CVR Energy (CVI), Walker&Dunlop (WD), Hostess Brands (TWNK), Sabra (SBRA), Boise Cascad Llc (BCC), Harmony Bio (HRMY), Innospec (IOSP), Equitrans Midstream (ETRN), Triple Flag Precious Metals (TFPM), Olink Holding AB (OLK), Abcellera Biologics (ABCL), Crestwood Equity Partners LP (CEQP), Dana (DAN), LGI Homes (LGIH), Matson (MATX), Ziprecruiter (ZIP), National Health Investors (NHI), Enpro Industries (NPO), Cracker Barrel Old (CBRL), Arconic (ARNC), Kennedy-Wilson (KW), Trinity Industries (TRN), TRI Pointe Homes (TPH), Viper Energy Ut (VNOM), JBG SMITH Properties (JBGS), Pebblebrook Hotel (PEB), Tanger Factory Outlet Centers (SKT), Q2 Holdings (QTWO), BioCryst (BCRX), AtriCure (ATRC), Diamondrock Hospitality (DRH), KAR Auction Services (KAR), Sandstorm Gold Ltd N (SAND), Veris Residential (VRE), Archrock (AROC), Donnelley Financial Solutions (DFIN), Avanos Medical (AVNS), MEDIFAST (MED), Sapiens (SPNS), Nexpoint Residential Trust Inc (NXRT), La-Z-Boy (LZB), Apartment Invest (AIV), Equinox Gold (EQX), Camping World Holdings (CWH), Global Industrial Co (GIC), Jeld-Wen Holding (JELD), ProPetro (PUMP), CVR Partners LP (UAN).

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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.