OPENING CALL
Stock futures stalled on Wednesday after strong gains the previous day as investors shrugged off a somewhat hotter-than-expected inflation report.
"Despite this [inflation report], market expectations for rate cuts remain steady at around 80-90 basis points for the year, closely aligned with the Fed's projected 75 basis points cut. Consequently, there has only been a modest uptick in 10-year yields," SPI Asset Management said.
Analysts noted that the importance of inflation data to stocks markets appears to have waned of late, as secular growth factors in tech and hopes a hard economic landing has been avoided continued to underpin sentiment.
"Inflation may have ticked up in the U.S., but the glass half-full mentality rules for now, as the underlying strength in the economy prompts celebration rather than caution," Hargreaves Lansdown said.
Premarket Movers
Allbirds posted a wider-than-expected loss in the fourth quarter and guided for another drop in revenue in both the first quarter and 2024. Shares were down 4.3%.
Boeing was up 0.2% following Tuesday's session that saw shares decline 4.3% after it reported that deliveries in February fell from a year earlier. Southwest Airlines was rising 1.1%.
Coinbase said late Tuesday it plans to carry out a $1 billion convertible-debt offering to raise money. Its stock traded up around 1% premarket, as bitcoin resumed its rally.
Intel was falling 1.5% after a report from Bloomberg said the Pentagon was pulling out of a plan to spend as much as $2.5 billion on a chip grant to the company.
Nvidia edged up in premarket after having climbed 7% Tuesday, leading tech stocks higher.
Tuesday's Post-Close Movers
Activist investor Jonathan Litt has a 3% stake in Equity Commonwealth and is pushing it to liquidate and return cash to investors. Shares rose 1.7%.
Latham Group said it forecasts another year of industry weakness and falling sales. Shares fell 13%.
MaxCyte's fourth-quarter results topped analysts' expectations and it backed its previous guidance for this year. Shares rose 13%.
SIGA Technologies swung to a profit in the fourth quarter on a surge in revenue and declared a special cash dividend. Shares rose 8.8%.
Watch For:
EIA Weekly Petroleum Status Report; Earnings from Dollar Tree, Lennar
Today's Top Headlines/Must Reads:
- It's a Higher-for-Longer World for Rates, and That's OK
- Frothy U.S. Stock Market Just Isn't Crazy Enough to Be a Bubble
- Bitcoin Sets Another Record. How to Call the Crypto Market Top.
MARKET WRAPS
Forex:
The market reaction to the rise in annual inflation has so far been contained, leaving the dollar trading steady, but this news could soon push the currency higher, ING said.
"The hot CPI should warrant a stronger dollar from these levels, and we think there is a good chance that the dollar will find more support in the coming days."
For now, the recent message by Jerome Powell that interest rates will be cut this year "continues to resonate loudly with investors."
Long dollar positions provide a good equity hedge given the negative correlation between equities and the dollar, J.P. Morgan said.
"Given the low level of FX [volatility], this favors expressing long dollar positions via options."
J.P. Morgan favors options betting on the dollar against the euro and Canadian dollar due to lingering U.S. economic outperformance and the prospect of tariffs if Donald Trump wins the election.
EUR/USD digital puts also offer an attractive hedge against a scenario of higher-for-longer interest rates, it added.
Sterling showed little reaction to data showing that the U.K. economy expanded by 0.2% in January as moves in the FX market broadly remained muted.
Brown Brothers Harriman said GBP/USD was "trading heavy" even as the data pointed to U.K. interest rates staying higher for longer.
"The U.K economy is on track to recover quickly from its end-2023 technical recession, supporting the case for no immediate Bank of England policy rate cuts."
Bonds:
It is "far easier" to see 10-year Treasury yields edge higher than a capitulation and fall in yield from here, ING said.
"Continuing to move clear of 4% and towards 4.35% makes a degree of sense."
ING said the "poor" 10-year Treasury auction on Tuesday signals that demand is "less than impressive" at current yield levels.
Energy:
Oil prices edged higher after industry data showed a large draw in U.S. inventories, while the hot inflation data didn't seem to hurt expectations around interest-rate cuts this year.
Market watchers now await official U.S. inventories data from the EIA later on Wednesday and the International Energy Agency's monthly report due on Thursday.
Metals:
Metal prices were mixed, with base metals rising but gold taking minor losses following a surge in Treasury yields.
Base metals edged slightly higher, following on from Tuesday's gains, Sucden Financial said.
While the recent narrative around metals has been driven mostly by a softer macroeconomic picture, the upside suggests the appetite for higher prices is building across the complex, Sucden added.
Aluminum and copper prices are both testing their upper trading ranges, which could quickly trigger strong gains if they break through, it said.
TODAY'S TOP HEADLINES
Adidas Proposes Flat Dividend as 2024 Growth Expected in Second Half
Adidas said it will propose a flat dividend for 2023 and that growth this year is expected to be geared toward the second half.
The German athletic apparel and footwear company on Wednesday said it would propose a dividend of EUR0.70 a share, and that it plans to return to its policy of paying annual dividends to shareholders in the range of 30% to 50% of net income from continuing operations.
Berkshire Buys More Liberty Sirius XM, Now Holds $2.6 Billion of Tracking Stock
Berkshire Hathaway continued buying shares of Liberty Sirius XM Holdings, the tracking stock for Sirius XM Holdings, as the tracker traded at a discount to the value of an exchange offer due to take place in the third quarter.
Berkshire Hathaway purchased 9.6 million shares of Liberty Sirius XM Holdings for about $288 million on Friday, Monday and Tuesday, according to two Form 4 filings with the Securities and Exchange Commission late Tuesday.
Zara Owner Inditex Posts Higher Sales, Plans Higher Investments
Zara clothing-store owner Inditex plans to boost investments to meet strong demand after it reported sales growth for its latest fiscal quarter and got off to a positive start to the new year.
The Spanish fashion group said Wednesday that sales were 10.34 billion euros ($11.30 billion) for the quarter ended Jan. 31, up from EUR9.51 billion a year earlier.
How China Tried to Fix the Stock Market-and Broke the Quants
China's biggest quant funds beat the market for years by applying complicated statistical models to stock picking. But they didn't model a key factor-the government.
Quantitative funds, which use algorithms to chew masses of data and make trading decisions, have become a powerful force in the U.S., where funds such as AQR Capital Management, Renaissance Technologies and Millennium Management manage huge portfolios and provide an important source of liquidity for small investors. But the industry has at times been controversial, being accused of herd behavior that exacerbates periods of volatility.
Republicans' New Abortion Strategy: Talk About It More, Not Less
WASHINGTON-Republicans leading the party's effort to defend the House in this fall's elections are pushing GOP colleagues to openly discuss their positions on abortion, rather than try to sidestep the issue like many did in the previous campaign, arguing that doing so will be critical to winning competitive races.
A memo prepared by House Republicans' campaign arm and viewed by The Wall Street Journal says Republicans have a "brand problem, not a policy problem," as their reluctance to discuss the issue left it to Democrats to define where the GOP stood. Many voters view the party's hopefuls as opposing abortion under any circumstances, when there are actually a variety of positions held by candidates, particularly in swing districts, the memo states.
High-Stakes Rematch Is Set as Biden, Trump Clinch Party Nominations
President Biden and former President Donald Trump won enough delegates to become the presumptive nominees of their parties in the latest round of primary voting Tuesday, more definitively starting the clock on a bitter and costly eight-month general election campaign.
For months there has been little uncertainty about their eventual selection-a pairing of elderly candidates most Americans don't want. Biden pushed beyond the delegates he needed after winning the Democratic primary in Georgia, while Trump got there after taking the Republican contest in Washington state, according to the Associated Press.
Gaza Airdrops Take Huge Effort and Don't Solve Hunger Crisis
U.S. AIR FORCE FLIGHT OVER NORTH GAZA-Rice, flour, milk, pasta and canned food glided out the back of this transport plane in 400-pound bundles, hurtling toward the bombed-out terrain 2,000 feet below where hungry Palestinians scrambled for a scrap of desperately needed humanitarian aid.
The flight on a C-130 from Jordan to the Gaza Strip on Sunday took two hours, cost roughly $30,000 and needed nine experienced crew members. Its 3.2-ton payload was barely enough to feed 4,000 people in the besieged territory, where almost the entire population of 2.2 million is now in urgent need of lifesaving assistance, say the United Nations and nonprofit relief groups.
Write to ina.kreutz@wsj.com
TODAY IN CANADA
Earnings [4Q Unless Stated Otherwise]:
Enghouse Syss 1Q
Jamieson Wellness
Mattr
North American Const
VerticalScope
Economic Indicators (ET):
Nothing scheduled
Stocks to Watch:
BSR REIT 4Q FFO 93c/Shr
---
(MORE TO FOLLOW) Dow Jones Newswires
03-13-24 0617ET
