Stock futures lower as Fed decision looms, earnings in focus; Samsung confirms weakest quarterly profit in eight years, maintains capex plans; UnitedHealth, Humana slide as Medicare plans overpayment clawback; Exxon earnings on deck after Chevron miss and AMD earnings in focus as chip sector feels global demand slump.
Five things you need to know before the market opens on Tuesday January 31:
1. — Stock Futures Lower As Fed Decision Looms, Earnings in Focus
U.S. equity futures moved lower again Tuesday, while the dollar edged higher in cautious overnight trading, as investors braced for a busy session of corporate earnings and the start of the Fed’s two-day policy meeting in Washington.
Investors are facing a unusually busy week on Wall Street over the coming days, with more than 100 S&P 500 companies reporting December quarter earnings and the Federal Reserve unveiling its highly-anticipated interest rate decision on Wednesday.
With stocks sitting on a January gain of around 6%, paced by an 8.9% advanced for the tech-heavy Nasdaq, investors remain focused on corporate earnings, alongside near-term profit outlooks, to determine whether the current rally is sustainable.
Fresh forecasts from the International Monetary Fund, published Tuesday, suggest at least the chance of a firmer economic backdrop to support earnings growth, with the fund lifting its 2023 global GDP estimate to around 2.9%, thanks in part to solid U.S. demand, cooling inflation and the re-opening of China’s economy after years of tight Covid restrictions.
Official figures from China, in fact, showed that economic activity rebounded firmly in January, the first full month of re-opening, with the National Bureau of Statistics indicating its main PMI measure jumped to 50.1 from 47.0 in December. Any reading over 50 is generally considered to indicate growth.
In the U.S., a host of industrial, tech, consumer and pharma stocks will report fourth quarter earnings today, including Pfizer PFE, McDonald’s MCD, Caterpillar CAT, Exxon Mobil XOM and General Motors GM before the start of trading and Advanced Micro Devices AMD and Snap SNAP after the closing bell.
Thus far this earnings season, with 143 companies reporting, collective S&P 500 earnings are expected to fall 2.9% from last year to a share-weighted $443.6 billion.
Beat rates are modest, as well, with 67.8% of reporting companies coming in ahead of Wall Street forecasts — only only by a small margin — compared to the long-term average of 66.3% and the 75.5% average recorded over the past four quarters.
The Fed will also kick-off its two day policy meeting in Washington, with investors widely expecting the central bank to lift its benchmark Fed Funds rate by another 25 basis points, taking it to a range of between 4.5% and 4.75%
The European Central Bank and the Bank of England will also deliver key rate decisions in their respective economies on Thursday.
The U.S. dollar index, which tracks the greenback against a baskets of its global peers, was marked 0.18% higher at 102.462 heading into the start of the New York trading session, but is still on pace for its fourth straight monthly decline.
Benchmark 10-year Treasury note yields, meanwhile, were little-changed in overnight trading at 3.525% while 2-year notes were down 4 basis points from Monday’s close at 4.22%.
Heading into the start of the trading day on Wall Street, futures tied to the S&P 500 are priced for a 12 point opening bell decline while those linked to the Dow Jones Industrial Average are set for a 108 point pullback. The tech-focused Nasdaq was marked 55 points lower.
In overseas markets, Europe’s Stoxx 600 fell 0.66% in early Frankfurt trading, while Asia’s region-wide MSCI ex-Japan index fell 1.38% and Japan’s Nikkei 225 slipped 0.23%.
2. — Samsung Confirms Weakest Quarterly Profit In Eight Years, Maintains Capex Plans
Samsung Electronics shares finished sharply lower in South Korean trading Tuesday after the world’s biggest chipmaker confirmed its slowest quarterly profit in eight years and said it would maintain capital investment levels despite a slump in global demand.
Samsung, which published profit estimates for the December quarter earlier this month, said operating earnings came in at 4.3 trillion won ($3.5 billion), paced by 1.82 trillion won from its display business and 1.7 trillion from its mobile operations. Its chip division, however, saw profits slump to just 270 billion won.
Looking into the first half of the financial year, Samsung said it would maintain 2023 capex at 2022 levels, but noted it could limit some production rates in order to better match muted customer demand.
Samsung shares closed 3.63% lower at 61,000 won each in Seoul, trimming the stock’s year-to-date gain to around 10.3%.
3. — UnitedHealth, Humana Slide As Medicare Plans Overpayment Clawback
UnitedHealth Group (UNH) – Get Free Report shares moved lower in pre-market trading after the U.S. Department of Health and Human Services said it would look to recoup around $4.7 billion in funds that may have paid to companies in the Medicare Advantage system.
The HHS said payments made to various Medicare Advantage Organizations that were based on a submitted diagnosis that wasn’t backed-up by the beneficiary’s medical records would be audited, and the so-called risk adjustment overpayments — which haven’t been collected since 2007 — would be recovered over the next ten years under the so-called RADV final rule.
“Protecting Medicare is one of my highest responsibilities as Secretary, and this commonsense rule is a critical accountability measure that strengthens the Medicare Advantage program,” said HHS Secretary Xavier Becerra. “CMS has a responsibility to recover overpayments across all of its programs, and improper payments made to Medicare Advantage plans are no exception.”
4. — Exxon Earnings On Deck After Chevron Miss
The biggest U.S. oil major, much like its domestic rivals, is expected to capitalize on gains from the ongoing rise in global crude prices, linked in part to Russia’s war on Ukraine and bets on a demand rebound from China’s post-Covid reopening.
Analysts see Exxon posting a bottom line of $3.29 per share, up more than 60% from last year, on revenues of just under $95 billion.
Exxon Mobil shares were marked 0.5% lower in pre-market trading to indicate an opening bell price of $113.00 each.
5. — AMD Earnings In Focus As Chip Sector Feels Global Demand Slump
Analysts expect AMD to post a bottom line of 67 cents per share on revenues of around $5.5 billion. Last October, AMD said December quarter revenue would rise 14.5% from last year to $5.5 billion, plus or minus $300 million, with gross margins rising to around 51%.
AMD’s main U.S. rival, Intel, issued a bleak near-term outlook last week, but the Santa Clara, California-based chipmaker has taken market share in the data center space through the launch of its Genoa chip late last year.
Barclays analyst Blayne Curtis has also said AMD could see the potential for it to build gains from Meta Platforms when it accelerates AI and other spending later this year.
AMD shares were marked 1.26% lower in pre-market trading to indicate an opening bell price of $71.58 each.