Stocks Edge Higher, Powell On Deck, CVS, Bed Bath & Beyond, Boeing – Five Things to Know

Stock futures edge higher as Treasury yields steady; Powell speech in focus as markets embrace higher Fed rates; Oak Street Health soars on new CVS takeover report; Bed Bath & Beyond plummets as retailer plans $1 billion capital raise and Boeing to cut 2,000 jobs as U.S. Corporate layoffs escalate.

Five things you need to know before the market opens on Tuesday February 7:

1. — Stock Futures Edge Higher As Treasury Yields Steady

U.S. equity futures edged higher Tuesday, while the dollar held steady on foreign exchange markets are Treasury yield slipped, as investors hit pause on a two-day sell off on Wall Street ahead of a key address from Fed Chairman Jerome Powell later in the session.

Global markets are, for the most part, still reeling from Friday’s blowout jobs report, which showed a net new 517,000 positions created last month and a fresh five-decade low unemployment rate of 3.4%. 

The reading, alongside stronger-than-expected activity in the services sector — the principal driver of GDP growth — forced traders to re-set both their near term inflation forecasts as well as their assumptions for Fed rate hikes, which markets now suggest could take the terminal Fed Funds rate to as high as 5.15% over the coming months.

That view was echoed by Atlanta Fed President Raphael Bostic last night, when he told Bloomberg TV that, should firmer economic data persist, the Fed will “probably mean we have to do a little more work” in terms of rate hikes. 

The CME Group’s FedWatch suggests both a 96.7% chance of another 25 basis point rate hike from the Fed next month in Washington, with bets on a follow-on move in May — that would take the Fed Funds rate to a range of between 5% and 5.25% — rising to around 70%.

An overnight hike from the Reserve Bank of Australia, its ninth in succession, paired with hawkish comments from policymakers in the U.K. and Europe, was also a reminder that central banks have not given up on their inflation fight, putting extra emphasis on Powell’s speech later in the session. 

Bond yields were, however, marked modestly lower from their session highs yesterday, with benchmark 10-year notes trading at 3.621% and 2-year notes pegged at 4.421% in overnight trading.

The U.S. dollar index, which tracks the greenback against a basket of its global peers, was holding steady at 103.501 and helping stock futures bump slightly higher ahead of President Joe Biden’s State of the Union address later this evening in Washington. 

Futures tied to the S&P 500 were marked for a 9 point opening bell gain while those linked to the Dow Jones Industrial Average are set for a 25 point bump. The tech-focused Nasdaq was marked 50 points higher.

In overseas markets, Europe’s Stoxx 600 was marked 0.27% higher in early Frankfurt trading while a big gain for oil giant BP, which posted record 2022 profits of $27.6 billion helped lift the FTSE 100 by around 0.4% in London.

Overnight in Asia, the region-wide MSCI ex-Japan index was marked 0.2% higher into the close of trading while the Nikkei 225 slipped 0.03%.

2. — Powell Speech In Focus As Markets Embrace Higher Fed Rates 

Federal Reserve Chairman Jerome Powell will participate in a question-and-answer session at the Economic Club of Washington, D.C., later today as markets look to validate their conversion to the central bank’s months-long rate path signals. 

Powell has long insisted that investors have underestimated the level at which the Fed will need to raise rates in order to tame some of the fastest inflation rates in decades, noting that wage increases and prices pressures in the services sector remain unaffected by its early rate hikes. 

However, the Fed Chairman also chose not to push back against market expectations last week, when the Fed lifted its benchmark rate for an eighth consecutive meeting, preferring instead to highlight the various pockets of ‘disinflation‘ now emerging in various sectors of the economy.

Friday’s blowout payroll data, however, may force Powell to take a more hawkish tone when he speaks today at 12:40 pm eastern time, although in many respects the market has largely front-run any further rate signals by lifting 2-year note yields to a multi-month high of 4.47% yesterday and pegging the terminal Fed Funds rate at 5.15%. 

3. — Oak Street Health Soars On New CVS Takeover Report

Oak Street Health  (OSH) – Get Free Report shares soared higher following report that the primary care center operator is close to agreeing a $10.5 billion takeover by drug store and pharmacy benefits giant CVS Health  (CVS) – Get Free Report.

The Wall Street Journal reported late Monday that CVS, which has been tied to takeover talks with Oak Street for several months, is prepared to pay around $39 per share for the Chicago-based group.

Bloomberg reported earlier this year that CVS was in advanced talks with Oak Street in a deal that would likely rise past $10 billion, including both equity and debt, if completed. 

CVS is set to publish its fourth quarter earnings prior to the start of trading on Wednesday, with analysts expecting a bottom line of $1.92 per share on revenues of $76.21 billion.

Oak Street Health shares were marked 34.8% higher in pre-market trading and indicating an opening bell price of $35.00 per share. CVS shares, meanwhile, edged 1.47% lower to $84.00 each.

4. — Bed Bath & Beyond Plummets As Retailer Plans $1 Billion Capital Raise

Bed Bath & Beyond  (BBBY) – Get Free Report shares plunged lower in pre-market trading after the struggling home retailer said it will raise around $1 billion from a preferred stock sale as it looks to avoid an imminent Chapter 11 bankruptcy filing.

Bed Bath & Beyond said the two-pronged sale would included $225 million convertible preferred shares and a further $800 million in warrants linked to the newly-issued stock.

The retailer, which defaulted on a loan to JPMorgan last week, may be hoping to take advantage of yesterday’s surged in its share price, which sent Bed Bath & Beyond stock some 92% higher on the session to a year-to-date high of $5.86 each, pegging its market value at around $687 million.

Should the capital raising fail, Bed Bath & Beyond said, it will “likely file for bankruptcy protection”, noting it had appointed turnaround expert Holly Etlin as interim CFO.

Bed Bath & Beyond shares were marked 32% lower in pre-market trading to indicate an opening bell price of $3.99 each.

5. — Boeing To Cut 2,000 Jobs As U.S. Corporate Layoffs Escalate 

Boeing  (BA) – Get Free Report shares edged higher in pre-market trading after the planemaker said it would cut around 2,000 jobs over the coming months as American companies across all sectors of the economy continue to tighten their belts in anticipation of a weaker global economy.

Boeing said the layoffs would come from a combination of “attrition and layoffs” over the coming year, with the largest losses likely in finance and human resources, although some will be ‘offshored’ to India-based Tata Consulting Services. 

The Challenger job cuts report for January showed U.S. corporate layoffs rose 136% from last year to just under 103,000. JOLTs data for the month of December, however, indicated around 11 million open positions, the highest since early summer.

Late last month, Boeing posted a surprise fourth quarter loss of $1.75 per share on revenues of just under $20 billion, and noted its order backlog was pegged at around 4,578 aircraft with a value of around $404 billion.

Looking into the current financial year, Boeing repeated its forecast for operating cash flows of between $4.5 billion and $6.5 billion, with free cash flow of between $3 billion and $5 billion.

Boeing shares were marked 0.47% higher in pre-market trading to indicate an opening bell price of $207.78 each.  

Related Posts

Union Capital Financial Group Ltd, registered in the British Virgin Islands, does not provide investment services inside the United States. The company only provides consulting, advisory and educational services.