Daily Markets: Will January CPI Support a Slow Walking Fed?

Investments

Today’s Big Picture

Those Asia-Pacific equity markets that weren’t still celebrating the lunar new year finished the day higher, except for Australia’s ASX All Ordinaries, which declined 0.16%. India’s SENSEX gained 0.68%, and South Korea’s KOSPI added 1.12%. Japan’s Nikkei closed 2.89% higher, pushed ahead by gains in names like Tokyo Electron (TOELY), Softbank Group (SFTBY), and insurer Tokyo Marine to close at a 34-year high 37,963.97. China, Hong Kong, and Taiwan equity markets are closed again today as those countries continue to celebrate Lunar New Year. European markets are mostly lower in midday trading and U.S. equity futures are pointing to a lower open.

At 8:30 AM ET, the January Consumer Price Index (CPI) was published, showing that inflation came in a little hotter than expected as prices remained stubbornly high. The Consumer Price Index rose 0.3% for the month against expectations of 0.2%, and on a year-over-year basis, rose 3.1% against expectations of 2.9%. Core CPI rose 0.4% in January (higher than the 0.3% forecast) and 3.9% year-over-year (vs. the 3.7% forecast).

Heading into this morning’s report, while the CME FedWatch Tool shows very low prospects for a March rate cut, it continues to reflect the market’s anticipation for 5 rate cuts this year. As the market digests the data found in the January CPI report, it will no doubt turn to comments from Chicago Fed President Austan Goolsbee at 9:30 AM ET this morning and Fed Vice Chair for Supervision Michael Barr at 4 PM ET. It would take a meaningful decline in the core CPI figure on a year-over-year basis for them to soften their stance compared to the Fed’s current playbook. The odds of that happening are not only low, but the likelihood of Goolsbee and Barr breaking from the pack without caucusing with them is even lower.

Data Download

International Economy

Japan’s machine tool orders dropped 14.1% YoY to JPY 110,881 million in January, slipping further from a revised 12-month low of 9.6% fall in the previous month. The January figure marks the 13th consecutive month of declining orders due to falling domestic and international demand.

The ZEW Indicator of Economic Sentiment for the Euro Area increased by 2.3 points to 25 in February 2024, the highest in one year and above market forecasts of 20.1. The indicator of the current economic situation rose by 5.9 points to -53.4 and inflation expectations fell by 4.3 points to -61.1.

Domestic Economy

The NFIB Small Business Optimism Index in the U.S. fell to 89.9 in January, the lowest in eight months, compared to 91.9 in December 2023 and forecasts of 91.1, as labor quality and inflation were both a top concern. Thirty-nine percent of all owners reported job openings they could not fill, down one point from December and the lowest reading since January 2021. Meanwhile, plans to fill open positions softened, with a net 14% planning to create new jobs in the next three months, down two points from December and the lowest level since May 2020.

Markets

Equities breathed a sigh of relief after yesterday’s New York Fed Consumer Expectations survey results were released, which pointed to no substantive change in inflation expectations. Sectors ended higher except for Technology (-0.76%) which saw results from Apple (AAPL) and Microsoft (MSFT) contribute to just under 65% of the sector’s return, and Real Estate, which declined 0.31%. Consumer Discretionary came close to flat, down 0.08% due to some pressure from Amazon (AMZN) and Tesla (TSLA). Broad indexes were mixed as the Nasdaq Composite fell 0.30%, the S&P 500 came close to flat, declining 0.09%, the Dow gained 0.33% and the Russell 2000 added 1.75%, pushing that index into positive territory YTD.

While broad markets had a mixed day, shares of VF Corporation (VFC) were moving like a new limited edition Supreme t-shirt, rising 13.99% after it was disclosed that a shareholder activist seeking to make changes at the company as well as control of two board seats had the backing of a member of the company’s founding family, representing 15% of outstanding shares. Here’s how the major market indicators stack up year-to-date:

  • Dow Jones Industrial Average: 2.94%
  • S&P 500: 5.28%
  • Nasdaq Composite: 6.20%
  • Russell 2000: 0.90%
  • Bitcoin (BTC-USD): 19.14%
  • Ether (ETH-USD): 15.63%

Stocks to Watch

AutoNation (AN), Coca-Cola (KO), Datadog (DDOG), GlobalFoundries (GF), Herc Holdings (HRI), Krispy Kreme (DNUT), Marriott (MAR), Molson Coors (TAP), Restaurant Brands (QSR), WK Kellogg (KLG), and Zoetis (ZTS) are expected to release quarterly earnings before equities begin trading later this morning. Pre-market breadth is healthy today as 251 names in the S&P 500 have traded hands so far this morning with 70 gainers and 181 decliners. Names under pressure this morning include Arista Networks (ANET) and Cadence Design Systems (CDNS) while Waste Management (WM) (more below) and American Electric Power Company (AEP) are catching a healthy bid.

Shares of Waste Management (WM) were trending higher after the company reported a beat and raise December quarter. The December quarter benefited from pricing and volume and management sees 2024 revenue rising +6%-7% YoY to ~$21.65-21.86 billion vs. the $21.62 billion consensus. For the coming year, Waste guided its adjusted operating EBITDA to $6.275-$6.425 billion compared to the $5.899 billion achieved in 2023.

Lattice Semiconductor (LSCC) saw its shares fall in response to disappointing December quarter results and downside guidance for the current quarter. The weaker than expected revenue performance for the December quarter was due to declines in the company’s industrial and automotive as well as wireless infrastructure end markets. The company sees March quarter revenue of $130-$150 million compared to the $174.3 million consensus and the $170.6 million posted in the December quarter.

Blackberry (BB) shared it has made material progress towards establishing both the IoT and Cybersecurity business units as fully standalone divisions. The company also reaffirmed its February quarter guidance for $150-$159 million in revenue compared to the $149.88 million consensus.

Shares of TripAdvisor (TRIP) popped in aftermarket trading last night after the company announced the formation of a Special Committee comprised of independent directors of the Board of Directors of Tripadvisor. The mandate of the Special Committee is to evaluate any proposals that may be brought forward for a potential transaction, and any alternatives.

Group 1 Automotive (GPI) announced the expansion of its US portfolio in the greater Baltimore/Washington DC market with acquisitions including Toyota, Honda, Hyundai, and Kia new vehicle dealerships; one Toyota Certified pre-owned center; and three collision centers.

JetBlue (JBLU) shares moved higher after activist investor Carl Icahn disclosed a 9.91% stake in the airline.

IPOs

Readers who want to dig deeper into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Airbnb (ABNB), Akamai (AKAM), Angi Inc. (ANGI), Corsair Gaming (CRSR), Denny’s (DENN), IAC Inc. (IAC), Instacart (CART), Lyft (LYFT), MGM Resorts (MGM), Robinhood Markets (HOOD), Topgolf Callaway (MODG), Welltower (WELL), and Zillow (ZG) are expected to report quarterly results after equities stop trading today. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Wednesday, February 14

  • UK: Inflation Rate – January
  • Eurozone: GDP (2nd estimate) – 4Q 2023
  • Eurozone: Industrial Production – January
  • US: Weekly MBA Mortgage Applications
  • US: Weekly EIA Crude Oil Inventories

Thursday, February 15

  • Japan: GDP – 4Q 2023
  • UK: GDP – 4Q 2023
  • US: Weekly Initial & Continuing Jobless Claims
  • US: Import/Export Prices – January
  • US: Retail Sales – January
  • US: Industrial Production & Capacity Utilization – January
  • US: NAHB Housing Market Index – February
  • US: Weekly EIA Natural Gas Inventories

Friday, February 16

  • UK: Retail Sales – January
  • US: Producer Price Index – January
  • US: Housing Starts & Building Permits – January
  • US: University of Michigan Consumer Sentiment Index (Preliminary)

Thought for the Day

“The best revenge is massive success” – Frank Sinatra

Disclosures

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Original Post

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