Daily Markets: A Swiss Surprise, Micron’s Outlook, Flash PMI Data Ahead

Today’s Big Picture

Asia-Pacific equity markets finished the day up strongly on technology expectations except for China’s Shanghai Composite which fell 0.08%. India’s SENSEX rose 0.75%, Australia’s ASX All Ordinaries added 1.13%, Hong Kong’s Hang Seng gained 1.93%, Japan’s Nikkei jumped 2.03%, Taiwan’s TAIEX leapt 2.10%, and South Korea’s KOSPI closed 2.41% higher. European markets are up across the board in midday trading and U.S. equity futures point to a vibrant market open later this morning.

Those futures are being lifted by the market seeing the Fed’s updated economic projections still calling for three rate cuts this year as well as Micron’s (MU) beat and raise earnings report last night. A potential deal to fund the U.S. federal government likely helping give equity futures a boost, as is the surprise rate cut by the Swiss National Bank earlier today.

The above points to the market rally continuing into this morning's open. Whether it continues past that point could hinge on what the March Flash U.S. PMI data reveals about the domestic economy and inflation pressures. While the Fed’s updated economic projections still pencil in three rate cuts this year, during his press conference yesterday, Fed Chair Powell indicated the Fed will need to see more data that confirms inflation is moving sustainably toward the Fed’s 2% target to begin that rate cutting cycle.

That means if this morning’s Flash PMI data finds selling prices continued to trend higher in March or were little changed compared to the first two months of the year, we could see very recent upward revisions in June rate cut probabilities fade.

Data Download

International Economy

Passenger car registrations in the European Union increased 10.1% yoy to 883.6 thousand units in February, following a 12.1% jump in the previous month. Among the four major EU markets, the fastest growth was reported for France (13%) and Italy (12.8%) followed by Spain (9.9%) and Germany (5.4%).

The Flash HCOB Eurozone Manufacturing PMI fell to a three-month low of 45.7 in March 2024 from 46.5 in February, and well below market forecasts of 47.0. However, supplier delivery times at goods producers also continued to improve after the initial Red Sea-related delays seen at the start of the year, facilitating a further fall in manufacturing input prices. The Flash HCOB Eurozone Services PMI rose to 51.1 in March from 50.2 in the previous month, firmly above market expectations of 50.5 to mark the sharpest growth since June of 2023. Firms recorded an increase in new business for the first time in nine months, albeit at a soft pace and input costs increased at the softest pace in eight months, leading selling price inflation to moderate as well.

The Swiss National Bank surprised the market with a decision to lower its main policy rate by 0.25 percentage points to 1.5%, saying national inflation is likely to stay below 2% for the foreseeable future. Supporting the move, the bank now sees average inflation reaching 1.4% in 2024, down from its 1.9% estimate in December, and 1.2% for 2025, trimmed from the previous 1.6% estimate.

The S&P Global UK Manufacturing PMI rose to 49.9 in March of 2024 from 47.5 in the previous month, firmly above market expectations of 47.8, per preliminary data. On the price front, goods producers noted that input costs accelerated yet again due to supply chain setbacks as shippers avoided the Red Sea. The S&P Global UK Services PMI was revised lower to 53.4 in March 2024, down from a preliminary estimate and February's reading of 53.8. This decrease reflects the slowest growth in business activity within the service sector for three months, with many firms attributing it to constraints on households’ disposable income. To offset shrinking margins, prices were raised at the quickest rate since July 2023.

At 8 AM ET, the Bank of England will unveil its latest interest rate decision, and the market expects that the central bank will follow the Fed, leaving interest rates unchanged.

Domestic Economy

The pace of economic data picks up in a meaningful way today. In addition to the latest weekly jobless report at 8:30 AM ET, we also have Existing February Home Sales and February Leading Indicators, both out at 10 AM ET.

Just days before a Saturday deadline for a partial government shutdown, congressional leaders released details of a $1.2 trillion deal to keep open most US government agencies through September 30. Defense spending rises more than 3% to $886 billion under the agreement while domestic spending remains largely flat.

Markets

Healthcare (-0.23%) and Energy (-0.14%) were the only sectors to close lower yesterday. Consumer Discretionary rose 1.49% and Industrials, Financials, and Communication Services all added close to 1.20% and Technology added 1.12%. Broad indexes were all higher, with the S&P 500 gaining 0.89%, the Dow adding 1.03%, the Nasdaq Composite rising 1.25% and the Russell 2000 closing 1.92% higher. Gold has been pushing higher recently, and last night saw futures rally toward fresh record highs after-hours last night after the Fed‘s decision to leave interest rates unchanged and maintain its forecast of three rate cuts this year.

Shares of Astera Labs (ALAB), which sells data center connectivity chips to cloud and AI infrastructure companies, soared 72% in their trading debut on the Nasdaq. Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: 4.84%
• S&P 500: 9.53%
• Nasdaq Composite: 9.05%
• Russell 2000: 2.36%
• Bitcoin (BTC-USD): 61.53%
• Ether (ETH-USD): 53.30%

Stocks to Watch

Accenture (ACN), Darden Restaurants (DRI), Designer Brands (DBI), Shoe Carnival (SCVL), and Winnebago (WGO) are expected to release quarterly earnings before equities begin trading later this morning.

Pre-market breadth is higher today as 274 names in the S&P 500 have traded hands so far this morning with 233 gainers and 41 decliners. Standouts on each leaderboard include Micron Technology (MU) (more below) on track to open almost 18% higher and Accenture Plc (ACN) coming under pressure as the company sees FY EPS coming in lower than expected.

Micron (MU) shares soared in aftermarket trading following the company’s beat and raise February quarter earnings report. The company delivered EPS of $0.42, significantly ahead of the -$0.25 consensus, on revenue that rocketed higher to $5.82 billion, up ~58% YoY. For the current quarter, Micron sees EPS in the range of $0.38-$0.52, also well ahead of the $0.09 consensus forecast. Revenue is expected to climb sequentially to $6.4-$6.8 billion, outstripping the $6.0 billion market forecast as the company benefits from the “multi-year opportunity enabled by AI."

KBHome (KBH) also reported better-than-expected results for its February quarter. Revenue for the period rose 6.5% YoY to $1.47 billion. Despite the drop in average home sale prices to $480,100 from $494,500, the company’s deliveries rose 9% to 3,037. Net orders of 3,232 increased from 1,909 in the prior quarter and 2,142 in the year-ago period. KB lifted its housing revenue guidance to $6.50-$6.90 billion, up from its prior guidance of $6.40-$6.80 billion.

January quarter results from Five Below (FIVE) came up short relative to market expectations and the company issued downside guidance for its current April quarter. Management guided EPS for the current quarter to $0.58-$0.69 vs. the $0.77 consensus with revenue in the range of $826-$846 million compared to the $852 million consensus. In discussing its performance and outlook, the company shared it has” implemented additional shrink mitigation initiatives based on our 2023 learnings.”

Shares of Li Auto (LI) are under pressure after the company revised its 1Q24 delivery outlook due to lower-than-expected order intake. The company’s revised outlook now calls for vehicle deliveries between 76,000-78,000 vehicles, down from the previous estimate of between 100,000 and 103,000 vehicles.

indie Semiconductor (INDI) announced a strategic investment in Expedera, a provider of scalable Neural Processing Unit (NPU) semiconductor intellectual property. The partnership is expected to deliver customized AI-enabled processing capabilities for sensing solutions targeting Advanced Driver Assistance Systems. It also includes a commercial agreement to integrate customized Expedera Origin NPU processing solutions into future indie products.

Reddit (RDDT) raised $748 million, pricing its IPO of 22 million shares at $34 each, the top of the marketed range of $31 to $34.

Reports indicate Barclays (BCS) is readying a plan to cut several hundred jobs in its investment bank unit, part of the company's years-long effort to pare costs and increase profits in the unit.

After Today’s Market Close

FedEx (FDX) and Nike (NKE) are on tap with their latest quarterly results. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Friday, March 22

• UK: Retail Sales - February

Thought for the Day

'Pain is inevitable. Suffering is optional.' – Haruki Murakami

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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