OPENING CALL
Stock futures held their ground on Monday with the release this week of consumer price index data seen as the next big hurdle for the latest equities rally.
"The Fed continues to look forward to rate cuts to offset an expected tightening of financial conditions as inflation returns to 2%, but the timing and magnitude remains elusive given the strength of the economy and lingering uncertainty over the path of inflation," SGH Macro Advisors said.
Two-thirds through fourth-quarter earnings season, 76% of companies have beaten bottom-line estimates, Jefferies said.
"Though we spend plenty of time thinking, analyzing and charting indicators of sentiment, flows, performance and economic health, the reality is that earnings revisions really do the best job of divining what direction stocks are likely to go in."
Overseas Markets
European stocks mostly rose, while many Asian markets were closed for holidays, including Japan, China and Hong Kong.
Stocks to Watch
Diamondback Energy could announce Monday it will be merging with Permian rival Endeavor Energy Resources in a deal that would create a an oil-and-gas giant worth more than $50 billion, WSJ reported. The stock-and-cash deal would value closely held Endeavor at around $25 billion, and Diamondback stockholders would own the majority of the combined company after the merger closes.
Premarket Movers
XPO was down 3.1% after shares of the company were downgraded by Morgan Stanley to Underweight from Equal Weight while the price target was increased to $80 from $75.
Friday's Post-Close Movers
Amtech Systems revenue increased 16% in the fiscal first quarter from the prior year, beating its own guidance, and its loss narrowed. Shares rose 5.8%.
Applied Digital said it had experienced a power outage at one of its facilities last month, which is ongoing as the company makes upgrades. It determined revenue from the facility will be materially impacted in the current quarter. Shares fell 7.1%.
E-Home Household Service said shareholders had approved a 1-for-5 stock consolidation at an extraordinary general meeting. Shares fell 9.7%.
Watch For:
Earnings from Arista Networks, Monday.com, Cadence Design Systems, Waste Management, Lattice Semiconductor, Avis Budget Group, and ZoomInfo Technologies.
Today's Top Headlines/Must Reads:
- Stocks Are at Records, but Are They Expensive?
- The Fed Is Right to Be Patient on Rate Cuts
- What Mortgage Bonds Say About the Office Meltdown
- Cash-Flush Buyers Dip Into Distressed Commercial Real Estate
MARKET WRAPS
Forex:
The dollar could hold up well in the near term, supported by slowing global growth and U.S. bond yield levels that are still high, NatWest Markets said.
It's wary that the recent bout of dollar weakness looks premature, given the global growth backdrop. The dollar is likely to weaken in the second quarter, closer to when the Federal Reserve starts cutting interest rates, NatWest said.
Morgan Stanley Research said the dollar's movements are "highly correlated" to moves in U.S. government-bond yields and auctions by the Treasury of 10- and 30-year bonds have an influence on the currency.
EUR/USD is unlikely to move much until the release of U.S. inflation data, DZ Bank Research said, although a number of speeches by ECB and Fed officials later on Monday could spark some limited movement.
The U.K. budget on March 6 could boost sterling further if it is both larger than expected but also viewed as sustainable, Morgan Stanley Research said.
Longer term, increased predictability in fiscal and trade policy, credibility in price stability and potential GDP growth could see meaningful inflows to U.K. assets given their steep discount versus peers, bolstering sterling in the process, it added.
Energy:
Oil prices edged lower as traders continued to closely monitor the latest developments in the Israel-Hamas war , while volumes were subdued, with major Asian markets closed for the Chinese New Year.
Investors' focus this week will be on monthly reports from OPEC and the IEA, as well as key U.S. inflation data for cues on interest-rate cuts, according to analysts.
Metals:
Base metals were mixed with gold flat, as the Chinese New Year dragged on investor sentiment.
Asian markets saw little metals trading with China, Singapore, Hong Kong and Japan among several other hubs on holiday.
Looking further ahead, the release of U.S. consumer price index data on Tuesday is prompting further caution in the market, with investors preparing to scrutinize the data for more hints as to the Fed's plan for rate cuts, analysts said.
TODAY'S TOP HEADLINES
Why Three Media Giants Made a Hail Mary Bet on Sports Streaming
Executives at the National Football League were in Las Vegas on Tuesday preparing for this weekend's Super Bowl when they got word from news reports that their business-and the sports media industry writ large-was about to change in a fundamental way.
Disney's ESPN and Fox, two of the league's biggest media partners, announced that alongside Warner Bros. Discovery they would create a new streaming service to offer all their live-sports programming. The NFL, a titan that's used to having a seat at the table in any discussion affecting its future and content, was out of the loop. Executives including Commissioner Roger Goodell and media chief Brian Rolapp were caught off guard by the news.
AI Is Starting to Threaten White-Collar Jobs. Few Industries Are Immune.
Decades after automation began taking and transforming manufacturing jobs, artificial intelligence is coming for the higher-ups in the corporate office.
The list of white-collar layoffs is growing almost daily and include jobs cuts at Google, Duolingo and UPS in recent weeks. While the total number of jobs directly lost to generative AI remains low, some of these companies and others have linked cuts to new productivity-boosting technologies like machine learning and other AI applications.
New York Community Bancorp Went From a Crisis Winner to Banking's Next Worry
New York Community Bancorp closed a transformational deal in late 2022, buying mortgage lender Flagstar Bancorp to nearly double its size. Four months later, it struck again, buying parts of Signature Bank, which had just been seized by regulators during a bank run.
The deals catapulted NYCB from a relatively small lender focused on niche commercial real estate into the regulators' group of big diversified commercial banks. It also crossed $100 billion in assets, bringing increased regulatory scrutiny and rules.
NATO Leader Blasts Trump's Suggestion He Would Encourage Russian Invasion of U.S. Allies
President Biden and NATO leaders on Sunday denounced presidential candidate Donald Trump's latest comments that he would encourage Russia to invade U.S. allies that don't contribute sufficiently to military defense.
"NATO remains ready and able to defend all Allies," said NATO Secretary-General Jens Stoltenberg in a statement. "Any suggestion that allies will not defend each other undermines all of our security, including that of the U.S., and puts American and European soldiers at increased risk. I expect that regardless of who wins the presidential election the U.S. will remain a strong and committed NATO Ally."
Hamas Military Compound Found Beneath U.N. Agency Headquarters in Gaza
GAZA CITY-Hidden deep below the headquarters of the United Nations' aid agency for Palestinians here is a Hamas complex with rows of computer servers that Israel's armed forces say served as an important communications center and intelligence hub for the Islamist militant group.
Part of a warren of tunnels and subterranean chambers carved from the Gaza Strip's sandy soil, the compound below the United Nations Relief and Works Agency buildings in Gaza City appears to have run on electricity drawn from the U.N.'s power supply, Israeli officials said.
Write to ina.kreutz@wsj.com
TODAY IN CANADA
Earnings:
Dream Impact 4Q
Economic Calendar:
None scheduled
Stocks to Watch:
Canadian Overseas Petroleum CFO Ryan Gaffney Steps Down; Co Will Consider a Process to Identify CFO Candidates Amid Ongoing Restructuring Discussions
Expected Major Events for Monday
00:01/UK: Jan UK Regional PMI
19:00/US: Jan Monthly Treasury Statement of Receipts and Outlays of the U.S. Government
23:50/JPN: Jan Corporate Goods Price Index
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Monday
2U Inc (TWOU) is expected to report $0.31 for 4Q.
Alexander's Inc (ALX) is expected to report for 4Q.
Andrew Peller (ADW.A.T,ADW.B.T) is expected to report for 3Q.
Arista Networks Inc (ANET) is expected to report $1.54 for 4Q.
Astrotech (ASTC) is expected to report for 2Q.
Avis Budget Group (CAR) is expected to report $4.32 for 4Q.
Beasley Broadcast Group (BBGI) is expected to report for 4Q.
Beyond Air Inc (XAIR) is expected to report for 3Q.
Brighthouse Financial Inc (BHF) is expected to report $2.86 for 4Q.
Brixmor Property Group Inc (BRX) is expected to report $0.20 for 4Q.
Buckle Inc (BKE) is expected to report.
Cadence Design Systems (CDNS) is expected to report $0.88 for 4Q.
Daseke Inc (DSKE) is expected to report $-0.23 for 4Q.
Delta Apparel Inc (DLA) is expected to report $0.23 for 1Q.
Encision (ECIA) is expected to report for 3Q.
Equity Commonwealth (EQC) is expected to report for 4Q.
Federal Realty Investment Trust (FRT) is expected to report for 4Q.
First Guaranty Bancshares (FGBI) is expected to report $0.09 for 4Q.
Goodyear Tire & Rubber Company (GT) is expected to report $0.28 for 4Q.
Hudson Pacific Properties Inc (HPP) is expected to report $-0.37 for 4Q.
Kentucky First Federal (KFFB) is expected to report for 2Q.
Lattice Semiconductor (LSCC) is expected to report $0.33 for 4Q.
Li-Cycle Holdings Corp (LICY) is expected to report for 4Q.
Luther Burbank Corp (LBC) is expected to report $0.06 for 4Q.
(MORE TO FOLLOW) Dow Jones Newswires
02-12-24 0621ET
