OPENING CALL
Stock futures were lower on Monday as hopes for a March interest-rate cut kept fading.
Speaking in a rare television appearance on "60 Minutes, " Jerome Powell said officials feel they "can approach the question of when to begin to reduce interest rates carefully," due to ongoing economic strength.
Powell still expects 75 basis points of cuts this year, but reiterated the committee was in no rush to cut rates and would wait for more data before making a move, IG Group said.
This followed on from Friday's non-farm payroll reading blowing past expectations and restating the strength of the economy-lowering the chances of a March rate cut further and sending the dollar and yields soaring, IG added.
"After the heavyweight data and earnings of last week, things cool down slightly, though today's ISM report will be worth watching to see if it confirms the strong outlook for U.S. jobs."
Overseas Markets
Chinese stocks sold off again, despite the latest vow from regulators to stabilize the market. The Shanghai Composite fell 1%, while the Hang Seng Index lost about 0.2%.
Premarket Movers
Boeing said it would have to rework about 50 undelivered 737 MAX jets after supplier Spirit AeroSystems found two misdrilled holes on some fuselages. Boeing shares were down 1.9% in premarket trading, while Spirit Aerosystems fell 1.8%.
Meta fell 0.5% after shares surged 20% on Friday to a closing record of $474.99 following an outlook that surpassed Wall Street expectations and an announcement that it planned for its first-ever dividend.
Nvidia set a record intraday high of $666 on Friday, and a closing record of $661.60. Shares were up 1.3% premarket.
Palantir Technologies is expected by analysts to report fourth-quarter adjusted earnings after the closing bell Monday of 8 cents a share on revenue of $603 million. The stock was rising 1.8% ahead of the earnings report.
Tesla fell 1.6% premarket, on track to extend its bad run this year. Tesla shares are down 24% this year through Friday, a sharp contrast to the performance of other growth companies in 2024.
Watch For:
ISM Report on Business Services PMI for January; Earnings from Caterpillar, McDonald's, Palantir Technologies
Today's Top Headlines/Must Reads:
- Big Tech Stocks Find Little Room for Error After Monster Run
- Week of Whipsawing Treasurys Casts Doubt on Soft-Landing Trade
- Home Buyers Are Shopping Again and Finding More Options
- Big Brands Are Playing the Long Game in China
MARKET WRAPS
Forex:
Weaker economic data and interest-rate cuts by the Fed will both be necessary for the dollar to weaken, and this is likely to take longer to materialize than markets expect, BofA Global Research said.
It forecast EUR/USD will fall to 1.07 in the first quarter, then rise to 1.15 by year-end, "assuming the U.S. economy slows from here and the Fed starts to cut rates in June."
Combined with improved risk appetite, this should mean the dollar weakens even if Fed rate cuts are slower than current market pricing suggests, BofA added.
ING said Friday's jobs data have knocked the possibility of a rate cut by the Fed as early as March "off the table" and this caused EUR/USD to extend losses and fall under 1.08.
Steep losses from here are unlikely given the current very low volatility environment, though it's possible that EUR/USD could drop towards 1.07, ING said.
This would likely be a function of dollar gains rather than euro falls given that the eurozone data calendar is relatively light this week.
Bonds:
A light data calendar and sporadic central bank speak this week allow time for some "soul-searching" for fixed income, with all the attention remaining on the pricing of central banks' rate-cut path, Barclays Research said.
"For now, central banks are in risk-management mode and they are willing to be patient. While the recent data trajectory could validate the Fed's wait-and-see approach, the same may not be so obvious for the European Central Bank, the growth and inflation projections of which are too high, in our view."
Energy:
Oil futures traded lower on a strengthening dollar as traders clawed back bets for imminent rate cuts by the Fed.
Meanwhile, traders continued to closely watch developments in the Middle East as the Biden administration vowed more attacks against Iranian proxies.
"The oil market is largely balanced in 1Q and OPEC is sitting on a large amount of spare capacity, leaving the market fairly comfortable," ING said. "However, this could quickly change if tensions spread to other parts of the Middle East."
Metals:
Base metals and gold prices were lower on a strengthening dollar, after Powell said he expected rate cuts but played down expectations they would arrive soon.
Jefferies said iron ore and coal prices are set to drift lower over the coming months, as seasonal weakness kicks in earlier than expected.
"Demand in India and Southeast Asia is booming and will likely drive the next demand cycle in the mining sector, but these end markets are still too small to offset potential weakness in China," it said.
TODAY'S TOP HEADLINES
Meta Finally Figures Out How to Sell the Metaverse
The last time Mark Zuckerberg signaled plans to open his wallet, his shareholders bailed. What a difference two years makes.
Meta Platforms saw its share price jump 20% Friday following strong fourth-quarter results that included a significantly boosted share buyback and the company's first-ever dividend. It was a significant bump for a stock that had already nearly tripled in value during 2023. The recent gains have also put Meta's market value back above $1 trillion, in the rarefied ranks of Apple, Microsoft, Amazon, Nvidia and Google-parent Alphabet.
Target Pulls Magnet Kit Misidentifying Black Leaders
Target has removed a children's educational kit featuring Civil Rights figures from its shelves after a history teacher spotted several errors and made a now-viral TikTok about them.
Las Vegas high-school teacher Tierra Espy said she realized three major Black figures in U.S. history-Carter G. Woodson, W.E.B. Du Bois and Booker T. Washington-were misidentified in the product as soon as she opened it.
Citigroup Fell Behind With Rich Customers. Can It Win Them Back?
Citigroup's wealth-management business raked in $2 billion in profits in 2007, just before the financial crisis brought the bank to its knees. At the end of last year, it barely broke even.
The collapse is one reason why Citi's stock is stuck in a deep slump and CEO Jane Fraser is under pressure to boost profits. She is hoping to turn the unit around after recently poaching Andy Sieg from a job running Bank of America's Merrill Wealth Management business.
China Service-Sector Gauge Signals Solid Rise in Activity
A private gauge of China's services activities fell slightly at the start of 2024 but stayed in expansion territory, showing continued activity growth.
The Caixin services purchasing managers index declined to 52.7 in January from 52.9 in December, Caixin Media Co. and S&P Global said Monday. A reading above the 50 mark suggests activity expansion, while one below indicates contraction.
The Investment Firm That Keeps Raising Giant Climate Funds
The biggest clean-energy investor in private markets is widening its lead, tapping into rising demand for wind and solar power and a push by big companies to reduce emissions.
Infrastructure investing giant Brookfield Asset Management said it hopes to raise more than $25 billion for two new private funds investing in clean energy. The firm said Monday it has taken in $10 billion for its latest energy transition fund and will continue fundraising for it. Brookfield expects to raise billions more in an emerging-markets-focused fund.
U.S. Plans Further Action Against Iran's Militia Allies
The U.S. and U.K. launched a fresh wave of strikes against Iran-backed Houthi rebels in Yemen in response to their attacks on international shipping in the Red Sea, as Secretary of State Antony Blinken prepared to head to the Middle East in hopes of brokering a pause in Israel's war in Gaza.
The U.S. Central Command, which is responsible for U.S. military operations in the Middle East, said it had conducted another strike early Sunday against an antiship cruise-missile position that the rebels had prepared to target vessels in the Red Sea. Separately, Washington said it is also planning more military strikes in response to an attack from an Iran-backed militia that killed three American soldiers in Jordan a week ago, after targeting Iranian allies in three Middle East countries over the weekend, including an earlier strike on the Houthis.
U.S. Pairs Military Action With Diplomacy in Effort to Reshape Middle East
The U.S. is facing monumental challenges as it deepens its diplomatic and military involvement in the Middle East to try to bring an end to the brutal war in Gaza and roll back Iranian influence.
As Secretary of State Antony Blinken heads Sunday on his fifth visit to the Middle East since the Oct. 7 Hamas attack on Israel, the U.S. goal is to secure a sustained pause in the fighting and the release of around 130 hostages still in Gaza, a crucial step for advancing its more ambitious objectives.
House Plans Israel Vote, Snubs Senate's Broader Aid Plan
WASHINGTON-House Speaker Mike Johnson (R., La.) plans to bring up for a vote next week legislation giving Israel $17.6 billion for military supplies and missile-defense systems, setting up a direct challenge to the Democratic-controlled Senate, which aims to take up a far broader foreign-aid and border package.
(MORE TO FOLLOW) Dow Jones Newswires
02-05-24 0613ET
