MARKET WRAPS
Watch For:
Weekly Jobless Claims; Fourth quarter Revised Productivity and Costs; Earnings from Toronto-Dominion Bank
Today's Top Headlines/Must Reads:
- Fed Might Be Winning Inflation Fight, Depending on Index Used
- Small-Cap Stocks Shine in Market Reversal
- The 1% Stock-Buyback Tax Hasn't Slowed Repurchases. A Proposed 4% Tax Might.
- Eurozone Inflation Eases, but Core Measure Hits Record High
- Idled Ships, Empty Containers. Ocean Shipping Faces Its Biggest Slump in Years.
- Tesla's Growth Ambition Comes With a $175 Billion Price Tag
- Biden National Cyber Strategy Seeks to Hold Software Firms Liable for Insecurity
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Opening Call:
Stock futures mostly weakened on Thursday as rising bond yields continued to weigh on equities.
Recent data indicating that the Federal Reserve's campaign of interest rate hikes is yet to significantly slow the economy and suppress inflation has pushed benchmark borrowing costs back above 4% as traders bet the central bank will have to tighten policy further.
China's PMI reading yesterday has added to concerns that inflationary pressures will persist.
And data from the eurozone published Thursday showed annual consumer price inflation of 8.5% in February, down only fractionally from January's 8.6% and higher than the 8.2% forecast by economists.
Stocks to Watch
Funko reported a wider-than-expected loss in the fourth quarter and guided for first-quarter revenue below estimates. Shares tumbled 27% in after-hours trading.
Okta jumped 13.3% after fourth-quarter adjusted earnings beat analysts' consensus and the identity-management software company issued an upbeat financial forecast.
Tesla was down 5.3% in premarket trading after CEO Elon Musk confirmed the electric-vehicle maker plans to build its fifth assembly plant in Monterrey, Mexico. A lack of details during the presentation appeared to be sending the shares lower.
Salesforce surged 14.6% after it posted better-than-expected fiscal fourth-quarter adjusted earnings and said fiscal 2024 adjusted profit would come in well above analysts' expectations.
Snowflake issued revenue guidance for fiscal 2024 below expectations and the stock declined 6.4% in premarket trading.
Silvergate Capital plunged 29.5% after the banker to the cryptocurrency industry delayed filing its annual report.
Splunk declined 3.5% in premarket trading after its outlook for the fiscal first quarter and year missed estimates.
Forex:
The dollar recovered after losses in the previous session that were triggered by reduced safe-haven flows after strong Chinese PMI data boosted optimism in the country's economic recovery, MUFG Bank said.
"While renewed China reopening optimism has weighed down on the dollar, it is still deriving support from rising U.S. yields," MUFG said.
Higher Fed interest rate rise expectations and the recent pick-up in inflation expectations helped lift the 10-year U.S. Treasury yield back above 4.00% yesterday for the first time since the first half of November, it said.
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Sterling fell as investors continued to digest cautious remarks from BOE Governor Bailey yesterday about the outlook for interest rates.
Bailey signalled that further rate rises weren't guaranteed and said he hasn't seen any data to justify the recent rise in the market's rate expectations.
"We now expect the BOE to deliver one more 25bps hike this month but doubt that rates will need to rise as far as current market pricing," MUFG said.
The BOE's relatively cautious stance remains a negative factor for sterling in the near-term, it added.
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The euro stayed weaker against the dollar even after the latest eurozone inflation data exceeded expectations.
The data may have been priced in following higher-than-forecast inflation prints from Germany, Spain and France earlier this week.
Energy:
Oil prices ticked 0.1% lower in Europe, balancing signs of demand weakness in the U.S. with hopes for China's reopening.
Read Carbon Emissions Climbed Less Than Feared in 2022 Despite Coal Resurgence
Metals:
Base metals prices weakened in London trading as investors mulled hawkish comments from Fed officials and a stronger dollar.
TODAY'S TOP HEADLINES
Credit Suisse's Legal Charges Threaten Recovery
Credit Suisse Group AG's multibillion-dollar legal bills are posing another threat to its planned recovery.
The Swiss bank has taken around $4 billion in litigation provisions since 2020, contributing to net losses in 2021 and 2022. In February, it estimated up to another $1.3 billion looks reasonably possible.
Tesla's Growth Ambition Comes With a $175 Billion Price Tag
AUSTIN, Texas-Elon Musk's Tesla Inc. spent around $28 billion to cement itself as the world's most valuable car company. It is now preparing to invest roughly five times that as it strives to meet the next objective: Becoming the world's largest car maker by volume.
Chief Financial Officer Zach Kirkhorn said publicly for the first time on Wednesday that Tesla could need to spend nearly $150 billion more to achieve its long-term goals, which includes selling 20 million vehicles a year. Today's largest auto maker sells roughly half that annually, while Tesla delivered around 1.3 million vehicles to customers globally last year.
Beer Drinkers Cut Back as Bud Brewer AB InBev Raises Prices
Budweiser brewer Anheuser-Busch InBev SA reported a fall in sales volumes for the fourth quarter as drinkers in North America bought less of the company's beer amid rising prices.
The drop comes as companies across the consumer-products industry grapple with how much they can raise prices to offset rising costs without deterring shoppers. For much of the past year, AB InBev said drinkers weren't giving up their brews despite inflation's bite, though that trend appeared to end in the last quarter.
Salesforce Stock Surges as Software Maker Sees Its Profitability Rising
Salesforce Inc.'s shares surged Wednesday, after the company forecast its profitability would increase this fiscal year as it faces activist shareholders focused on spending levels at the business-software provider.
For its just-started fiscal year, Salesforce projected widening profit margins and revenue that would surpass analysts' forecasts.
Amazon to Invest $6 Billion on Cloud Infrastructure in Malaysia
Amazon.com Inc.'s cloud-computing arm plans to invest $6 billion in Malaysia by 2037 to launch cloud-computing infrastructure in the Southeast Asian nation.
Amazon Web Services said Wednesday that it plans to build an infrastructure region in Malaysia, comprising three so-called availability zones, or clusters of data centers. The zones will add to 99 existing such zones globally.
SpaceX Launches New Crew to Space Station After Delay
SpaceX launched a crew to the International Space Station early Thursday, a makeup flight for a mission that the company and NASA scrubbed earlier this week due to a technical issue.
The delay was a rare hiccup in SpaceX's work handling high-profile human spaceflights for the National Aeronautics and Space Administration. The Elon Musk-led rocket company has now conducted seven of those missions for NASA since 2020, when it blasted off the first astronauts from the U.S. in close to a decade.
China Rare Earths Miners Drop on Tesla Plans for New Motors
Shares of Chinese rare earths miners are lower Thursday on news that Tesla Inc. plans to drop use of the metals in its new generation of permanent magnet electric motors.
Shares of China Rare Earth Resources & Technology Co. are down 7.6% at the midday break, while shares of China Northern Rare Earth (Group) High-Tech Co. and Rising Nonferrous Metals Share Co. are down 4.1% and 8.2%, respectively.
Fed Might Be Winning Inflation Fight, Depending on Index Used
Two measures of U.S. inflation are now telling a similar story. But those measures are likely to diverge this year, with one signaling the Federal Reserve's work is nearly done and the other suggesting the opposite.
That could make it hard for the Federal Reserve to explain to the public why it is holding interest rates high.
Small-Cap Stocks Shine in Market Reversal
Investors are hoping shares of small, domestic-focused companies have more room to run, even as the rebound in the broader market fizzles.
They have added a net $4.2 billion to U.S. mutual and exchange-traded funds that buy small-capitalization stocks this year, while pulling $17.4 billion from large-cap funds, according to data from Refinitiv Lipper through Feb. 22. Of the equity groups tracked by Refinitiv Lipper, the inflows to small-cap funds are second only to international stock funds, which have attracted $16 billion.
Bank Profits Fell 6% Last Year as War, Inflation and Higher Rates Hurt Results
For banks, 2022 wasn't a year to remember. But it wasn't a year to forget, either.
Profit across the banking industry fell 6% in 2022 compared with the previous year, according to Federal Deposit Insurance Corp. data released this week. Still, the $263 billion in profit was the biggest of any year except 2021.
The 1% Stock-Buyback Tax Hasn't Slowed Repurchases. A Proposed 4% Tax Might.
Executives largely shrugged off a new 1% tax on stock buybacks as the cost of doing business. But a recently proposed 4% tax might move them to reshape their buyback strategies, some said.
The proposed rate increase-which faces hurdles to passage in the divided Congress-now has executives from companies including Overstock.com Inc., Kinder Morgan Inc. and Leidos Holdings Inc. thinking about how their approach to share repurchases might change if it were to pass. Among the strategies under consideration: looking to execute repurchases at lower share prices to limit the tax impact, or to instead focus on dividends to return capital to shareholders.
Eurozone Inflation Eases, but Core Measure Hits Record High
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03-02-23 0638ET
