MARKET WRAPS
Watch For:
University of Michigan Preliminary Consumer Survey for February; Canada Labour Force Survey for January; Earnings from Enbridge
Today's Top Headlines/Must Reads:
- Russia to Cut Oil Production, Sending Prices Higher
- U.K. Ekes Out Economic Growth, Boosted by World Cup
- FOMO Options Bets Sweep Market During Stock Rally
- U.S. Government Borrowing Costs Rise as Debt Ceiling Fuels Partisan Clash
- Layoffs and Shutdowns Hit Biotech Industry in U-Turn
- Disney Revamps Entertainment Unit
- U.S. Poised to Further Tighten Technology Exports to China After Balloon Incident
Follow WSJ market coverage here
Opening Call:
Stock futures slipped, with the S&P 500 on track for its worst week since mid-December.
"Futures hint at a bearish open... on the back of rising option bets that the Federal Reserve could hike the rates to 6%," Swissquote Bank said.
"The inversion between the 2- and 10-year yields hit the highest levels since the 1980s, as the Fed members' calls for higher rates finally started kicking in."
Swissquote Bank said option traders are "piling into bets that the U.S. rates could peak at 6%."
"But nothing is clear before next Tuesday's CPI release, in terms of Fed expectations. For now, there is rising will to believe that the Fed will continue hiking the rates. If inflation numbers don't show the easing expected, that willpower will get even stronger, and could result in a sharp pullback in the equity rally," Swissquote said.
Stocks to Watch
Adidas warned it could swing to a loss this year amid concerns it could be stuck with unsold Yeezy shoes after it ended a partnership with Kanye West. The company's Frankfurt-listed shares fell nearly 12%.
Alteryx reported a 73% boost in fourth-quarter revenue and provided a full-year outlook that exceeded estimates. Shares rose 9% in after-hours trading.
Cloudflare's stock rose more than 8% premarket, after it reported a narrower fourth-quarter net loss, and said it expected revenue for 2023 to total at least $1.33 billion.
Expedia reported fourth-quarter earnings that missed expectations. The stock was falling 2.1% in premarket trading.
Flowers Foods missed analysts' expectations for fourth-quarter revenue and provided a full-year outlook for adjusted earnings per share that came in below analysts' views, according to FactSet. Shares fell 4% in after-hours trading.
Ford CEO told employees he is working on simplifying goals and performance metrics to help overcome problems with quality and supply-chain management.
Lyft reported an unexpected quarterly loss, sending the stock 30% lower in after-hours trading Thursday. Lyft shares remained under pressure in premarket action Friday.
News Corp said it expects to cut head count 5% this year amid economic challenges. The media company's Class A stock fell more than 3% off hours.
PayPal CEO Dan Schulman said he plans to retire at the end of 2023 but remain on the board. His successor has yet to be chosen.
Forex:
The dollar may lack clear direction until the release of U.S. inflation data next Tuesday, ING said.
While today's University of Michigan's consumer sentiment survey could have some market impact, the inflation report is the "real risk event," ING said.
"And if the general risk environment proves resilient for another session today, the dollar should still find a floor on the back of some defensive positioning ahead of next week's inflation data, as happened in the run-up to the Fed meeting."
The DXY dollar index may remain near 103 into next week's inflation data, ING added.
Read Dollar's Recent Losses Could Stall Briefly Before Resuming Sell-Off
---
Sterling rose against a weaker dollar but was little changed against the euro after data showed the U.K. economy narrowly avoided a recession last year despite a worse-than-expected contraction in December.
U.K. gross domestic product fell 0.5% month-on-month in December, more than the 0.3% fall expected by analysts in a WSJ survey. However, GDP was unchanged between the third and fourth quarters.
"The fact that the fourth quarter's weakness was heavily concentrated in December means the starting point for the first quarter is pretty low, and means we'll almost certainly get a contraction in the first quarter, " ING said.
Read Weak UK Economic Outlook Seen as Headwind for Pound
---
The scope for the euro to rise on any further hawkish comments from European Central Bank officials about the need for further interest rate rises might be limited, ING said.
Yesterday's lower-than-expected German inflation data might have made investors more cautious about another EUR rally, ING added.
"In this sense, the ability of ECB speakers to lift the euro appears diminished."
"One of the most prominent hawkish voices in the ECB, Isabel Schnabel, will participate in a live Q&A today, although her message on the need for more tightening has already been passed through to asset prices," ING said.
Bonds:
The 10-year German Bund yield continues to trade in the 2%-2.50% range that has been prevailing since October and is likely to remain there, UniCredit Research said.
"With a very light data calendar today, more range trading for government bonds is to be expected."
The 10-year Treasury yield is close to 3.70%, "a breach of which could pave the way to a rise towards the 3.90% area," UniCredit said.
Investors should see phases of rising yields as buying opportunities as inflation is expected to moderate on the medium-term, paving the way for lower policy rates, it added.
Energy:
Brent crude oil jumped by more than 2% after media reported that Russia plans to slash output by 500,000 barrels a day next month in response to Western-impose price caps on its oil exports.
Brent gained 2.5% at $86.60 a barrel after the reports carried by Reuters and Bloomberg. WTI rose 2.8% to $80.25 a barrel.
The steps were taken in response to Western measures which banned Western insurers and shipping firms from handling Russian crude exports unless it was sold below a set price, the news agencies reported.
Read more here
Oil Outlook
Goldman Sachs lowered its price forecasts for crude as it expects oil markets to be slightly less tight than previously thought.
The Wall Street bank lowered its forecast for every quarter between now and the end of 2024 by around $5 a barrel.
Goldman expects prices to rise to $90 a barrel next quarter then edge higher by around $5 a barrel each quarter until plateauing at $100 a barrel for all of 2024.
Weak Russian output, limited U.S. shale oil production growth and increasing China demand means the bank still expects oil markets to tighten into a deficit by 2024.
"We still see the China comeback as the most persistent driver of the outlook," it said.
Metals:
Base metals prices were falling, while gold edged up, after higher inflation figures from China added to worries over consumption recovery in the country.
"While most agree the overall economic growth will recover in China this year, there appears to be a lack of conviction on the magnitude of that rebound," SPI Asset Management said.
"Many local traders now think this year's household consumption recovery could be slower than expected, given the scarring effects of property deleveraging and the legacy of three years of Covid controls."
TODAY'S TOP HEADLINES
Elon Musk's First 100 Days at Twitter Defined by Rapid Change and Challenges
Elon Musk has been adding and tweaking features to Twitter Inc.'s platform at a rapid pace since taking over. The challenge now is translating those changes into meaningful benefits for Twitter's business.
Mr. Musk's ownership of Twitter hit the 100-day mark on Saturday. The billionaire has said his goals for Twitter include building the company's subscription business, lessening its dependence on advertising, and making the experience better for users.
Layoffs and Shutdowns Hit Biotech Industry in U-Turn
The joy ride for biotech is over.
For a decade, the companies flourished, flush with cash, and fueled by excitement over new technologies such as cell therapy, gene editing and messenger RNA.
Robert Iger Shakes Up Disney's Entertainment Operations, Rethinks Hulu Ownership
Robert Iger's plans for reshaping Walt Disney Co. came into sharper focus Thursday, as the company detailed plans for a reorganization of its entertainment operations and signaled it could explore a sale of streaming platform Hulu.
Mr. Iger, who made a stunning return as Disney's chief executive in November in a boardroom coup, has begun to lay out a vision that includes cost-cutting, streamlining investments in general-entertainment and sports, and giving more control to creative leaders. Mr. Iger outlined broad changes during the company's earnings call Wednesday, and Disney provided more specifics Thursday.
HarperCollins, Striking Workers Reach Tentative Deal After Three-Month Strike
HarperCollins Publishers and a union representing more than 200 staffers said the two sides have reached a tentative agreement on a new labor pact following a work stoppage of nearly three months.
The deal must still be ratified by workers who went on strike on Nov. 10. Olga Brudastova, president of Local 2110 of the United Auto Workers, said on Thursday evening that the union won't picket on Friday in front of the building in lower Manhattan where the publisher is based.
News Corp Expects to Cut Its Head Count 5% This Year
News Corp said it expects to reduce head count 5% this year amid economic challenges, as the media company reported lower quarterly revenue despite continued growth at Wall Street Journal parent Dow Jones & Co.
(MORE TO FOLLOW) Dow Jones Newswires
02-10-23 0646ET
