OPENING CALL
A cautious mood enveloped risk assets on Tuesday, with investors of a more technical bent wary of the previous session's action, when the S&P 500 rose to a fresh high but then finished in the red at the close.
"After posting 16 weekly gains out of 18 for the first time since 1971, yesterday saw the S&P 500 get the week off to a subdued start as we await several key events later this week, including appearances from Powell, the U.S. jobs report, and the ECB decision," Deutsche Bank said.
Index futures were also being pressured by indications Apple's shares will fall 1.5% to a fresh four-month low after news that iPhone sales in China fell 24% during the first six weeks of the year.
A tentative tone also has been inherited from Asia as the pullback in some U.S. tech stocks and frustration over the lack of a big economic stimulus emerging from China's National People's Congress pushed Hong Kong's Hang Seng down 2.6%.
"China's highly anticipated NPC fell short of altering economic or policy trajectories, leaving some disappointed, particularly those hoping for a larger fiscal deficit-to-GDP target. The unchanged target of 3% fell below expectations and signaled a cautious approach to fiscal policy," SPI Asset Management said.
Premarket Movers
GitLab narrowed its fourth-quarter loss but provided disappointing guidance for the year. Shares fell roughly 20%.
New York Community Bancorp shares had another bad day on Monday, closing down 23%. Its stock recently was up 6%.
Tesla shares dropped 2%, after a 7.2% decline on Monday, when they were the S&P 500's worst performer.
Post-Close Movers
Paymentus's profit had a 10-fold increase in the fourth quarter, while revenue rose 25% and surpassed analysts' expectations. Shares rose 24%.
ThredUp's revenue increased 14% in the fourth quarter and beat analysts' expectations, but the company issued a first-quarter sales outlook below Wall Street's estimates. Shares fell 8.5%.
Watch For:
Factory Orders for January; ISM Report on Business Services PMI; Target earnings
Today's Headlines/Must Reads
- China Sets Ambitious 5% Growth Target for 2024
- China's High-Wire Act: Downshifting Growth Without Slipping Into Stagnation
- Bitcoin Funds Pull In Money at Record Pace
MARKET WRAPS
Forex:
If the ECB starts cutting interest rates before the Fed an expected weakening of the dollar and a tightening of transatlantic yield spreads could be delayed, Generali Asset Management said.
Generali AM expects the ECB to start cutting interest rates on June 6, just ahead of the Fed's expected first rate reduction on June 12. It expects a cumulative 100 basis points of ECB rate cuts in 2024, while for the Fed they forecast a total of 75 bps, less than the 90bps anticipated by markets, with a risk of a smaller 50bps being implemented.
ING said market participants are likely to be reluctant to sell dollars ahead of Powell's testimony this week.
It pointed to comments on Monday by the Fed's Raphael Bostic, which "feed into the prevailing view that the Fed is in no rush to cut rates."
This view will likely be echoed in Powell's testimony, ING added.
The ISM services data for February is unlikely to be a major market mover, although "a repeat of the strong January release would be dollar-positive," ING said.
Bonds:
Treasurys are attractive as a way to hedge against recession risk, even as the market appears to be pricing in a soft landing, Russell Investments said.
"But a soft landing is not certain, and while we think a soft landing is more likely than a recession, we still believe there's a 40% probability of a U.S. recession in the next 12-18 months."
If a recession were to materialize, the inflationary pressures would sharply dissipate, giving the Fed considerable latitude to cut interest rates aggressively to cushion the economic blow, Russell Investments said.
Energy:
Oil prices edged lower after China's growth targets provided little optimism about an immediate economic rebound, and fears of slowing demand continued to weigh on sentiment.
"Lower fiscal spending could restrict the economic stimulus measures by China even as the government aims to push the economy higher," ING said.
Still, OPEC+'s extension of supply cuts amid signs of a tightening market and concerns over deadlocked ceasefire talks between Israel and Hamas continue to broadly underpin prices.
Metals:
Base metals were little changed, with gold edging slightly up, as investors looked ahead to a busy slate of market-moving events.
Sucden Financial analysts said gold could be entering overbought territory, predicting a downward correction, potentially bringing the precious metal back to around $2,050 an ounce.
There will be plenty of macroeconomic releases and central bank speakers this week, but any data is unlikely to change momentum in base metals trading--at most volatility could increase to reflect fluctuations in the dollar, Sucden said.
Iron Ore
Rising stockpiles of iron ore at China's steel mills aren't a cause for concern yet, according to Morgan Stanley, which said increasing mill inventories have recently weighed on prices, but that the rise in stocks isn't out of character at this time of year.
"Chinese inventories at ports and mills are often looked to as a barometer for the health of iron ore's fundamentals, but we can't see evidence of concerning shifts here," MS said.
While the build in inventories this year has been stronger than in 2023, it is similar to what occurred in prior years, MS added.
TODAY'S TOP HEADLINES
Novo Nordisk Says Ozempic Drug Cuts Risk of Kidney Problems
Novo Nordisk's blockbuster weight-loss drug cuts the risk of kidney disease-related events in diabetic patients by 24%, according to a new clinical trial conducted by the Danish pharmaceutical company.
Headline results from a five-year study of Semaglutide, which is marketed as Ozempic to treat diabetes, show that diabetic patients with chronic kidney disease saw a statistically significant and superior reduction in kidney disease progression, major adverse cardiovascular events and death, it added.
Calls Mount for Government Help as Change Healthcare Hack Freezes Medical Payments
Federal intervention is desperately needed to help ease a healthcare-sector crisis that began almost two weeks ago with a cyberattack on a key medical technology company that handles insurance filings, lawmakers and trade bodies say.
UnitedHealth Group-owned Optum said it was forced to disconnect over 100 systems at its Change Healthcare unit, following a ransomware attack on Feb. 21. The move brought insurance payments and other services to a halt for providers across the U.S.
Seoul Semiconductor Files Patent Lawsuit Against Amazon With European Court
Seoul Semiconductor has filed a patent lawsuit against online retail giant Amazon.com with the newly created European Unified Patent Court.
The South Korean light-emitting diode manufacturer said in a statement Tuesday that the lawsuit aims to stop the distribution of products allegedly infringing on its patent rights throughout Europe.
China to Issue CNY1 Trillion in Special Ultralong Bonds This Year
China will issue the equivalent of $139 billion in special ultralong bonds this year, part of plans to boost business activity and achieve its ambitious economic growth target of around 5% for 2024.
Chinese Premier Li Qiang said Tuesday in a government work report seen by Dow Jones Newswires that Beijing will issue CNY1 trillion of "ultralong special central government bonds" in 2024 and may continue doing so for "the next few consecutive years."
China Caixin Services PMI Shows Continued Growth, But at Slower Pace
A private gauge of China's services activities edged down again, but showed continued, albeit modest, expansion in the sector.
The Caixin services purchasing managers index declined to 52.5 in February from 52.7 in January, Caixin Media Co. and S&P Global said Tuesday. A reading above the neutral 50 mark suggests expansion, while one below indicates contraction.
Chinese Stock Exchanges Hold Compliance Training for Quant Firms
Chinese stock exchanges have held a compliance training session for quant firms as part of ongoing efforts to curb volatility and boost investor confidence in domestic equities markets.
Representatives of 28 top quant trading firms attended the session, the Shanghai and Shenzhen stock exchanges said in statements late Monday.
Supreme Court Restores Donald Trump's Ballot Eligibility
WASHINGTON-The Supreme Court ruled unanimously Monday that states lack the power to reject presidential candidates on the grounds they engaged in rebellion or insurrection against the U.S., a decision that restored former President Donald Trump's name to Colorado's ballot and ended similar challenges to his candidacy elsewhere.
The unsigned opinion puts to rest a series of state-level claims that Trump isn't eligible to be president a second time under a long dormant constitutional provision barring former officials who engaged in insurrection or rebellion from holding office again.
Netanyahu's War Cabinet Is at War With Itself
TEL AVIV-Fearing a breakdown in ties between the White House and Israel over the war in Gaza, Benny Gantz, chief political rival to Israeli Prime Minister Benjamin Netanyahu and a minister in his wartime cabinet, planned a trip to Washington.
When Gantz informed Netanyahu about the trip, the prime minister was angry.
Write to paul.larkins@dowjones.com TODAY IN CANADA
Earnings [4Q unless stated otherwise]:
Boralex
Aecon Group
Ag Growth International
Andlauer Healthcare
Bird Construction
First National Financial
Franco-Nevada
Nuvei
Pet Valu Holdings
Softchoice
Titanium Transportation
Economic Calendar (ET):
0815 Feb Official International Reserves
0930 Feb Services PMI
Stocks to Watch:
(MORE TO FOLLOW) Dow Jones Newswires
03-05-24 0616ET
