Daily Markets: February Inflation Data Sets Tone for End of Week Trading

Today’s Big Picture

Asia-Pacific equity markets finished the day higher, except for Taiwan’s TAIEX which declined 0.16%. China’s Shanghai Composite rose 0.39%, Hong Kong’s Hang Seng added 0.47%, Australia’s ASX All Ordinaries gained 0.60%, India’s SENSEX advanced 1.72%, and Japan’s Nikkei close 1.90% higher, bumping up against 40,000 as the index continues to push into record territory. South Korea’s markets are closed today as the country observes Independence Movement Day which commemorates the country’s 1919 uprising against Japanese colonial rule. European markets are up in midday trading and U.S. equity futures point to a mixed market open later this morning.

As we close the books on February and enter the final month of the current quarter, the Nasdaq Composite ended the month by hitting a closing record, its first since November 2021. That market barometer closed February with a gain of 6.1%, outpacing the S&P 500 and it 5.2% increase during the month.

As we noted above, equity futures point to a mixed start for March, but our thinking is that this morning’s February Manufacturing PMI reports from ISM and S&P Global will reveal new insights about the strength of the manufacturing economy, inflation and job creation and will influence how the market begins this new trading month. Because the market will be interested in whether yesterday’s January core PCE Price Index and inflation as well as the manufacturing data in today’s manufacturing reports sway the Fed’s message that rate cuts could happen “later this year,” comments from the six Fed speakers today will be another influence on how the market closes out the week.

Data Download

International Economy

The au Jibun Bank Japan Manufacturing PMI was at 47.2 in February, unrevised from the preliminary figures, after a final 48.0 in January. It was the ninth straight month of deterioration in factory activity, pointing to the steepest decline since August 2020 as both output and new orders contracted.

The official NBS Manufacturing PMI in China edged down to 49.1 in February from 49.2 in the previous month, in line with market forecasts. It was the fifth straight month of contraction in factory activity, amid an impact of the week-long Lunar New Year break as most factories were closed or slowed their operations. The NBS Non-Manufacturing PMI increased to 51.4 in February 2024 from 50.7 in the previous month, exceeding market forecasts of 50.8.

The Caixin China General Manufacturing PMI was up to 50.9 in February from 50.8 in the prior two months, beating market estimates of 50.6. It was the fourth straight month of growth in factory activity and the strongest pace since August 2023. Per the report, output rose the most since May 2023, new order growth accelerated, and foreign sales expanded at the strongest pace in a year.

The HCOB Eurozone Manufacturing PMI was revised higher to 46.5 in February, up from a preliminary estimate of 46.1 and compared with January's 10-month high of 46.6. Flash estimates for the consumer price inflation rate in the Euro Area declined to 2.6% YoY for February, down from 2.8% in the previous month, but remaining slightly above market expectations of 2.5%. The annual core inflation rate in the Euro Area, excluding volatile food and energy prices, eased for the 7th straight month to 3.1% in February, the lowest since March 2022, down from January's 3.3%. However, the February flash figure was above market forecasts of 2.9%.

The S&P Global UK Manufacturing PMI was revised up to 47.5 in February, the highest in ten months and up from the preliminary estimate of 47.1. Despite this uptick, the PMI continues to signal contraction for the 19th consecutive month due to the ongoing crisis in the Red Sea leading to disruptions in production and vendor delivery schedules.

Domestic Economy

In addition to this morning’s February Manufacturing PMI reports, the January Construction Spending Report will be released at 10 AM ET.

Markets

Equities responded positively to yesterday’s PCE update but it was mega caps that provided the boost to sector leaders Technology (1.11%) and Communication Services (0.89%). Healthcare (-0.82%), Consumer Staples (-0.16%) declined and Financials ended the day even, down a mere 0.05% as declines in Mastercard (MA), Visa (V), and Berkshire Hathaway (BRK.B) offset bank gains. Broad indexes ended higher, as the Dow gained 0.12%, the S&P 500 rose 0.52%, the Russell 2000 added 0.71%, and the Nasdaq Composite closed up 0.90%.

In individual names, shares of Hormel Foods (HRL) shot up 14.56% after the company surprised markets with an unexpectedly strong quarter, producing EPS of $0.41 on $3.0 billion of revenues, well ahead of estimates. The stock saw higher price target revisions although Goldman Sachs (GS) analysts maintained their “Sell” rating on the company. Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: 3.47%
• S&P 500: 6.84%
• Nasdaq Composite: 7.20%
• Russell 2000: 1.37%
• Bitcoin (BTC-USD): 46.29%
• Ether (ETH-USD): 46.12%

Stocks to Watch

Hibbett (HIBB), Plug Power (PLUG), and Radnet (RDNT) are expected to release quarterly earnings before equities begin trading later this morning. Pre-market breadth is higher today as 278 names in the S&P 500 have traded hands so far this morning with 151 gainers and 127 decliners. After reporting earnings, shares of Hewlett Packard Enterprise (HPE) are under pressure and on track to open over 6% lower (more below). Conversely, NetApp (NTAP) produced a strong quarter and outlook which is seeing shares popping ahead of the open, pointing to opening over 17% higher than yesterday’s close. Our view is that we should expect to see a strong day from cloud and digital infrastructure names to start the month.

January quarter results from Dell (DELL) not only topped market expectations but they were the latest favorable AI data point. Management shared the company’s strong AI-optimized server momentum continues, with orders increasing nearly 40% sequentially and backlog nearly doubling, exiting our fiscal year at $2.9 billion. For the coming year, Dell forecasts average annual revenue growth of 3%-4% and a minimum 8% increase in EPS compared to the current consensus of flat growth. Dell also announced a 20% increase in its dividend.

Zscaler (ZS) easily cleared January quarter expectations for revenue and EPS and guided the current quarter ahead of market expectations. However, the company’s shares are under pressure in pre-market trading this morning, likely due to the slowing rate of growth in its revenue metrics.

New York Community Bancorp (NYCB) shares plunged over 21% after the lender revealed material weaknesses in its internal accounting protocols and announced immediate leadership changes. The weaknesses stem from ineffective oversight, risk assessment, and monitoring activities.

Shares of SoundHound AI (SOUN) dropped 18% yesterday after the company missed quarterly expectations. Despite signing deals with companies like Jersey Mike's, Krispy Kreme, White Castle, and Church's Chicken last year to use its voice AI in their stores, SoundHound expects 2024 sales to be between $63-$77 million compared to the consensus forecast of $69.73 million and the $45.8 million booked in 2023. For 2025, Soundhound anticipates revenue to exceed $100 million.

In its 10-K filing, United Airlines (UAL) shared it expects to see a reduction in deliveries from Boeing (BA) during the next couple of years due to the delay of 737 MAX 10 certification. B.Riley Financial (RILY), PureCycle Technologies (PCT), 3D Systems (DDD), Adtran (ADTN), and Mattel (MAT) all announced delays for their 10-K filings with the SEC.

IPOs

Readers who want to dig deeper into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Once again we have reached the end of the week, which means no companies are expected to report quarterly results after equities stop trading today. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Tuesday, March 5

• Japan: Tokyo CPI - February
• Japan: Jibun Bank Services PMI - February
• China: Caixin Services PMI - February
• Eurozone: HCOB Services PMI - February
• Eurozone: Producer Price Index - January
• UK: S&P Global Services PMI - February
• US: S&P Global Final Services PMI - February
• US: ISM Non-Manufacturing PMI - February
• US: Factory Orders - January

Wednesday, March 6

• Eurozone: Retail Sales - January
• Canada: Bank of Canada Interest Rate Decision
• US: Weekly MBA Mortgage Applications
• US: ADP Employment Change Report - February
• US: JOLTs Job Openings & Quits - January
• US: Wholesale Inventories - January
• US: Fed Beige Book

Thursday, March 7

• China: Imports/Exports - February
• Eurozone: European Central Bank Interest Rate Decision
• US; Weekly Initial & Continuing Jobless Claims
• US: Productivity & Unit Labor Costs - 4Q 2023
• US: Consumer Credit - January

Friday, March 8

• Japan: Eco Watchers Survey - February
• Eurozone: Employment Change, GDP - 4Q 2024
• US: Employment Report - February

Thought for the Day

“Life is very short and anxious for those who forget the past, neglect the present, and fear the future.” – Seneca

Disclosures

• Zscaler (ZS) is a constituent of the Foxberry Tematica Research Cybersecurity & Data Privacy Index

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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