MARKET WRAPS
Watch For:
Leading Indicators for December; Canada New Housing Price Index for December; earnings from Synchrony Financial, Baker Hughes, Zions Bancorp, Brown & Brown, Crane
Today's Headlines/Must Reads
Elliott Management Takes Big Stake in Salesforce
Fed Sets Course for Milder Interest-Rate Rise in February
Market Recovery Hinges on Quick Inflation Drop
Debt Ceiling Looms Over Capitol as Congress Returns to Work
Tech Layoffs Unwind Recent Head-Count Growth, Torpedo Long-Shot Projects
Tesla's Price Cuts Are Roiling the Car Market
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Opening Call:
Stock futures hovered around the flatline on Monday as traders struggled to extend the latest rally.
The stock market's recent vacillations reflect how traders daily shift the emphasis they afford the market's current main drivers: fears of an economic slowdown; how much the Federal Reserve will continue to raise interest rates given inflation levels and evidence of any slowdown; and the impact these factors will have on corporate earnings.
As these issues do battle for traders' attention the result is an S&P 500 that has of late been trading in an increasingly narrow range, noted BTIG.
"The market continues to frustrate both bulls and bears, unable to breakout decisively either way. At this point, we wonder if this range is too obvious, and perhaps we need to see a 'false breakout' above 4k before moving lower, similar to what we saw in mid December at 4,100," BTIG said.
The Fed is now in its blackout period ahead of its next decision on interest rates, due February 1st, so traders will have no monetary policy chatter on which to make bets. Consequently the continuing earnings season will likely carry greater heft for the time being.
Read A recession is coming, economists say. Some even think it's already here
Overseas, the tone was generally upbeat in many markets, although trading in Asia was lighter than usual, with Hong Kong and Shanghai closed for the Lunar New Year.
Stocks to Watch
Abbott Laboratories is under investigation by the Justice Department over conduct at its infant-formula plant in Sturgis, Mich., that led to a shutdown last year, The Wall Street Journal reported, Shares declined 3.4% in after-hours trading on Friday.
Boxed disclosed up to $20 million in new financing, which its CEO said will provide the company with more flexibility to execute its strategic vision and the strategic alternatives process. Shares rose 55% in after-hours trading.
Helbiz said it's looking to address alleged illegal short selling of its stock that it believes has artificially depressed the stock price. Shares rose 27% in after-hours trading.
Hutchmed (China) said it will receive up to $1.13 billion after striking a deal that will allow Takeda Pharmaceutical to develop and commercialize its colorectal cancer treatment outside China. Hutchmed's ADRs added more than 8% premarket.
Silvergate Capital shares added 3% after a weekend rally in bitcoin. Crypto stocks tend to rise and fall alongside crypto prices.
Week Ahead
It will be a big week of fourth-quarter earnings, with about 90 S&P 500 companies scheduled to report. There will be plenty of notable economic data releases for investors to watch out for as well.
Highlights will include results from Microsoft, Johnson & Johnson, General Electric, Verizon Communications, and Lockheed Martin--all on Tuesday.
Wednesday will bring results from Tesla, AT&T, Boeing, and IBM. American Airlines, Comcast, Intel, Mastercard, Southwest Airlines, and Visa report on Thursday, then American Express, Charter Communications, and Chevron will close the week on Friday.
On Monday, the Conference Board reports its Leading Economic Index for December, then S&P Global releases both the Manufacturing and Services Purchasing Managers' Indexes for January on Tuesday. Both are expected to remain in contraction territory.
On Thursday, the Bureau of Economic Analysis will report fourth-quarter gross-domestic-product, which is expected to show a 2.5% annual rate of growth. Also on Thursday, the Census Bureau will release the durable goods report for December.
Finally, the Bureau of Economic Analysis will report personal income and outlays for December on Friday. Earnings are expected to show a 0.2% month-over-month rise, while spending is seen slipping 0.1%. The Federal Reserve's preferred inflation gauge will be part of the same report, and is forecast to be up 4.4% from a year earlier.
Forex:
The dollar was 0.2% lower in Europe as positive risk appetite helped drive investors away from safe haven assets, ING said.
"Risk assets are largely holding onto their 2023 gains, buoyed by the view that recessions may be mild and that slowing price pressures could allow the Federal Reserve to respond if need be," ING said.
Data this week including economic growth figures on Thursday should keep the dollar on the "soft side" although the currency has fallen materially already and short-sellers may prove reluctant to build bets against the currency ahead of the Fed's Feb. 1 meeting, ING said.
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The euro rose, hitting a nine-month high, after European Central Bank member Klaas Knot said the central bank is set to raise interest rates by 50 basis points at upcoming meetings.
Knot told Dutch broadcaster WNL on Sunday a 50bp rate rise was likely in February and March with further hikes expected in the months thereafter. The attention now turns to a speech from Christine Lagarde in Germany later on Monday.
"We doubt that her speech...will offer anything new but the EUR might further hold gains if hawkish tones prevail again," UniCredit Research said.
Read Sterling Could Rise Vs Euro Later in 2023
Energy:
Oil prices edged down in holiday-thinned trading as investors awaited clues on China's reopening.
China's Lunar New Year holiday has reduced trading volumes as Chinese traders are absent. Plus, investors are largely waiting for the week-long holiday to finish before making big bets on oil as the holiday could spur a surge in Covid-19 cases.
"There is still a high level of concern about China's consumption post-Lunar New Year that could be holding the proceedings back," SPI Asset Management said.
Metals:
Base metals were mixed and gold was weaker in early European trading in lighter-than-usual trading volumes.
Last week, "copper recorded its fifth consecutive weekly gain amid ongoing signs of tightness," ANZ Research said. Tight LME stocks and a boost in Chinese demand after the Lunar New Year should support prices for LME base metals.
Meanwhile, hawkish comments from some Fed officials and mixed economic data has kept gold steady, ANZ said.
Copper/Iron Ore Outlook
The most likely driver of copper prices in the short term will be China's post-lockdown bounce, given the country buys roughly 45% of the global supply, Liberum said. "Everything ex-China looks quiet/boring."
Liberum reckons the single most useful China-centric copper signal for investors is China's domestic physical and merchant premia--effectively what buyers there pay on top of the local spot price for immediate delivery of the metal. At the moment, it is very low, around $30 a metric ton.
"If this lifts, a bullish fundamental price driver is emerging [not just the current speculative one]," Liberum said.
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Iron-ore's bull market has been driven by sentiment and optimism, rather than a physical tightening of supply and demand, Morgan Stanley said. But a tighter market is expected in the months ahead, which should justify the recent rally and extend it into 2Q.
"We are increasingly asked about the sustainability of the current iron-ore rally. Our short answer is that recent momentum can only be maintained beyond the Lunar New Year break if supply-demand fundamentals catch up with recent price action, something we still expect to happen."
Morgan Stanley has tipped an average 2Q price of $140/metric ton.
TODAY'S TOP HEADLINES
Elliott Management Takes Big Stake in Salesforce
Activist investor Elliott Management Corp. has made a multibillion-dollar investment in Salesforce Inc., according to people familiar with the matter, adding to the pressures facing the business-software provider.
While details of the campaign couldn't be learned, Elliott, one of the biggest and most prolific activists, often seeks board representation and pushes for companies to make operational improvements and other changes.
Tech Layoffs Unwind Recent Head-Count Growth, Torpedo Long-Shot Projects
Google and Microsoft Corp. this past week joined other tech companies, big and small, in cutting jobs and shelving some products and projects as the industry grapples with economic turbulence.
The big question now: Will those moves be enough?
Tesla Is Last Stronghold for Investors Buying the Dip in Tech Stocks
After a brutal year for technology stocks, individual investors have lost their appetite for buying the dip, with one notable exception. They are still scooping up shares of Tesla Inc.
Individual investors' net purchases of a basket of eight popular tech stocks hit a recent peak in November, before dropping sharply through the end of the year, according to Vanda Research. Buying has since picked up slightly in the new year as tech shares rebound.
Tesla's Price Cuts Are Roiling the Car Market
Tesla Inc.'s recent price cuts on its most popular models in the U.S. are reverberating through the car business, pressuring rivals and affecting purchase decisions for new- and used-car buyers.
The Elon Musk-led car maker's most recent cut-slashing as much as 20% from the price of some versions of its top-selling Model Y earlier this month-shocked Stanly Tran. The 32-year-old California psychotherapist had been on the waiting list for a Ford Mustang Mach-E electric SUV, but quickly ditched his reservation and purchased a Model Y after a friend alerted him to the price drop.
Genesis Demise Marks End of Era for Crypto's Pseudo-Banks
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01-23-23 0621ET
