MARKET WRAPS
Watch For:
Federal Reserve Bank of Richmond President Thomas Barkin speaks at Rosslyn Business Improvement District event; Earnings from CenterPoint Energy, Deere and AutoNation
Today's Top Headlines/Must Reads:
- Growth Stocks Are Trumping Value Once Again
- Lack of Crypto Audit Regulation Raises Questions About PCAOB Authority
- Lenovo's Third-Quarter Profit Fell 32%
- Abu Dhabi to Sell 4% of Natural-Gas Business in IPO
- DOJ Nears Settlement With Claims Agent Firms Over Data Sharing Deals
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Opening Call:
Stock futures were pointing to losses again on Friday, as a spate of hot economic data is lifting expectations for Federal Reserve interest-rate hikes.
Comments from two regional Fed presidents yesterday have led traders to begin to price in the possibility that the Fed may hike by more than a quarter-point at its March meeting.
There's now an 18% chance of a half-point rate hike at the March 22-ending meeting, from 9% a week ago, according to the FedWatch tool from the CME that is based on trading in fed funds futures contracts.
Economists at Goldman Sachs late yesterday added a rate hike in June to their Fed interest-rate forecasts, with the investment bank now forecasting quarter-point increases in March, May and June.
"After a reassuring week, the U.S. market appeared to suffer a renewed bout of interest rate nerves. Yet it was blamed on a PPI number distorted by weather effects, and comments from two Fed officials who do not currently have a vote on the policy decisions," U.K. broker Peel Hunt said.
Stocks to Watch
DoorDash reported a 40% rise in revenue in its latest quarter. The stock gained 5.8% premarket.
DraftKings raised its fiscal-year 2023 guidance after reporting a surge in fourth-quarter revenue. Shares increased 5.1% in after-hours trading.
iBio on Thursday disclosed that the MUC16 protein is the target of its latest immune-oncology program. Shares surged 129% in after-hours trading.
Moderna posted mixed results for an experimental vaccine against seasonal influenza in a clinical trial of more than 6,100 adults in the southern hemisphere. Shares fell 5.3% ahead of the opening bell.
Tesla is facing a vehicle recall and a complaint from factory workers who said dozens of staff were fired in retaliation for a union drive. Shares fell 5.7% in regular trading Thursday, and stood 0.4% lower premarket.
Interest Rates
The Fed and the European Central Bank are expected to raise interest rates beyond May with the ECB deposit rate reaching a plateau at 3.5% and Fed rates peaking at 5.5% in June, Commerzbank said.
It raised its forecast for eurozone core inflation to 5% from 4.5% in 2023 with a peak at 5.6% in June, and rates still above 4% at year-end.
"Even though headline inflation looks set to fall swiftly thanks to lower energy prices and massive base effects, the central bank focus needs to be on the core measures and wages."
Forex:
The dollar rose as further signs of stubborn U.S. inflationary pressures and remarks from Fed officials fuel expectations for continued interest-rate rises.
"The odds for a 50 basis points hike at the March Fed meeting stand now around 18%, whereas this probability was just around 9% at the start of this week," Swissquote Bank said.
Read Dollar May Stay Higher on Prospect of Further Hawkish Fed Remarks
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Sterling fell after Bank of England's Huw Pill suggested the central bank could slow the pace of interest rate rises.
Speaking at the Warwick Think Tank yesterday, Pill said there's a risk of excessive monetary policy tightening if the pace of rate rises over the past few months is maintained.
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The euro fell against the dollar after more cautious remarks from ECB members came in contrast to comments from Fed officials about the need for decisive interest rate rises.
"It is clear that the faster than expected decline in inflation in the eurozone has encouraged some ECB Governing Council members to speak more forcefully on the dangers of over-tightening," MUFG said, noting remarks from Yannis Stournaras, Philip Lane and Fabio Panetta yesterday.
Bonds:
Natixis Investment Managers sees it appropriate to start extending portfolio duration, namely in the U.S., it said.
In Europe, Natixis IM looks for better entry points, it said.
"Although we are increasing duration in diversified portfolios, we remain underexposed to European short-dated government bonds.".
"Investment-grade markets should offer opportunities as growth is not expected to suffer anywhere near what we have feared some months ago," but high-yield bonds remain less attractive on a relative basis as the risk of seeing default rates picking up does not compensate at current levels, Natixis said.
Energy:
Oil fell around 2% in Europe as U.S. economic data added to fears about interest rates and a recession.
"Oil prices are trading lower because Fed hike fears keep the U.S. economy in a recession's shadow," SPI Asset Management said.
Metals:
Base metals and gold prices were falling in early London trading, with a hawkish outlook from the Fed supporting the dollar and pressuring risk assets like commodities.
"Markets took a knock over the last 24 hours, with rates rising and equities selling off thanks to strong inflation data and hawkish central bank rhetoric, as some Fed officials even floated the prospect they might resume 50-basis-point hikes," Deutsche Bank said.
TODAY'S TOP HEADLINES
Lenovo's Third-Quarter Profit Fell 32%
Lenovo Group Ltd.'s net profit fell 32% in its third quarter, as personal-computer sales continued to decline amid a deteriorating global economy and soft consumer spending.
Net profit for the three months ended December was $437 million, the world's largest PC maker said Friday. That compared with profit of $640 million a year earlier, when pandemic-driven electronics demand pushed Lenovo's earnings to a record.
DOJ Nears Settlement With Claims Agent Firms Over Data Sharing Deals
The U.S. Justice Department's bankruptcy watchdog said Thursday it has reached settlements in principle with three legal service providers that include "substantial monetary penalties" over collection of unauthorized fees from a bankruptcy claims trading startup.
The settlements would resolve disputes between the U.S. Trustee Program and Stretto Inc., Epiq Corporate Restructuring LLC and Omni Agent Solutions Inc. over fees the firms collected from Xclaim Inc. in exchange for providing the claims trading startup with creditor information in large chapter 11 cases.
Microsoft Defends New Bing, Says AI Chatbot Upgrade Is Work in Progress
Just over a week after Microsoft Corp. unveiled its new Bing search engine powered by the technology behind the buzzy ChatGPT artificial-intelligence chatbot, early testers are calling out mistakes and disturbing responses generated by the technology.
Microsoft said that the search engine is still a work in progress, describing the past week as a learning experience that is helping it test and improve the new Bing. So far, only a select set of people have been given access to it. The company said in a blog post late Wednesday that the Bing upgrade is "not a replacement or substitute for the search engine, rather a tool to better understand and make sense of the world."
Fugitive Stablecoin Founder Do Kwon Accused of Securities Fraud in U.S.
WASHINGTON-The founder of failed cryptocurrencies TerraUSD and Luna and his company misled U.S. investors who purchased billions of dollars of the digital assets, the Securities and Exchange Commission said Thursday.
The SEC filed a civil fraud lawsuit against Do Kwon and Singapore-based Terraform Labs Pte. Ltd. in Manhattan federal court, accusing them of misrepresenting the risk of TerraUSD and misleading investors about how Luna was used in South Korea.
Abu Dhabi to Sell 4% of Natural-Gas Business in IPO
DUBAI-The United Arab Emirates' national energy company plans to sell a stake of about 4% of its natural-gas business in an initial public offering that it hopes will raise $2 billion, as Middle East petrostates increase plans to supply Europe.
The Abu Dhabi National Oil Co., or Adnoc, will sell more than 3 billion shares in Adnoc Gas, one of the world's largest gas-processing entities, on the Abu Dhabi Securities Exchange on Feb 23. Shares are expected to begin trading on March 13.
Oil Shipping Stocks Have Soared. The Rally May Not Be Over.
Tankers hired to ferry oil across the ocean have rarely been in higher demand; even after large gains their stocks may still have open water ahead of them.
Russia's invasion of Ukraine upended oil markets, causing crude prices to spike to 14-year highs. Oil producers were the most high-profile winners from high prices, but the biggest beneficiaries of the changes may have been a group of smaller and lesser-known companies: oil tankers. Some of the stocks, including Ardmore Shipping (ASC) and Scorpio Tankers (STNG), quadrupled last year. As new sanctions have shifted the flow of Russian oil to more distant ports, one analyst thinks the rally could keep going. "This is a cycle that has some life," says Evercore analyst Jonathan Chappell.
After hot economic data, the big question is whether the Fed will return to 50 basis point rate hikes
The economic data coming in over the last week has by and large been characterized by one word: hot.
U.S. nonfarm payrolls employment surged by 517,000. Retail sales jumped by 3%. Consumer and producer prices did decelerate on a year-over-year basis, but not by as much as forecast. After the PPI data, economists at Goldman Sachs added another quarter-point rate hike to their forecasts, so that they now see 25 basis point hikes in March, May and June, which would take the fed funds rate between 5.25% and 5.5%.
Growth Stocks Are Trumping Value Once Again
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02-17-23 0627ET
