MARKET WRAPS
Watch For:
Personal Income and Outlays for March; Employment Cost Index for 1Q; University of Michigan Final Consumer Survey for April; Canada GDP for February; Earnings from Chevron, Exxon Mobil, Berkshire Hathaway, Colgate-Palmolive
Today's Top Headlines/Must Reads:
- Wage Growth, Inflation Data to Inform Fed Before Rate Decision
- Amazon's Cloud Casts a Shadow
- Europe's Economy Avoids Recession-Just About
- Regulators to Publish Postmortems on Silicon Valley Bank, Signature Failures
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Opening Call:
Stock futures pointed to a lower start on Friday, with technology in the lead after caution from Amazon.com on its cloud sector, while investors await an update on the Federal Reserve's preferred inflation gauge.
Investors will also be keeping an eye on First Republic Bank, after Reuters reported, citing sources, that U.S. officials have begun discussions with banks and even private equity, to find a rescue solution for the struggling lender. Shares rose 8% in premarket trading.
Overseas stocks were mixed. Bank stocks weighed on the Stoxx Europe 600, which fell 0.5%. Japan's Nikkei 225 rose 1.4% after the Bank of Japan left policy at its extremely loose levels.
Stocks to Watch
Alteryx said it is cutting its workforce by about 11% to reduce operating costs and improve operating margins. Shares fell 14% in after-hours trading.
Amazon reported surging growth, but its cloud-computing business showed further signs of cooling. The stock fell 2% off hours.
Cloudflare cut its forecast for the full year, citing a "material lengthening" of its sales cycle that's expected to weigh on results. Shares fell 25% in premarket trading.
First Solar reported first-quarter earnings that missed expectations and sales that also missed and were nearly halved. Shares fell 7% in after-hours trading.
Intel posted a record quarterly loss, but its revenue beat expectations. Intel's stock gained 4% in premarket trading.
Mondelez lifted its revenue-growth forecast and reported sales that beat consensus estimates. Shares gained more than 2% off-hours.
Snap on Tuesday reported a decline in revenue for its latest quarter, as changes to its advertising platform and a broader slowdown in the economy hampered results. Sharesfell 18% premarket.
Forex:
Markets remain complacent about the risk of a U.S. "hard landing" repricing, Morgan Stanley said.
"Investors appear complacent about the idea that a slowing U.S. economy can raise market-implied risks of a global hard landing, bolstering safe havens like USD," it said.
Morgan Stanley remains bullish on the dollar, particularly against the euro, the Australian dollar and the Canadian dollar.
ING said GBP/USD will probably stay in a 1.2400-1.2525 range on Friday, with the focus on data from the U.S. and Europe.
Nonetheless, sterling could rise against the dollar later in 2023 as U.K. business sentiment improves and relations with the EU warm up, ING added.
"Pressure does look to be building for a GBP/USD move higher later in the year."
Bonds:
Government bond yields slipped across the board in the U.S. and overseas after the Bank of Japan left its interest-rate targets unchanged despite inflationary pressures.
Read BOJ Maintains Easing, Will Review Monetary Policy
Energy:
Oil prices edged up in Europe but remained on course for a sharp weekly fall as demand concerns have undermined a round of Saudi-led production cuts.
Diesel prices have tumbled in recent months, "spurring worries of an impending recession," JPMorgan said. "The declines are weighing on crude oil and pushing down margins for refiners."
Metals:
Base metals and gold prices edged lower in early London trade, with investors looking to the U.S. PCE indicator.
Analysts said persistently high inflation figures are likely to keep the Fed more hawkish going forward.
"The core PCE inflation print for the first quarter showed that inflation was still running at 4.9% versus 4.7% expected," Deutsche Bank said.
"Bear in mind that's up from 4.4% in Q4, which puts a dent in the narrative that inflation is heading lower now."
Precious Metals Outlook
The price outlook for precious metals may remain clouded in the near term, given lingering uncertainties over the Fed's monetary tightening, Saxo Bank said.
Macroeconomic data in the U.S. has sent mixed signals for how the Fed may act in the coming months, and the market likely lacks "clear clues" on tightening expectations, it added.
This could weigh on trading sentiment for precious metals, Saxo said.
Higher interest rates typically weigh on gold and silver buying demand. But Saxo reckons a brighter outlook could emerge once it becomes clearer when the Fed will stop raising interest rates, as peaking rates are historically followed by a strong precious metals rally.
Lithium
The use of direct lithium extraction technologies could be a game changer for the lithium industry, similar to how shale transformed the oil industry, Goldman Sachs said.
A number of proven direct lithium-extraction technologies are emerging and being tested at scale. Their implementation "has the potential to significantly increase the supply of lithium from brine projects, nearly doubling lithium production/yield (taking recoveries from 40-60% to 70-90%+) and improving project returns," GS said.
The technologies also have ESG benefits--with land area needs and water usage much lower--while also widening, rather than steepening, the lithium cost curve, it added.
As a result, the GS analysts "prefer briners over miners," and reiterate buy ratings on Allkem and Rio Tinto.
TODAY'S TOP HEADLINES
Regulators to Publish Postmortems on Silicon Valley Bank, Signature Failures
Washington regulators plan to release postmortems of their oversight of Silicon Valley Bank and Signature Bank before they abruptly collapsed last month, potentially highlighting missteps by both banks' management and their federal supervisors.
The Federal Reserve is expected to release a report Friday morning digging into its handling of SVB, the culmination of a review led by Michael Barr, the Fed's vice chair for supervision. A second report, expected later in the day from the Federal Deposit Insurance Corp., will analyze that agency's oversight of Signature.
Amazon's Cloud Casts a Shadow
Amazon.com sells an awful lot of goods and services to generate half a trillion dollars in annual revenue. But it is what the company isn't selling right now that counts for a lot.
Amazon's first-quarter results late Thursday were strong in many respects. Revenue rose 9% year over year to $127.4 billion, beating Wall Street's projections for 7% growth. That was driven by better-than-expected sales across most of the company's business lines, particularly advertising, subscription services and third-party seller services.
First Republic Stock Is Rising Amid Report of Rescue. Other Regionals Edge Down.
Shares of regional lender First Republic Bank extended gains after reports that authorities are working on brokering new assistance for the bank.
The stock traded up 7.4% to $6.65 in Friday's premarket. That follows an 8.8% gain Thursday.
Mercedes-Benz Reports Higher First-Quarter Profit on Top-End Models, Pricing
Mercedes-Benz Group AG on Friday confirmed its outlook for the year and reported higher profit and revenue in the first quarter on sales of top-end cars and vans and improved pricing.
The German luxury car maker said net profit rose to 3.945 billion euros ($4.35 billion) from EUR3.49 billion in last year's first quarter. Revenue increased 7.6% to EUR37.52 billion. Earnings before interest and taxes were confirmed at EUR5.50 billion, in line with preliminary figures released last week, while adjusted EBIT rose to EUR5.42 billion from EUR5.30 billion.
Sony Group's Fourth-Quarter Net Profit Rose
Sony Group Corp. said Friday that its fourth-quarter net profit rose 15% from a year earlier as greater earnings from its image sensors and music businesses helped offset weakness in the games and entertainment tech businesses.
The Japanese entertainment and electronics company said that net profit for the quarter ended March 31 rose to 128.16 billion yen ($956.4 million) from Yen111.08 billion a year earlier. That beat the estimate of Yen71.23 billion from a poll of analysts by Visible Alpha.
Wage Growth, Inflation Data to Inform Fed Before Rate Decision
A Labor Department report will show whether worker-pay gains continued to slow from last year's rapid pace, a data point closely watched by Federal Reserve policy makers seeking to tame inflation.
Fed officials will also see their preferred gauge of consumer inflation along with details on household income and spending in a separate Commerce Department report. The reports are among the last major releases before the Fed's monetary policy committee meeting next week.
There's 'a disconnect' between stock-market rally and Fed pivot expectations
This year's stock market rally has been "very narrow" and may not be sustainable, according to Seema Shah, chief global strategist at Principal Asset Management.
U.S. stocks rose sharply Thursday, bringing the S&P 500 index's gains this year to 7.7% despite a slowing economy, according to FactSet data. The U.S. economy expanded at a soft 1.1% annual pace in the first quarter, slower than Wall Street analysts' forecast for 2% growth in gross domestic product.
Europe's Economy Avoids Recession-Just About
Europe's economy skirted a recession at the start of the year, underlining the continent's surprising resilience despite Russia's war on Ukraine, signs of banking strains, and repeated interest-rate increases to combat stubbornly high inflation.
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04-28-23 0617ET
