MARKET WRAPS
Watch For:
Weekly Jobless Claims; Earnings from AbbVie, Apollo, Kellogg, Lyft, News Corp., PayPal, PepsiCo, Philip Morris, and S&P Global.
Today's Top Headlines/Must Reads:
- Dow Sits Out Stock Market's Wild Ride
- U.S.-China Tensions Are High. So Is Commerce Between the Nations.
- Russia's War Could Lead to Shift in Sources for Energy Supplies
- Pfizer, Novartis, Merck Executives Say They Are Hunting for Deals Again
- Disney's Shake-Up Resets the Stage
- Credit Suisse Buys Klein Group in Step Toward Investment-Bank Spinoff
- China's Fleet of Balloons Prove Hard to Detect as They Survey the World
Follow WSJ market coverage here
Opening Call:
Stock futures on Thursday were pointing to a bounce back, but the key indexes remained locked in a tight range.
"It feels like the market is transitioning into a tighter range before getting new information on which to decide whether to continue to uptrend or reverse lower," Saxo Bank said.
"The signs are leaning towards a cyclical uptrend, but the signal-to-noise level remains low across many macro indicators."
There's not much on the economic calendar besides the release of jobless claims, as traders start to look ahead of the release of consumer price index next Tuesday.
Stocks to Watch
Affirm Holdings said it would cut 19% of its staff after the company reported a quarterly loss and issued an outlook shy of forecasts. The stock fell 18.2%.
Alphabet fell 7.7% yesterday on concerns about its nascent AI chatbot, Bard.
Applovin reported better-than-expected fourth-quarter revenue and said it expects the mobile ad market remaining "relatively stable" in the first quarter. The stock was soaring 28.4%.
Robinhood Markets gained 5.5% in premarket trading after its board approved plans to buy back 55 million shares originally purchased last year by Emergent Fidelity Technologies, a firm tied to Sam Bankman-Fried.
Mattel was down 10.1% after fourth-quarter profit and sales at the toymaker missed estimates. The company also guided for flat sales in 2023.
MGM Resorts was rising 6.2%. The casino company reported fourth-quarter revenue that topped expectations and announced a stock buyback program of $2 billion. Fellow casino operator Wynn Resorts gained 5.4% after it also posted quarterly revenue that beat estimates.
Salesforce shares ticked up in premarket trading; Dan Loeb's hedge fund Third Point has a stake in the customer management software maker, the fifth activist investor to pile in.
Sonos surged 15.2% after posting record revenue in its fiscal first quarter and beating analysts' earnings expectations.
Walt Disney plans to trim 7,000 jobs and eliminate $5.5 billion in costs as part of a major corporate reorganization. Shares rose 5.7% in after-hours trading.
Forex:
Investors may be re-entering dollar short positions that bet on it falling but it is too early to expect a sustained downtrend for the currency, ING said.
Risk-sensitive currencies were in demand ahead of the open, which suggests markets see the peak in the Fed's hawkish communications about raising interest rates and are eyeing opportunities to re-enter dollar shorts at more attractive levels, ING added.
"However, there is still some room for USD rates to absorb further hawkish repricing in rates expectations, and the rebound in risk currencies may be premature."
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Sterling could strengthen as gas prices fall and risk appetite improves, Deutsche Bank said.
"Sterling's external vulnerabilities have reduced with the fall in gas prices."
GBP/USD appears cheap and the risk-sensitive exchange rate should benefit from more supportive market sentiment in the first half of 2023, DB added.
It expects GBP/USD to rise to 1.25 by the second quarter of 2023.
Bonds:
Government bonds on both sides of the Atlantic seem to be preparing for consolidation for the time being, Metzler said.
Central banks remain in focus, but monetary policy tightening by major central banks no longer seems to be very high on market participants' list of concerns, it said.
"Even if we assume that yields are a bit too relaxed given what still has to come from the central banks, we do not expect any stronger swings to the upside."
That said, expectations may be forming that improving economic expectations make it no longer attractive to bet on yields falling significantly, Metzler added.
Energy:
Oil prices edged higher in Europe as hopes for Chinese demand balance out rising stockpiles in the U.S.
The prospect of stronger Chinese demand continues to keep prices supported.
Saudi Aramco this week added to their prices for Asia, suggesting they are hopeful for Chinese demand.
"We expect Chinese oil consumption to increase by around 1.0mb/d this year, with strong growth emerging as early as late in Q1," ANZ said.
A build in U.S. crude inventories was capping gains, however. U.S. crude stocks rose by 2.4 million barrels while stocks of gasoline and distillates also rose.
Read Barrons.com: Russia's War Could Lead to Shift in Sources for Energy Supplies
Metals:
Base metals and gold prices moved higher in London trading as the dollar continued to weaken, supporting risk assets.
Central-bank policy remains key for prices, with the Fed keeping a close eye on data for its decisions.
"Initial jobless claims are the local economic highlight today," Commonwealth Bank of Australia said.
"We expect the FOMC will keep raising the Funds rate until there is sufficient evidence of labor market loosening."
Aluminum Outlook
Higher demand from China and lower supplies of aluminum are likely to keep prices elevated in 2023, according to Fitch Solutions.
Fitch said in a note that it is maintaining its average price forecast for 2023 at $2,600 a metric ton, with prices on the LME currently sitting at $2,471 a ton.
The research agency said that production strains in China and Europe are likely to remain as high power costs continue to hit producers, while sanctions on Russian producers are also likely to provide support.
Meanwhile, Fitch expects Chinese demand to recover significantly from the second quarter on government policies to support growth in the construction, autos and renewables sector, giving further impetus to prices.
TODAY'S TOP HEADLINES
ChatGPT Clones Are Preparing to Take Over China
This column isn't written by ChatGPT. At least not yet. But the conversational artificial-intelligence tool seems to be taking over the world-and that now includes the Chinese stock market.
Investors should be careful not to get ahead of themselves, however.
Pfizer, Novartis, Merck Executives Say They Are Hunting for Deals Again
Pharmaceutical executives are ready to make deals.
Executives at Pfizer Inc., Merck & Co. and Novartis AG said they are looking for promising drugs to add to their pipelines and replenish sales as top-selling products lose patent protection in the coming years.
Higher Prices Hit Demand for Unilever's Soap and Ice Cream
LONDON-UnileverPLC reported a fall in quarterly sales volumes as higher prices for its soap and ice cream hit consumer demand, and warned that the trend was set to continue this year.
The maker of Dove soap and Ben & Jerry's ice cream said sales volume fell 3.6% in the fourth quarter, with declines in all its business groups, as it increased prices by an average of 13.3%. Underlying sales growth for the three months to Dec. 31 came in at 9.2%, above analysts' expectations.
Credit Suisse Strikes Deal for Klein Group as Losses Deepen
Credit Suisse Group AG reported a fifth consecutive quarterly loss and said rich customers withdrew around $100 billion in the fourth quarter, signs that the beleaguered lender has yet to turn the corner.
The Swiss bank is trying to recover from scandals and financial losses with a sweeping overhaul. It wants to focus on wealth management and is breaking up its investment bank.
Post to Buy Pet Food Brands From J.M. Smucker for $1.2 Billion
Post Holdings Inc. agreed to pay $1.2 billion to buy multiple brands from J.M. Smucker Co. in a deal that marks the food giant's entry into the pet-foods market.
The transaction includes Rachael Ray Nutrish, Gravy Train, 9Lives, Nature's Recipe and Kibbles 'n Bits, as well as manufacturing locations in Bloomsburg, Pa.; Meadville, Pa.; and Lawrence, Kan.
Disney's Shake-Up Resets the Stage
Even Robert Iger can only do so much in six weeks. He did manage to make Nelson Peltz's job a little more difficult in that time, though-with the help of all those grown-ups in mouse ears.
Disney's fiscal first-quarter results reported Wednesday afternoon were the company's first since Mr. Iger's return to the corner office. That happened about halfway through the quarter, following a disastrous earnings report and historic stock selloff sealed the fate of his handpicked successor. The most recent results are also the first since activist Trian Fund Management launched a proxy challenge, seeking a board seat for a founding partner, Mr. Peltz.
The Atlanta Billionaire Behind Goldman's Latest Consumer-Lending Push
A billionaire entrepreneur who owns more of Goldman Sachs Group Inc. than Chief Executive David Solomon is leading an effort to refresh the Wall Street stalwart's Main Street lending ambitions.
Goldman is shrinking Marcus, its homegrown consumer-banking business. But it is doubling down on GreenSky, a home-improvement lender it bought last year over the objection of some senior executives.
Abbott Laboratories to Acquire Cardiovascular Systems At Equity Value of $890M
Abbott Laboratories plans to acquire medical-device company Cardiovascular Systems Inc. in a deal that will boost Abbott's vascular disease offerings.
Under the terms, Cardiovascular Systems stockholders will receive $20 per common share at a total expected equity value of about $890 million, the companies said Wednesday.
(MORE TO FOLLOW) Dow Jones Newswires
02-09-23 0637ET
