Five things you need to know before the market opens on Monday 30 January:
1. — Stock futures decline as markets face headline risk challenge
US stock futures were trading lower on Monday as the dollar slipped against its global counterparts and Treasury yields held steady as investors treaded cautiously at the start of a challenging week for global markets.
Three major interest rate decisions, a string of US corporate earnings and a key domestic labor market reading will provide the first tests of markets’ year-to-date resilience this week, with investors likely focused on Wednesday’s Federal Reserve policy meeting and a trio of earnings from the country’s biggest tech companies.
Indeed, technology stocks are posting their best start to the year since 2001, with the Nasdaq up more than 11% so far this year despite a sharp decline in the chip sector’s outlook.
Earnings will be a big part of this week’s momentum, particularly from the technology sector, with some 107 S&P 500 companies reporting their December quarter updates this week.
So far this earnings season, with 143 companies reporting, collective S&P 500 earnings are expected to decline 2.9% from last year to $443.6 billion stock-weighted.
Success rates are also modest, with 67.8% of reporting companies exceeding Wall Street’s forecasts – by only a small margin – compared to the long-term average of 66.3% and the average of 75.5% recorded in the past four quarters.
That may not be enough to keep stocks on their current path, especially if the Fed surprises Wednesday with a larger-than-expected rate hike or adds hawkish language to its post-decision statement.
The CME Group’s FedWatch still suggests a 98.9% probability of a 25 basis point rate hike on Wednesday, with the probability of a similar move in March pegged at 84.7%.
The European Central Bank and the Bank of England will also deliver key rate decisions in their respective economies on Thursday.
Benchmark 10-year Treasury yields, meanwhile, remained little changed in overnight trading at 3.533%, after falling 4 basis points last week, while 2-year bonds were up 2 basis points over at Friday’s close at 4.226%.
The US dollar index, which tracks the greenback against a basket of its global peers, was marked down 0.11% to 101.818.
As the trading day begins on Wall Street, futures linked to the S&P 500 are priced for an opening drop of 38 points, while those linked to the Dow Jones Industrial Average are forecast for a drop of 212 points. The tech-focused Nasdaq was marked down 155 points.
In overseas markets, the European Stoxx 600 index gained 0.5% in early trading in Frankfurt, while the MSCI Asia regional index ex-Japan fell 0.58% from a seven-month high. Japan’s Nikkei 225 gained 0.16% to close at a one-month high of 27,433.40 points.
2. — Week Ahead: Fed Decision, Big Tech Earnings, Jobs Spotlight
Wall Street’s solid year-to-date rally, fueled by an 11%-plus hike for the Nasdaq, will face a series of severe tests this week in the form of several gains Big Tech, the much-anticipated February from the Fed and aa crucial update on job and wage growth in January.
About 107 S&P 500 companies will report December quarter earnings this week, including Big Tech stalwarts like Meta Platforms (A HALF) – Get a free report Tuesday and Apple (AAPL extension) – Get a free report, Amazon (AMZ extension) – Get a free report and Google Parent Alphabet (GOOGL) – Get a free report on Thursday.
Those updates will close Wednesday’s Fed rate decision, scheduled for 2:00 p.m. New York time and followed by Chairman Jerome Powell’s Q&A session with the media 30 minutes later.
Friday’s nonfarm payrolls report, meanwhile, could provide clarity to investors trying to understand why — and perhaps how — wage growth is slowing even as jobless claims continue to fall and the economy has grown at a pace 2.9% faster than expected in the three months ending in December.
Analysts estimate that 185,000 net new jobs were added to the economy last month, with overall unemployment slightly higher at 3.6% and average hourly wages declining at an annualized rate of 4.3%. .
3. — The Adani group replies to Hindenburg’s brief report
Adani Group, an Indian conglomerate controlled by billionaire Gautam Adani, released a detailed response to last week’s report from Hindenburg Research that described the short seller’s allegations as “nothing but a lie”.
Last week, Hindenburg accused Adani of being involved in a “blatant stock manipulation and accounting fraud scheme spanning decades” and accused her of misusing tax havens to bury stock holdings in some of the its listed companies, noting that “substantial debt” could threaten the broader group.
In a 413-page response, published on Sunday, Adani said that “all transactions made by us with entities which qualify as ‘related parties’ under Indian laws and accounting standards have been duly disclosed by us,” adding that Hindenburg’s claims regarding offshore entities have been “deceptive”.
Adani CFO Jugeshinder Singh said the sale of the shares would “set sail” despite the recent market turmoil related to the Hindenburg report, which jumped from $72 billion from Adani Group shares.
4. — Renault and Nissan Overhaul Alliance, putting automakers on an equal footing
Renault SA shares fell in Paris trading on Monday after the French automaker agreed to historic changes to its alliance with Japan’s Nissan Motor Co. as the two companies look to expand their fledgling electric vehicle divisions.
Renault and Nissan, which had worked in terms of an unbalanced alliance that has seen the French automaker wield vastly more power for more than two decades, will trade as evenly matched as the Paris-based group cuts its stake in Nissan to 15% from 43%, placing the 28% stake – worth about $4.1 billion – in a French trust that will eventually be sold.
Nissan, which holds a 15% stake in Renault, will also be able to exercise the right to vote for the first time. The two companies said they would prioritize the development of electric vehicles in the Latin American, Indian and European markets.
Shares of Renault, which have risen more than 25% since news of the alliance talks first surfaced in October, were marked down 2.5% in Paris at 37.33 euros each. Nissan finished down 0.68% in Tokyo at ¥453.9 each.
5. — The Philadelphia Eagles are favorites over the Kansas City Chiefs in Super Bowl LVII
The Philadelphia Eagles were installed as favorites to win Super Bowl LVII against the Kansas City Chiefs last night after both teams prevailed in the Conference championship games on Sunday
Las Vegas betting odds opened with Philadelphia as a 1-point favorite over Kansas City, before moving to about 2.5 points, following the Eagles’ decisive 31-1 win over the San Francisco 49ers in the first of two Finals of Conference on Sunday.
Kansas City, which is playing its third Super Bowl in five years under QB Patrick Mahomes, outscored the Cincinnati Bengals 23-20 in a thrilling game that ended in a last-second field goal.
Fox Sports, which will air the game on Sunday, Feb. 12, is reportedly seeking $7 million for each 30-second ad, with Anheuser-Busch expected to pay about $20 million for three minutes of airtime.