OPENING CALL
Stock futures were mostly lower on Wednesday, with Nasdaq futures hit hardest, following a slump in some big tech shares.
Alphabet, Microsoft and Advanced Micro Devices were among those leading the declines after each reported earnings that disappointed investors. Tesla stock also fell premarket after a judge struck down Elon Musk's $55 billion pay package.
The Federal Reserve is also in focus Wednesday as it concludes its two-day policy meeting. Officials are expected to hold rates steady, though investors will be tuned into whether they say anything about when they might lower interest rates.
Treasury yields fell, with the 10-year benchmark yield edging down toward 4%. European bond yields were also lower after French inflation fell to its lowest rate in two years in January.
Overseas Markets
Chinese stocks extended their declines after data showed that factory activity in China contracted for a fourth consecutive month. Hong Kong's Hang Seng and the Shanghai Composite both lost more than 1%. In Europe, the Stoxx Europe 600 was flat.
Stocks to Watch
Mondelez said financial pressures were affecting appetites for the company's snacks, but that it expected conditions to improve in 2024. The CEO also said the snack giant would continue raising prices on its products, in large part due to soaring cocoa costs.
Premarket Movers
Fourth-quarter earnings at Alphabet rose but total advertising sales at Google missed analysts' expectations. The stock was falling 5.2%.
Advanced Micro Devices said first-quarter revenue would be "approximately $5.4 billion, plus or minus $300 million" versus Wall Street estimates of $5.73 billion. Shares fell 6.4%.
Novo Nordisk said fourth-quarter profit surged 62% and sales jumped 37%, driven by demand for weight-loss drug Wegovy and diabetes drug Ozempic. Its U.S.-listed shares rose 1.3%.
Paramount Global's B shares rose 24% and the A class gained 22% after a report that Byron Allen's media group is offering to buy the company. Citing a statement, Bloomberg News reported that Allen Media Group, as well as unnamed partners, are making a bid valued at $14 billion, or $30 billion when including assumed debt.
PayPal plans to cut its global workforce by another 9%, or 2,500 jobs, to "right-size" the company, which is facing stiffer competition under its new CEO. The stock fell 1.3%.
Skyworks Solutions jumped 4.5% after the company posted adjusted earnings in its fiscal first quarter that beat analysts' forecasts.
Tesla was down 3.3%. A Delaware court voided CEO Elon Musk's pay package, which was valued at nearly $56 billion.
Walmart rose 1.4%, close to an all-time high, after the retailer declared a 3-for-1 stock split, the company's first since 1999.
Post-Close Movers
American Superconductor is planning an underwritten public offering of its common stock. Its shares dropped 11%.
Ashland guided for sequential growth in sales in the upcoming quarter. Its shares rose 5.2%.
Powell Industries reported a rise in profit amid higher revenue in the latest quarter and increased its dividend. Its shares rose 16%.
Teradyne warned of weaker demand for some systems and forecast another drop in revenue. Its shares declined 6.3%.
Watch For:
Fed Interest-Rate Decision; ADP National Employment Report for January; Employment Cost Index for 4Q; Chicago Business Barometer--ISM-Chicago Business Survey--Chicago PMI for January; EIA Weekly Petroleum Status Report; Canada GDP for November; earnings from Boeing, Mastercard, Qualcomm
Today's Headlines/Must Reads
- Brought to You by BlackRock: Airports, Pipelines and Data Centers
- Will a Hiring Slowdown Push the Fed to Cut Rates Soon?
- Negative Takes on China's Economy Are Disappearing From the Internet
MARKET WRAPS
Forex:
Given recent solid economic data, it is unlikely to push the market to price any more Fed rate cuts than the around 130 basis points currently priced in for this year and this should be "neutral/positive" for the dollar, ING said.
ING expects the central message from the Fed will be "that imminent action was not on the table" and added that the DXY dollar index should trade toward the upper end of a 103-104 range.
UniCredit Research said the euro remains weak and risks falling against the dollar ahead of the Fed's policy decision, when policymakers are likely to be in no rush to cut interest rates.
EUR/USD has failed to sustain gains above 1.0850 for now and it needs to rally back above 1.09/1.0930 to "stem selling pressure in a more convincing way."
Gains in the yen against the dollar following signals from the Bank of Japan in its summary of opinions for its recent meeting that interest-rates could be raised prove short-lived.
Energy:
Oil prices edged lower as the focus shifts to demand concerns, even as tensions around Middle Eastern conflicts continue to smolder.
According to analysts, Saudi Aramco's decision to abandon plans to boost oil production capacity due to an uncertain demand outlook has stoked concerns, and while China has been taking supportive measures to help its faltering economy there is no clear indication of a strong demand revival just yet.
Increasingly intense clashes in the Middle East have raised supply concerns, but this slump in demand is for now keeping downward pressure on prices.
Metals:
Base metals were firmer in Europe, with analysts saying recent economic data has highlighted the resilience of many developed nations to higher interest rates, and it appears prices have now factored that in.
"Liquidity is ample, and metals such as aluminum and copper are able to take any external shocks and return to the mean in due time," Sucden said.
Commonwealth Bank of Australia said iron-ore prices are likely to retreat toward $100/metric ton in the months ahead, from roughly $135/ton now.
Its forecast is based on expectations of limited stimulus in China and, consequently, losses for steelmakers there.
The World Gold Council said central banks' demand for gold is expected to remain high this year and could offset a slowdown in consumer demand due to elevated prices and slowing economic growth,
Central banks have been supportive of gold demand in 2023 and helped offset weakness in other areas of the market, keeping demand well above the ten-year moving average, it noted.
TODAY'S TOP HEADLINES
Qualcomm Earnings Are Today. Its Chip Products Look Strong and Its Stock Is Cheap.
Qualcomm should benefit if the smartphone industry returns to growth this year. The leading maker of mobile processors and 5G wireless chipsets will offer its latest update Wednesday when it reports earnings after the market close.
The Wall Street consensus estimates for Qualcomm is for the company to report December quarter revenue of $9.5 billion with adjusted earnings of $2.37 a share. Analysts' estimates for the current quarter's revenue is $9.3 billion and earnings of $2.25 a share.
Universal Music Group Poised to Stop Licensing Music to TikTok
Universal Music Group, the world's largest music company, said it would stop licensing content to TikTok if the firm fails to reach a new contract with the social-media app to pay its musicians, which include Taylor Swift and Drake.
The current contract is set to expire Wednesday, and no new agreement has been reached, Universal said in an open letter to the artist and songwriter community.
The Companies Calling Workers Back to the Office Five Days a Week
UPS on Tuesday joined a small group of large companies pushing for a return to what has become an anomaly in American worklife: five days in the office.
The delivery giant followed JPMorgan Chase and Boeing among employers requiring full-time attendance for at least some segment of their workforces.
23andMe's Fall from $6 Billion to Nearly $0
Five years ago, 23andMe was one of the hottest startups in the world. Millions of people were spitting into its test tubes to learn about their ancestry. Oprah had named its kit one of her favorite things; Lizzo dressed up as one for Halloween; Eddie Murphy name-checked the company on "Saturday Night Live." 23andMe went public in 2021 and its valuation briefly topped $6 billion. Forbes anointed Anne Wojcicki, 23andMe's chief executive and a Silicon Valley celebrity, as the "newest self-made billionaire."
Now Wojcicki's self-made billions have vanished. 23andMe's valuation has crashed 98% from its peak and Nasdaq has threatened to delist its sub-$1 stock. Wojcicki reduced staff by a quarter last year through three rounds of layoffs and a subsidiary sale. The company has never made a profit and is burning cash so quickly it could run out by 2025.
Where Are Interest Rates Headed? What to Expect From the Fed Meeting
Federal Reserve officials are set to hold interest rates steady this week at a 23-year high, putting the focus on what, if anything, they say about when they might lower rates.
At their last three meetings, central-bank officials made no changes to their policy rate but debated whether they had to raise rates more. Now, officials are turning their attention to when they might lower rates, though several have signaled they are in no hurry.
Two Ways the Fed's Rate Moves Could Help Home Buyers in 2024
Falling mortgage rates could help home buyers in two ways this year: Houses might become slightly more affordable, and there might finally be more listings to choose from.
Mortgage rates aren't generally expected to drop below 6% in 2024, though they are likely to decline gradually as the Federal Reserve starts making interest-rate cuts. The first cuts aren't expected Wednesday, but some economists say they could begin this spring.
China Factory Activity Contracts for Fourth Straight Month
HONG KONG-Chinese factory activity remained in contraction for a fourth straight month, the latest sign that the country's economy is struggling to regain momentum, adding to pressure on policymakers to boost demand.
(MORE TO FOLLOW) Dow Jones Newswires
01-31-24 0619ET
