Markets Today: Stock Index Futures Add to Record Highs on U.S. Economic Optimism

Morning Markets

March E-Mini S&P 500 futures (ESH24) are up +0.35%, and March Nasdaq 100 E-Mini futures (NQH24) are up +0.57%, both at new all-time nearest-futures highs. 

Stock index futures this morning are moderately higher on optimism in the U.S. economic outlook and expectations for solid company earnings.  Also, a decline in government bond yields today is supportive of stocks.  The earnings season heats up this week with companies including Netflix, Tesla, and Intel due to report. 

Early Q4 corporate earnings results have been positive so for the overall market.  With only 11% of the stocks in the S&P 500 reporting, data compiled by Bloomberg shows about 85% have beaten profit estimates. 

On the negative side for stocks, Archer-Daniels-Midland sank more than -13% in pre-market trading after placing its CFO on leave and cutting its earnings outlook pending an investigation into its accounting practices.  Also, B Riley Financial plunged more than -20% after the SEC said it was probing the company’s deals with a key client who was linked to a securities fraud. 

The markets are discounting the chances for a -25 bp rate cut at 1% at the next FOMC meeting on Jan 30-31 and 46% for that same -25 bp rate cut for the following meeting on March 19-20.

U.S. and European government bond yields today are lower.  The 10-year T-note yield is down -4.0 bp at 4.082%.  The 10-year German bund yield is down -6.2 bp at 2.279%.  The 10-year UK gilt yield is down -4.7 bp at 3.882%.  

Overseas stock markets are mixed.  The Euro Stoxx 50 is up +0.44%.  China’s Shanghai Composite Index closed down -2.68%.  Japan’s Nikkei Stock Index closed up +1.62%.

The Euro Stoxx 50 today climbed to a 1-week high and is moderately higher.  M&A activity is boosting European stocks today, with Kindred Group Plc up more than +18% after La Francaise des Jeux SA offered to buy the company for 27.95 billion kroner ($2.7 billion).  Also, Worline SA rallied 6% after Credit Agricole acquired a 7% stake in the company.  As European government bond yields declined today, interest rate-sensitive sectors such as real estate and technology gained.  In addition, ASML Holding NV gained more than +2% after Bernstein upgraded the stock to outperform.   

France Dec retail sales volume fell -2.4% y/y, the nineteenth consecutive monthly decline.

Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 3% for its next meeting on January 25 and at 16% for the following meeting on March 7.

China’s Shanghai Composite Index today tumbled to a 3-3/4 year low and closed sharply lower. Chinese stocks slumped today as an absence of fresh economic stimulus and market support measures deepened investor pessimism.  Chinese banks kept their benchmark lending rates unchanged today, following the recent move by the PBOC to maintain borrowing costs at current levels, disappointing investors hoping for more aggressive stimulus.  Chinese property stocks retreated today after JPMorgan Chase said it expects property sales in China to fall by -10% this year.  Chinese lithium-related stocks fell today after the U.S. banned the Defense Department from buying batteries produced by China’s biggest manufacturers.  In addition, Chinese food and beverage stocks were under pressure today as investors remain cautious, given weak consumption trends amid macroeconomic weakness. 

According to Bloomberg-compiled data, the meltdown in Chinese stocks forced about 240 local mutual funds to be liquidated last year, the most since 2018.  The trend has continued this year, with 14 funds already liquidated and nearly two dozen more warning of imminent closures.

Japan’s Nikkei Stock Index today rallied to a nearly 34-year high and settled moderately higher.  Japanese stocks garnered support today from last Friday’s rally in the S&P 500 and Nasdaq 100 stock indexes to record highs.  Also, interest-rate-sensitive stocks moved higher today on widespread expectations that the BOJ will maintain its negative interest rate policy on Tuesday. Market attention will focus on Tuesday’s post-meeting comments from BOJ Governor Ueda on how he assesses progress made toward achieving the sustainable inflation needed for the BOJ to end negative interest rates. 

Pre-market U.S. Stock Movers

Super Micro Computer (SMCI) is up more than +6% in pre-market trading, adding to last Friday’s +35% surge after reporting Q2 preliminary adjusted EPS of $5.40-$5.55, well above the consensus of $4.55. 

Zscaler (ZS) rose more than +3% in pre-market trading after Calcalist reported the company is in talks to buy Avalor Technologies for $250 million-$300 million. 

Macy’s (M) climbed more than +3% in pre-market trading after rejecting a bid from Arkhouse Management and Brigade Capital Management to take over the company. 

SentinelOne (S) jumped more than +7% in pre-market trading after BTIG LLC upgraded the stock to buy from neutral with a price target of $30.

Ionis Pharmaceuticals (IONS) rose more than +3% in pre-market trading after reporting its Phase 3 study showed its donidalorsen drug met the primary endpoint with a statistically significant reduction in the rate of HAE attacks in patients started every 4 weeks of patients treated every 8 weeks.

NuStar Energy LP (NS) surged more than +25% in pre-market trading after Sunoco agreed to acquire the company for $7.3 billion, including assumed debt. 

Cloudflare (NET) climbed more than +2% in pre-market trading after Citigroup raised its price target on the stock to $82 from $66. 

Archer-Daniels-Midland (ADM) sank more than -13% in pre-market trading after placing its CFO on leave and cutting its earnings outlook pending an investigation into its accounting practices. 

Boeing (BA) fell more than -1% in pre-market trading after the FAA recommended door plug inspections on another 737 model jet after most 737 Max 9 jets were grounded for inspections following a mid-flight blowout of a panel earlier this month. 

B Riley Financial (RILY) plunged more than -20% in pre-market trading after the SEC said it was probing the company’s deals with a key client who was linked to a securities fraud. 

U.S.-listed Chinese stocks are falling in pre-market trading after the Shanghai Composite tumbled to a 3-3/4 year low today amid concerns over China’s economic health.  Alibaba Group Holding (BABA), Baidu (BIDU), JD.com (JD), NetEase (NTES), PDD Holdings (PDD), and Trip.com (TCOM) are down more than -3%.

Vita Coco (COCO) slid more than -1% in pre-market trading after William Blair downgraded the stock to market perform from outperform.

Earnings Reports (1/22/2024)

AGNC Investment Corp (AGNC), Brown & Brown Inc (BRO), United Airlines Holdings Inc (UAL), Zions Bancorp NA (ZION).

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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.