MARKET WRAPS
Watch For:
Weekly Jobless Claims; Weekly Export Sales; Advance GDP estimate for 1Q; Pending Home Sales for March; Kansas City Fed Survey for April; Fed Discount Window Borrowings; Canada Payroll Employment for February; Johnson & Johnson shareholders meeting; Earnings from Merck, MasterCard, Comcast, Caterpillar, Intel
Today's Top Headlines/Must Reads:
- GDP Report to Show Pace of U.S. Growth in First Quarter
- The Surprising Risk That Turbocharged a $142 Billion Bank Run
- Europe Moves Toward Cutting a Last Source of Russian Energy
- Amazon Expected to See Slower Growth as It Continues to Pare Back
- Deutsche Bank Reports Higher Profit in Tumultuous Quarter
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Opening Call:
Stock futures rose on Thursday after another set of well-received megacap results, this time from Meta Platforms.
Shares in the Facebook owner rose nearly 12% in premarket action after it revealed profit declined less than expected in the first three months of 2023.
TickMill Group said "banking sector concerns are once again clouding the risk landscape as Wall Street witnessed a late day sell off as investors were reluctant to hold meaningful risk exposure given the pressure on regional banks. However, as was the case the day before, an overnight bid has developed driven by better than expected earnings numbers from Facebook parent Meta platforms."
Meanwhile, looming in the background is next week's Federal Reserve's monetary policy meeting, after which the central bank is expected to raise interest rates by another 25 basis points to a range of 5% to 5.25%.
Whether that move may prove to be the last in the tightening cycle may depend on upcoming economic data, notably Friday's PCE index for March, among the Fed's favored inflation gauges.
Read US Economy Expected to Have Slowed in 1Q
Read Data Play Key Role in Upcoming Fed, ECB Decisions
Overseas markets mostly edged up. The Stoxx Europe 600 ticked up 0.1%. Indexes in Hong Kong, Shanghai and Tokyo rose between 0.2% and 0.7%.
Stocks to Watch
eBay rose 3% in premarket trading after it swung to a profit in the first quarter and adjusted earnings topped forecasts.
Hilton Worldwide raised its full-year outlook after topping analysts' expectations for the first three months of the year. Shares rose nearly 5% before the bell.
Roku was up 3% in premarket trading after the company reported a narrower-than-expected first-quarter loss but warned that discretionary spending would continue to be hurt by inflation and recession fears this year.
Sangamo Therapeutics said it would reduce its U.S. workforce by 27%, or about 120 roles, as it restructures to focus on a limited number of areas. Shares of the clinical stage biotech increased 5% to $1.69 in after-hours trading.
ServiceNow fell 1% in premarket trading. The company reported a first-quarter revenue jump of 22% to $2.1 billion, and raised its annual forecast for subscription sales.
Teradyne reported first-quarter adjusted earnings that beat Wall Street's expectations by 28%. Shares rose 7% in after-hours trading.
United Rentals posted lower-than-expected earnings in its latest quarter. Shares fell almost 6% in after-hours trading.
Wolfspeed fell more than 9% following a forecast that called for a fourth-quarter adjusted loss wider than expectations.
Forex:
The dollar edged lower as investors look ahead to the release of first-quarter U.S. gross domestic product data later in the session.
The data are unlikely to change the market's view that the Fed will cut interest rates in the second half of 2023, Commerzbank said.
"The GDP data will probably confirm the picture of a robust economy, albeit with reduced momentum, so that the market is likely to feel confirmed in its view that inflation and economic developments will justify imminent rate cuts."
Read Dollar Could Fall Further if Fed Signals Pause in Rate-Rise Cycle
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Markets seem to favor the euro over other currencies when the dollar falls on a scaling back of interest rate expectations for the Fed and U.S banking concerns, ING said.
Investors prefer currencies that offer ongoing monetary policy tightening and room for a "hawkish surprise" at upcoming central bank meetings like the ECB, ING said.
"The euro is one of the very few currencies that can offer this combination at the moment, and we don't fail to see its attractiveness compared to peers," it added.
"Today, a stabilisation around [EUR/USD] 1.1050/1.1100 seems plausible, although a break above 1.1100 could trigger another substantial rally in the pair."
Energy:
Oil edged higher in Europe after a sharp drop that took it to a four-week low.
The international oil benchmark has now completely erased the gains it made following the surprise production cut from Saudi Arabia and others less than a month ago.
The reversal has been driven by concerns about the health of the global economy, prompted by lingering concerns about bank stability and falling diesel prices.
"Falling refining margins and worries over the recovery in China's commodity-intensive economy have continued to weigh on oil futures," Commonwealth Bank Australia said.
Oil prices this week have also overlooked data showing falling U.S. inventories, typically a signal of strong demand.
Metals:
Base metal prices were moving lower while gold rose in early London trade, amid worries over the U.S. financial sector.
Worries around First Republic have been spreading through the market, with the U.S. government currently unlikely to intervene at this stage, Deutsche Bank said.
"There's still concern among market participants that the turmoil we saw last month could flare back up again," Deutsche said, adding that the stresses the financial sector is seeing could stop the Fed hiking interest rates past May--a boon for non-yielding assets like gold.
Lithium
The pace of transition to the green economy could be slowed because of increasing resource-nationalism, with countries such as Chile moving to nationalize its lithium assets, a potential headwind for green uptake, ANZ Research said.
Lithium prices have fallen 75% this year, amid worries over Chinese electric-vehicle demand and rising supply, ANZ said.
"These concerns may be unwarranted."
If the lithium resource is nationalized in Chile--the country with the world's largest reserves--then delivery to the market could be slowed with the country wanting to use "unproven" technologies to make the extraction process more environmentally friendly, it said.
"This could delay the delivery of its pipeline of projects," ANZ said, adding that it expects prices to rebound on this.
TODAY'S TOP HEADLINES
Amazon Expected to See Slower Growth as It Continues to Pare Back
Amazon.com Inc. is expected to report stalling sales growth in the first quarter after demand fell for cloud computing and the tech giant embarked on a wide-ranging cost-cutting plan.
The company is scheduled to report first-quarter earnings Thursday after markets close. Analysts polled by FactSet on average predict $124.6 billion in sales, or about 7% growth, which would be a slight slowdown from the revenue growth Amazon saw a year ago. Analysts expect Amazon made $2.2 billion in profit from January to March, an improvement from the nearly $4 billion the company lost in the same period a year earlier.
Microsoft's Activision Loss Is Sony's Gain
It isn't easy to play well against a deep-pocketed opponent like Microsoft. But Japan's Sony has scored a surprise win in the first round of the videogame merger wars-thanks to the U.K. government.
Antitrust regulators in the U.K. blocked Microsoft's $75 billion deal to buy game maker Activision Blizzard on Wednesday, putting the fate of the transaction in serious doubt. The Competition and Markets Authority said the combination could hinder competition in the nascent cloud gaming segment. Both companies will appeal the ruling, but completing the deal now seems like a long shot.
Deutsche Bank Reports Higher Profit in Tumultuous Quarter
Deutsche Bank AG said its business held up well during March's banking turmoil, with first-quarter profit rising 8% as it continued to benefit from rising interest rates.
The performance of its bread-and-butter lending and deposit-taking business offset a weaker performance for its investment-banking operation, which continued to be hit by a drought in deal making and capital raising by clients.
Barclays Profit Lifted by U.S. Credit-Card Business
Barclays PLC's profit rose robustly in the first quarter despite banking turmoil that roiled both sides of the Atlantic.
Profit grew 27% in the first three months of the year from a year earlier, to GBP1.78 billion, or about $2.22 billion, the British bank said Thursday. Analysts had expected a profit of GBP1.45 billion, according to a Barclays poll.
Chinese Liquor Maker Sinks After Serving Up Hong Kong's Biggest IPO in Months
Hong Kong's biggest listing so far this year flopped in its trading debut, a troubling sign for a market that has been trying to recover from a long IPO slump.
ZJLD Group Inc., a maker of a popular fiery spirit called baijiu, started trading on Thursday after raising the equivalent of $676.4 million in its initial public offering. Shortly before the market opened, executives downed shots of the company's flagship Zhen Jiu liquor at a listing ceremony at Hong Kong's stock exchange.
AstraZeneca 1Q Profit Rose, But Decline in Covid-19 Drug Sales Hurt Revenue
AstraZeneca PLC on Thursday reported a rise in profit for the first quarter, but said a decline in sales of its Covid-19 medicines hurt revenue.
The Anglo-Swedish pharma giant posted net profit of $1.80 billion for the period, up from $388 million the year prior, and beating analysts' expectations of $1.52 billion.
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04-27-23 0618ET
