OPENING CALL
Stock futures were down on Wednesday as Wall Street geared up for Nvidia's fourth-quarter results and the release of the Federal Reserve's latest policy meeting.
Shares in Nvidia were the most actively traded of any S&P 500 stock early on Wednesday. Its shares shed 1% premarket after they fell 4% Tuesday. Huge Nvidia options trading has added intrigue to the stock.
The minutes from the Fed's latest meeting may shed light on policymakers' thinking about cuts to interest rates, not to mention the economy and the central bank's balance sheet.
Overseas Markets
Chinese stocks rose as the government continued its efforts to reinvigorate the economy.The benchmark CSI 300 index closed up and is in the green for the year.
Premarket Movers
Amazon.com will be added to the DJIA at the start of trading Monday, replacing Walgreens Boots Alliance. It's the first change in the blue-chip index since 2020. Amazon rose 1.3% in premarket trading while Walgreens declined 2.9%.
Caesars Entertainment reported a fourth-quarter loss of 34 cents a share, narrower than a year-earlier loss of 70 cents. The stock was down 2.2%.
Diamondback Energy posted fourth-quarter adjusted earnings of $4.74 a share, better than analysts' projections of $4.70. Shares were up 1.1%.
RingCentral was falling 6.7% after its sales guidance for the fiscal first quarter and fiscal year was short of analysts' expectations.
SolarEdge Technologies said higher interest rates and lower power prices continued to dent residential solar demand last quarter. Shares sank 16%.
Teladoc Health fell 20% after its outlook for the current quarter and 2024 came up short of Wall Street's expectations.
Tuesday's Post-Close Mover
Palo Alto Networks shares fell 20% after it came up short with its forecasts for the current quarter and trimmed its full-year revenue outlook.
Watch For:
FOMC meeting minutes published; earnings from Nvidia, Rivian, Etsy, Lucid
Today's Top Headlines/Must Reads:
- Renewable Power Growth Is Setting New Records on the Back of Federal Support
- U.S. to Invest Billions to Replace China-Made Cranes at Nation's Ports
- It's Been 30 Years Since Food Ate Up This Much of Your Income
MARKET WRAPS
Forex:
MUFG said the dollar has slipped since last week's stronger-than-expected inflation data, failing to build on gains, and is now at the bottom of its recent range ahead of the Fed minutes.
The DXY dollar index is "testing support from the bottom of the recent narrow trading range between 104.00 and 105.00 after it hit a low yesterday of 103.80," MUFG said.
Since the last Fed meeting, U.S. money markets have pushed back the expected timing of a first rate cut to June. The minutes shouldn't significantly alter those expectations, though "an earlier rate cut in May is unlikely to be ruled out."
The euro should stay within a tight range against the dollar this week owing to a lack of major market-moving events, Danske Bank Research said, though it maintains a bias to sell EUR/USD on rallies.
The Fed minutes could "provide interesting insights," Danske said, adding that it expects a first interest-rate cut in May and two further cuts in 2024.
On Thursday, eurozone and U.S. PMI data will be watched for signs of any rebound in global manufacturing.
Bonds:
Bond markets have continued to stabilize in the absence of major news, led by the front-end of the Treasury curve, Commerzbank Research said.
"Today's agenda holds little headline risks to derail the momentum and we expect that the recovery from the yield highs in Bunds has legs."
Investment grade debt may be in favor this year given its higher credit quality as default rates for high-yield debt tick higher toward historical averages, according to Franklin Templeton Institute's Global Investment Management survey.
Fixed income is expected to broadly benefit from declining interest rates in 2024, it said, adding that municipal bonds will remain a high quality, diversifying investment option with total returns expected to be roughly 4% in 2024.
Two-year Treasury yields will likely decline meaningfully while 10-year yields may move modestly lower, it said.
Emerging market debt spreads are expected to end 2024 at 377 bps from 303 bps currently, while a range-bound dollar is not expected to have a meaningful impact on local currency debt returns.
Energy:
Oil prices edged down on the prospect of higher-for-longer interest rates and a weaker demand outlook, despite heightened tensions in the Middle East.
The dollar's pullback was offering some relief to prices but investors' focus in now on the Fed minutes for more cues on rate-cut plans this year.
"Commodities have recently closely followed the swings in market pricing of Fed cuts," Goldman Sachs said.
The Fed has pushed back expectations of early cuts after a hotter-than-expected inflation report earlier this month, a prospect that would weigh on demand and put downward pressure on prices.
Metals:
Base metals made gains on sanction speculation while gold was broadly flat.
Aluminum was up almost 2% following reports of a plan for a new wave of U.S. sanctions against Russia, ING said.
While President Biden didn't specify which industries would be affected in the sanctions package, set to be unveiled Friday, this has left the market speculating Russia's metal industries might be targeted, ING added.
So far, the U.K. is the only European country to ban individuals and entities from physical metals trading from Russia.
TODAY'S TOP HEADLINES
Brace for Stock Volatility When Lucid Reports Earnings
Lucid earnings are coming. Investors should brace for volatility.
Wednesday evening, Lucid is expected to report a per-share loss of 30 cents from sales of about $180 million, according to FactSet. A year ago, Lucid reported a 28-cent loss from sales of about $256 million.
HSBC Books Hefty China Impairment But Unveils Fresh Buybacks
HSBC Holdings' quarterly earnings were hurt by billions of dollars in impairments related to its investment in a Chinese bank, but higher full-year earnings prompted the lender to unveil up to $2 billion in fresh share buybacks.
The Asia-focused lender said Wednesday that it swung to a net loss of $153 million in the fourth quarter from a profit of $4.38 billion in the same period a year earlier, while pretax profit fell 81% on year to $977 million. The bottom line was hurt by a $3.0 billion charge taken as the bank adjusted its valuation of its stake in Shanghai-based Bank of Communications, an investment that dates back to 2004.
China's Property Stocks Gain as Lending Rate Cut Boosts Sentiment
Chinese property stocks rose in Wednesday trade, a day after a deeper-than-expected cut to a key mortgage reference rate bolstered hopes that authorities are doing more to shore up the ailing sector.
Two key gauges in Hong Kong-the Hang Seng Properties Index and the Hang Seng Mainland Properties Index-extended the previous day's gains, sitting 3.5% and 4.0% higher at the midday break. Among individual movers, developer Shimao Group was up 8.3%, China Resources Land added 4.7% and New World Development rose 5.3%.
China Quant Fund Suspended as Regulators Tighten Grip on Trading
China's two major stock exchanges have slapped a three-day ban on a large quantitative fund, the latest move by regulators ramping up trading scrutiny as they look to boost a sluggish market.
The quant hedge fund, Ningbo Lingjun Investment Management Partnership, has been barred from trading in the Shenzhen and the Shanghai stock exchanges, according to a statement issued by the two index operators late Tuesday.
Former FBI Informant Accused of Lying About Bidens Claimed Russian Intelligence Contacts
A former FBI informant accused of making false bribery allegations against President Biden and his son Hunter had "extensive and extremely recent" contacts with foreign intelligence services, including Russia's, federal prosecutors said in a court filing Tuesday.
In the 28-page filing, federal prosecutors detailed Alexander Smirnov's contacts with Russian intelligence to argue that he should remain in custody as he confronts an indictment that appeared to undercut corruption allegations that Republicans have long levied against the president. Lawyers for Smirnov, a dual U.S.-Israeli citizen, said in their filing that the government had seized his U.S. passport, but that he would surrender his Israeli passport and submit to electronic monitoring, among other conditions. A federal magistrate judge ordered his release Tuesday during a detention hearing in Nevada, according to the court docket.
Donors Keep Pouring Millions Into Nikki Haley's Long-Shot Campaign
Nikki Haley has vowed to stay in the presidential race despite losing every Republican primary so far-and her donors appear to share that optimism.
Last month, the former South Carolina governor's campaign pulled in more than $9.8 million in contributions. A pro-Haley super PAC took in an additional $5.8 million in individual donations, thanks almost entirely to donations of $100,000 or more. Venture capital and business leaders were among the most generous.
U.S. to Invest Billions to Replace China-Made Cranes at Nation's Ports
WASHINGTON-The Biden administration plans to invest billions in the domestic manufacturing of cargo cranes, seeking to counter fears that the use of China-built cranes with advanced software at many U.S. ports poses a potential national security risk.
The move is part of a set of actions being taken by the administration on Wednesday that is intended to improve maritime cybersecurity. They include a U.S. Coast Guard security directive to mandate certain digital security requirements for currently deployed foreign-built cranes at strategic seaports, as well as an executive order by President Biden setting baseline cybersecurity standards for computer networks that operate U.S. ports.
Write to ina.kreutz@wsj.com
TODAY IN CANADA
(MORE TO FOLLOW) Dow Jones Newswires
02-21-24 0621ET
