Daily Markets: Investors Watching Key Inflation Reading

Today’s Big Picture

Asia-Pacific equity markets finished the day higher except for China’s Shanghai Composite which fell 0.41% and Japan’s Nikkei which ended the day essentially flat, down a mere 0.06%. Australia’s ASX All Ordinaries added 0.12%, India’s SENSEX gained 0.22%, South Korea’s KOSPI rose 0.83% and Taiwan’s TAIEX advanced 0.96%. Hong Kong’s Hang Seng, which oftentimes acts as a kind of leveraged beta play to Mainland China’s markets broke away from that role as that index closed 3.05% higher which saw 73 of the index's 82 constituents post gains. European markets are up across the board in midday trading and U.S. equity futures are pointing to a mixed open as Boeing (BA) is coming under some pressure this morning and tipping Dow futures towards a flat to slightly lower open.

This morning gives us the latest inflation update (more below) and, as we have been discussing, it will provide another data point for market soothsayers to help predict the timing of the Fed’s next easing cycle. For the Fed, it will be one of the last pieces of data collected before they begin their March policy meeting next week. Several weeks ago, Fed Chair Powell telegraphed a March rate cut was off the table, but this will be one of those meetings after which the central bank shares its updated Economic Projections, including GDP and inflation forecasts for 2024. While both are expected to inch higher compared to their December figures, the degree of those revisions could push rate cut expectations, which have been slipping toward 3Q 2024 decidedly into that quarter.

Last night, the Fed funds Futures curve showed traders pricing in a roughly 55% chance of a 25 basis point cut at the June meeting and a combined 80% chance of at least a 25 basis point cut by July. Inflation ended up ticking up slightly for the month, 0.4%, which is in-line with expectations, but rose 3.2% year-over-year, slightly ahead of the 3.1% forecast. Excluding volatile food and energy prices, core CPI increased 0.4% on the month and 3.8% on the year, against expectations of 0.3% and 3.7%, respectively.

Besides showing that inflation is proving stickier than anticipated, it also keeps the inflation levels above the Fed's stated goal of 2%.

Data Download

International Economy

Last night saw Japan’s February Domestic Corporate Goods Index (CGPI, their PPI equivalent) come in at 0.60% indicating the beginning of a reversal of the 10.61% to 0.20% drop through 2023.

German consumer price inflation was confirmed at 2.5% year-on-year in February, the lowest rate since June 2021 and nearing the European Central Bank’s target of 2.0%.

Domestic Economy

The NFIB Small Business Optimism Index edged down to 89.4 in February, the lowest in nine months, from 89.9 in January, and below forecasts of 90.7. Twenty-three percent of small business owners reported that inflation was their single most important business problem in operating their business, up three points from last month, and replacing labor quality as the top problem.

Markets

The Dow (0.12%) was the only broad index to post a gain yesterday as the S&P 500 declined 0.11%, the Nasdaq Composite gave back 0.41% and the Russell 2000 fell 0.81%. Consumer Staples made strides to regain yesterday’s lost ground, but it wasn’t enough to signal a turnaround in the continued declines in Technology (-0.27%), Consumer Discretionary (-0.27%), and Communication Services (-0.19%) which as we have discussed, account for just over 50% of equity markets.

Shares of Moderna (MRNA) leapt 8.69% after the company announced it would be starting a phase 2/3 trial of what has been touted as a cancer vaccine that is being developed to treat cutaneous squamous cell carcinoma, a form of skin cancer. Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: 2.87%
• S&P 500: 7.30%
• Nasdaq Composite: 6.71%
• Russell 2000: 1.91%
• Bitcoin (BTC-USD): 71.83%
• Ether (ETH-USD): 77.38%

Stocks to Watch

Archer Daniels (ARCO) and Kohl’s (KSS) are expected to release quarterly earnings before equities begin trading later this morning.

Pre-market breadth is lighter today as 214 names in the S&P 500 have traded hands so far this morning with 166 gainers and 48 decliners. Shares of Oracle Corporation (ORCL) are on track to open close to 13% higher (more below) while airlines are having a tough morning as Southwest Airlines (LUV), Boeing Corporation (BA), Delta Airlines (DAL), and American Airlines (AAL) are all showing up on the decliners leaderboard ahead of the open.

Oracle's (ORCL) stock soared after strong quarterly results and an upbeat outlook. Of particular note, the company highlighted a 29% increase in total Remaining Performance Obligations, reaching over $80 billion due to new cloud infrastructure contracts, noting that demand for their Gen2 AI infrastructure surpasses supply. Oracle expects 43% of the $80 billion in those obligations to convert to revenue in the next four quarters and anticipates continued hypergrowth in their Gen2 Cloud Infrastructure business. Total revenue for the current quarter is expected to grow 4%-6% with total Cloud Revenue, excluding Cerner, forecasted to grow 22%-24% and EPS of $1.62-$1.66 compared to the $1.64 consensus.

Vail Resorts (MTN) missed consensus forecasts for its January quarter noting season-to-date total skier visits were down 9.7% YoY. Management’s guidance for 2024 was reduced to the company’s net income of $296-$343 million and EBITDA of $847-$889 million. Looking to take some of the sting out of that guidance, the company's Board of Directors approved an 8% increase in the quarterly cash dividend to $2.22 per share beginning with the dividend payable on April 11.

Shares of Acadia Pharmaceuticals (ACAD) tumbled double-digits after announcing that its late-stage study of pimavanserin for treating negative symptoms of schizophrenia did not meet its primary endpoint. The study showed no statistically significant improvement over placebo. Despite a consistent safety profile, Acadia does not plan further clinical trials with pimavanserin.

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

Rackspace (RXT) and The Beauty Health Company (SKIN) 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

Wednesday, March 13

• Eurozone: Industrial Production - January
• UK: Industrial Production, Manufacturing Production - January
• US: Weekly MBA Mortgage Applications
• US: Weekly EIA Crude Oil Inventories

Thursday, March 14

• US: Producer Price Index - February
• US: Retail Sales - February
• US: Business Inventories - January

Friday, March 15

• US: Import/Export Prices - February
• US: Industrial Production & Capacity Utilization - February
• US: The University of Michigan Consumer Sentiment Index (Preliminary) - March

Thought for the Day

"Anyone who has never made a mistake has never tried anything new." —Albert Einstein

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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