Stock futures lower as markets face headline risk gauntlet; Week Ahead: Fed decision, big tech earnings, jobs in focus; Adani group hits back at Hindenburg short report; Renault and Nissan overhaul alliance, putting carmakers on equal terms and Philadelphia eagles favored over Kansas City Chiefs in super bowl LVII.
Five things you need to know before the market opens on Monday January 30:
1. — Stock Futures Lower As Markets Face Headline Risk Gauntlet
U.S. equity futures traded lower Monday, while the dollar slipped against its global peers and Treasury yields held steady, as investors moved gingerly into the start of a challenging week for global markets.
Three major interest rate decisions, a slew of U.S. corporate earnings and a key reading of the domestic job market will provide early tests to the 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.
Tech stocks, in fact, are riding their strongest start to the year sine 2001, with the Nasdaq rising more than 11% since the start of the year despite a sharp pullback in prospects for the chip sector.
Earnings will form a major part of this week’s momentum, particularly from the tech space, with around 107 S&P 500 companies reporting December quarter updates this week.
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.
That may not be enough to keep stocks on their current path, especially if the Fed were to surprise with a larger-than-expected rate hike on Wednesday or add hawkish language to its post-decision statement.
The CME Group’s FedWatch still suggests a 98.9% chance of a 25 basis point rate hike on Wednesday, with odds 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 note yields, meanwhile, were little-changed in overnight trading at 3.533%, after falling 4 basis points last week, while 2-year notes were up 2 basis points from Friday’s close at 4.226%.
The U.S. dollar index, which tracks the greenback against a baskets of its global peers, was marked 0.11% lower at 101.818.
Heading into the start of the trading day on Wall Street, futures tied to the S&P 500 are priced for a 38 point opening bell decline while those linked to the Dow Jones Industrial Average are set for a 212 point decline. The tech-focused Nasdaq was marked 155 points lower.
In overseas markets, Europe’s Stoxx 600 added 0.5% in early Frankfurt trading, while Asia’s region-wide MSCI ex-Japan index fell 0.58% from a seven-month high. Japan’s Nikkei 225 added 0.16% to close at a one-month high of 27,433.40 points.
2. — Week Ahead: Fed Decision, Big Tech Earnings, Jobs In Focus
Wall Street’s solid year-to-date rally, powered by an 11%-plus advanced for the Nasdaq, will face a series of stern tests this week in the form of several Big Tech earnings, the Fed’s much-anticipated February policy meeting and a a crucial update on job and wage growth over the month of January.
Around 107 S&P 500 companies will report December quarter earnings this week, including Big Tech stalwarts such as Meta Platforms (META) – Get Free Report on Tuesday and Apple (AAPL) – Get Free Report, Amazon (AMZN) – Get Free Report and Google parent Alphabet (GOOGL) – Get Free Report on Thursday.
Those updates will book-end the Fed’s Wednesday rate decision, slated for 2:00 pm Eastern time and followed by Chairman Jerome Powell’s question-and-answer session with the media 30 minutes later.
Friday’s non-farm payroll report, meanwhile, could provide clarity to investors seeking to understand why — and perhaps how — wage growth is slowing even as jobless claims continue to decline and the economy grew at a faster-than-expected 2.9% clip over the three months ending in December.
Analysts estimate a net new 185,000 jobs were added to the economy last month, with headline unemployment edging modestly higher, to 3.6%, and average hourly earnings easing to an annualized rate of 4.3%.
3. — Adani Group Hits Back At Hindenburg Short Report
Adani Group, an Indian conglomerate controlled by billionaire Gautam Adani, issued a detailed response to report last week from Hindenburg Research that described the short seller’s accusations as ‘nothing but a lie’.
Last week, Hindenburg accused Adani of engaging in a “brazen stock manipulation and accounting fraud scheme over the course of decades”, and accused it of improperly using tax havens to bury stock holdings in some of its listed firms while noting that “substantial debt” could threaten the broader group.
In a 413-page reply, published Sunday, Adani said “all transactions entered into by us with entities who qualify as ‘related parties’ under Indian laws and accounting standards have been duly disclosed by us”, adding the Hindenburg’s claims regarding offshore entities were “misleading”.
Adani CFO Jugeshinder Singh said the share sale “will sail through” despite the recent market turmoil linked to the Hindenburg report which has loped from $72 billion from Adani Group stocks.
4. — Renault And Nissan Overhaul Alliance, Putting Carmakers On Equal Terms
Renault SA shares moved lower in Paris trading Monday after the French carmaker 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 been working under terms of a unbalanced alliance that had the French carmaker hold far more power for more than two decades, will operate as equals going forward as the Paris-based group reduces its stake in Nissan to 15% from 43%, placing the 28% holding — worth around $4.1 billion — in a French trust that will be eventually sold.
Nissan, which has a 15% stake in Renault, will also be able to exercise voting rights for the first time. The two companies have said they’ll prioritize EV development in markets in Latin America, India and Europe.
Renault shares, which have risen more than 25% since news of the alliance talks first emerged in October, were marked 2.5% lower in Paris at €37.33 each. Nissan closed 0.68% lower in Tokyo at ¥453.9 each.
5. — Philadelphia Eagles Favored Over Kansas City Chiefs In Super Bowl LVII
The Philadelphia Eagles were installed as favorites to win Super Bowl LVII over the Kansas City Chiefs last night after both teams prevailed in their Conference championship matches on Sunday
Las Vegas betting odds opened with Philadelphia as a narrow 1 point favorite over Kansas City, before moving to around 2.5 points, following the Eagles’ decisive 31-1 win over the San Francisco 49ers in Sunday’s first of two Conference finals.
Kansas City, which is playing in its third Super Bowl in five years under quarterback Patrick Mahomes, edged past the Cincinnati Bengals 23-20 in a thrilling game that came down to a last-second field goal.
Fox Sports, which is broadcasting the game on Sunday February 12, is reportedly seeking $7 million for each 30 second ad, with Anheuser-Busch expected to pay around $20 million for three minutes worth of airtime.