OPENING CALL
Stock futures were slightly higher on Wednesday with markets striving to recover some of the previous session's heavy losses, as Federal Reserve interest rate cuts were pared back.
"Bulls pointed to the fact that [Tuesday's] setback simply provided an excuse to lock in some profits after the recent strong run, and that the general trajectory for inflation remains intact, while also highlighting that the current earnings season has for the most part been much healthier than expected," Interactive Investor said.
Overseas stocks mostly rose. The Stoxx Europe 600 advanced 0.3%, while the U.K.'s FTSE 100 rallied after weaker-than-expected inflation data. In Asia, the Hang Seng rose 0.8%, while Japan's Nikkei fell 0.7%.
Fed officials making comments on Wednesday include Austan Goolsbee speaking at 9:30 a.m. and Michael Barr talking at 4 p.m. Traders will be keen to hear if the two address the January inflation report and its impact on their monetary policy thinking.
The Bureau of Labor Statistics will publish its annual producer price index seasonal adjustment revisions at 8:30 a.m. Eastern.
Premarket Movers
Airbnb was down 4.7% after it topped fourth-quarter revenue expectations.
Instacart unveiled plans to reduce staff by 7%. The company also announced mixed fourth-quarter results. The stock fell 3%.
Shares of Lyft were rising 17% after the company reported adjusted earnings in the fourth quarter of 18 cents a share, topping forecasts of 9 cents. Lyft also said it expected to post positive free cash flow for the first time in fiscal 2024.
QuidelOrtho was falling 32% after the company reported fourth-quarter adjusted earnings of $1.17 a share, well below analysts' expectations of $2.04.
Robinhood Markets swung to a profit in the fourth quarter on better-than-expected revenue, sending its shares up 12%.
Upstart Holdings declined 18% after the company said it expected first-quarter revenue of about $125 million, below analysts' projections of $152.3 million.
Vizio fell 4.4% after surging 25% following a report from The Wall Street Journal that said Walmart was in talks to buy the TV maker for at least $2 billion.
Zillow reported fourth-quarter revenue of $474 million, up 9% from a year earlier and above analysts' expectations of $452 million. The loss in the period was narrower than analysts' expectations. Shares rose 6.9%.
Watch For:
EIA Weekly Petroleum Status Report; earnings from Cisco Systems, Kraft-Heinz
Today's Headlines/Must Reads
- Rate Cuts Might Be Delayed. That's No Reason to Panic
- The Six Months That Short-Circuited the Electric-Vehicle Revolution
- Corporate Bond Funds Are Surging. What to Watch Out For
MARKET WRAPS
Forex:
The dollar remains supported in the near term due to the U.S.'s relatively high interest rates, Danske Bank said, which retains a long position in the greenback against the euro, sterling and Norwegian krone.
"We remain constructive on the dollar in the near term and prefer selling EUR/USD rallies."
Any correction in risk assets in the coming months "only add to the dollar demand." However, "we are getting closer to the point where this dollar-bullish argument has been exhausted."
ING said January's stronger-than-expected inflation data "is not a good look for a central bank preparing to cut rates" and should pave the way for the dollar to remain strong.
Given that seasonal patterns tend to favor the dollar in February and with PCE data--the next key data for the Federal Reserve--not due until Feb. 29, "it looks like the dollar will be able to hold recent gains for another couple of weeks."
ING expects the DXY dollar index to trade towards the top end of a 104.60-105.00 range on Wednesday.
The yen weakened to 150 per dollar for the first time in nearly three months, prompting a senior Japanese official to threaten action to stabilize the currency.
"Rapid movements have significant negative effects on the economy," Masato Kanda, vice minister of finance for international affairs, said Wednesday.
"We will monitor the foreign exchange market carefully with a high sense of tension and take appropriate action if necessary."
Sterling fell after data showed U.K. annual inflation unexpectedly held steady at 4% in January, against forecasts it would rise. Some analysts said the data could mean the Bank of England could cut rates by the summer, potentially in June.
Capital Economics said inflation should fall further in the coming months, which would "would make the BOE much more comfortable with cutting interest rates, perhaps in June."
Still, other analysts warn inflation remains well above the BOE's 2% target and wages remain sticky and these factors have limited the pound's losses.
With G10 FX increasingly explained by local policy, rather than by only one major overarching theme, the coming months will be crucial, SEB Research said.
"Central banks are waiting for more data to solidify the confidence in shifting policies--with the Fed paying extra attention to service inflation, [the] European Central Bank on wage growth and Bank of Japan on the outcome of wage negotiations with labor unions."
Bonds:
Inflation shocks beyond the first half of the year might be the most underpriced risks in markets, Oxford Economics said, adding that central banks are expected to proceed with interest-rate cuts more slowly than expected by markets.
"Central banks will [largely] not follow through with market pricing and we move to an underweight in DM [developed market] duration."
Oxford Economics, however, retains its overweight bias in emerging market bonds.
Energy:
Oil prices nudged higher on growing tensions in the Middle East as talks on a Gaza truce end inconclusively, but gains were capped by the hot inflation reading and fading hopes for early Fed rate cuts this year.
Investors' focus is now on official data from the Energy Information Administration and the IEA's monthly report on Thursday.
ING said the crude oil market is showing some signs of improving demand as the price structure of Brent indicates that backwardation--typically a sign of tight supply that occurs when spot prices are higher than future prices--has increased since the start of February.
Shell said it expects global demand for liquefied natural gas to grow beyond 2040, driven by industrial demand in China and economic development in South Asia and Southeast Asia.
The European benchmark price for natural gas has dropped below EUR25 a megawatt hour, setting a fresh eight-month low and helped by mild weather and ample storage.
Metals:
Base metals and gold were weaker as the fallout from the CPI print continued to hit sentiment.
"The outlook for gold will be largely dependent on Fed policy and if the pace of easing for this year is dialed back, it leaves our end-of-year forecast of $2,150 an ounce at risk," ING said.
TODAY'S TOP HEADLINES
The Six Months That Short-Circuited the Electric-Vehicle Revolution
The Michigan plant where the F-150 Lightning electric truck is built used to vibrate with excitement.
President Biden visited in 2021 and test drove the blazing-fast pickup. Before the first ones even started rolling off the assembly line in the spring of 2022, Ford said it would expand the factory to quadruple the number it could build.
Former Apple Executive Among CEO Candidates for New Sports-Streaming Venture
Disney's ESPN, Fox and Warner Bros. Discovery have begun reviewing potential CEO candidates to lead their new streaming venture, which will offer all their live-sports programming in one package.
Pete Distad, who was a top executive at Apple in charge of its video and sports businesses before leaving the tech giant last spring, is among the top candidates the companies are considering, according to people familiar with the situation. Distad earlier was a marketing and distribution executive for the streaming service Hulu.
Silicon Valley Needs to Accept That Insurance Is Boring
Silicon Valley entrepreneurs hate it when the audience gets bored, but they may need to elicit more yawns if they are to transform insurance.
Enthusiasm for artificial intelligence continues to power the stock market, but it isn't giving a second wind to companies committed to revolutionizing insurance through technology, or "insurtech." Shares in listed players such as Lemonade, Root and Hippo have been trading sideways.
Climate Change Has Hit Home Insurance. Is Health Insurance Next?
Climate change is making house insurance more expensive and harder to get. Health insurance could be next, as research shows extreme heat and wildfires are putting more people in the hospital.
Californians exposed to both extreme heat and wildfire smoke on the same day were at greater risk of being hospitalized for cardiorespiratory illnesses, according to a study published earlier this month by researchers at the University of California San Diego. In particular, the study linked higher temperatures to heart attacks and strokes and found that wildfire air pollution increased the risk of cancer and lung problems.
Eurozone Industrial Production Unexpectedly Expands Amid Signs Recovery for Sector
Eurozone manufacturing is showing signs of life again after industrial production jumped unexpectedly in December, further signaling that the recent slump in manufacturing in the bloc may be coming to a close.
Total production rose on 2.6% on month in December, according to figures published Wednesday by European Union statistics agency Eurostat, the second-straight rise, after a revised 0.4% increase recorded in November.
Hotter-Than-Expected Inflation Clouds Rate-Cut Outlook
Inflation eased again in January but came in above Wall Street's expectations, clouding the Federal Reserve's path to rate cuts and potentially giving the central bank breathing space to wait until the middle of the year.
(MORE TO FOLLOW) Dow Jones Newswires
02-14-24 0614ET
