Daily Markets: Waiting on Powell and the Fed, Plus More Tech Earnings Ahead

Today’s Big Picture

Asian markets closed today’s trading mixed as Japan’s Nikkei closed 0.44% lower, while Hong Kong’s Hang Seng and China’s Shanghai Composite closed 0.19% and 0.66% higher on the day. Taiwan’s TAIEX closed off 0.15% and South Korea’s KOSPI finished trading down 0.41%. India’s Sensex was closed for the day . By mid-day trading, European equity indices are up across the board and U.S. futures point to a vibrant market open later this morning. 

We see yet another step up in the velocity of quarterly earnings today, with earnings after today’s market close from Intel (INTC) and Tesla (TSLA). Not only will folks be listening for what Intel has to say about the chip shortage and its capital spending outlook, but also how its fending off competition in the data center market. In addition to the usual EV shipment data, inside Tesla’s comments we are curious to see what the company has to say about the growing competitive landscape as other carmarkers begin producing their own electric vehicles.

Before we can get to those earnings, however, it is Fed Day. That means at 2 PM ET the Federal Reserve will publish its latest monetary policy statement and trot out Fed Chairman Powell for the subsequent press conference at 2:30 PM. Given the volatile stock market thus far in 2022 and the expected-but-still-happening step down in the speed of the global economy due to omicron, today’s comments from the Fed will be akin to walking an even higher tightrope. The Fed has to convince the market its efforts will tame inflation but without sending the economy into a tailspin as it does so. 

Currently, Fed Futures are pricing in 4 rate hikes in 2022, but given the lag effect with monetary policy we could see Powell once again manage expectations, citing it will remain “data dependent.” Should that happen, market watchers would likely embrace those comments but still keep a close watch on forthcoming inflation data. If Powell takes a stricter tone regrading inflation, confirming the market’s current rate hike expectation in the process, the year-to-date market volatility will more than likely be with us at least through the current earnings season. 

Data Download

Coronavirus

Per the World Health Organization, the United States has crossed over 70 million confirmed cases and 860,000 deaths attributed to the increasing number of variants of coronavirus. Still, indications are the the latest wave is starting to subside despite the lack of coherent public safety approaches across various states and regions.

Denmark has announced it will be eliminating all covid-related restrictions as of next Tuesday. The changes come on the heels of the recent loosening of restrictions to open theaters and concert halls. This steps removes the need for restaurant customers to present vaccine passports, commuters to wear face masks traveling and shops to monitor and limit the number of customers entering stores.

International Economy

Today’s a rather light day on the international economic data front with France reporting January Consumer Confidence at 99.0 which surprised 1.5 on estimates but came is slightly lower than the previous reading. France also saw a modest drop of approximately 13,000 in the number of registered job seekers in December.

Later this morning the Bank of Canada will announce its Overnight Rate target which is expected to rise slightly from the current 0.25% to 0.28% per consensus estimates.

Domestic Economy

This morning brings the usual weekly MBA Mortgage Applications data, and given the tick higher in rates, investors in home builder stocks such as Toll Brothers (TOL) and DR Horton (DHI) should look to see how new mortgage originations are stacking up.  As we digest the December New Home Sales report the year-to-date mortgage application data should also give some indication as to how future New Home Sales reports stack up. 

With oil prices trending higher due to geopolitical tension in Ukraine, oil prices could climb further if the weekly EIA Crude Oil Inventories report drops more than expected. 

And rounding out the afternoon, as we discussed above, we have the latest Federal Reserve FOMC monetary policy announcement, and event that has a high probability of shaping how U.S. equity markets close the day’s trading. 

Markets

U.S. equity markets experienced yet another volatile session yesterday with the S&P 500 down as much as 2.8% at one point and clawed its way back to finish the day down 1.2% Growth stocks once again bore the brunt of it, leading the Nasdaq Composite to close down 2.3% on the day, while the Russell 2000 fell 1.5% and the Dow Jones Industrial Average closed just 0.2% lower. From a sector perspective, the information technology, communication services, and consumer discretionary sectors underperformed the S&P 500 while energy and financials finished the day higher. Factoring in yesterday’s trading, here’s how the closely watched market barometers stack up on a year-to-date basis so far:

• Dow Jones Industrial Average: -5.6%
• S&P 500: -8.6%
• Russell 2000: -10.8%
• Nasdaq Composite: -13.5%
• Bitcoin: -20.6%
• Oil: +13.3%

Items to Watch

Before U.S. equities kick off trading today, investors will get quarterly earnings from Abbott Labs (ABT), AT&T (T), Boeing (BA), General Dynamics (GD), Kimberly-Clark (KMB), Norfolk Southern (NSC), and Stifel Financial (SF).

Executive directors of the International Monetary Fund urged El Salvador's government to remove Bitcoin's (BTC) status as legal tender. 

Despite reporting better than expected December quarter results that included 32% YoY growth at its cloud business, shares of Microsoft (MSFT) traded off in after-market trading last night. While the company reported favorable year over year comparisons across its business lines, weighing on shares was slower year over year growth at its Azure business compared to the July and September quarters. Looking ahead, Microsoft shares it sees continued strength in PC shipments, particularly in the commercial segment despite ongoing supply chain constraints. It also sees gaming console sales continuing to be impacted by supply chain uncertainty.

F5 Networks (FFIV) also reported its December quarter results last night, which topped consensus expectations. However, the company issued downside guidance relative to expectations for both the current quarter and 2022. Explaining the revised outlook, the company shared that while demand for its solutions remains robust, it will be restricted by supply chain constraints for the remainder of year. 

Radware (RDWR) inked a multimillion-dollar deal expansion with a Tier-1 U.S. carrier wherein the latter is increasing its Radware security defenses to further safeguard and manage application traffic across its growing global cloud infrastructure.

Bloomberg reports Apple’s (AAPL) iPhone was the top selling smartphone in China in Q4 of 2021 for the first time since 2015.

IPOs

Semiconductor company Credo (CRDO) that provides secure, high-speed connectivity solutions is aiming to price its IPO of 25 million shares this week in a range of $10-$12. Readers looking to dig more into it should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Ameriprise Financial (AMP), Celestica (CLS), Crown Castle (CCI), Intel (INTC), Lam Research (LRCX), Las Vegas Sands (LVS), Levi Strauss (LEVI), Tesla (TSLA), and United Rentals (URI) as well as Xilinx (XLNX) are set to publish their latest quarterly results. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar. 

On the Horizon

Thursday, January 27

• Germany: GfK Consumer Confidence - February
• US: Weekly Initial & Continuing Jobless Claims
• US: Durable Orders – December
• US: Pending Home Sales – December

Friday, January 28

• Japan: CPI – January
• France: Consumer Spending – December
• France: GDP – 4Q 2021
• France: PPI – December
• Eurozone: Business Climate, Consumer Confidence, Economic Confidence - January
• US: Personal Income & Spending – December
• US: Michigan Consumer Sentiment Index (Final)

Thought for the Day

“You'll never find a rainbow if you're looking down” ~ Charlie Chaplin

Disclosures

• F5 Networks (FFIV), Radware (RDWR) are constituents of the Foxberry Tematica Research Cybersecurity & Data Privacy Index
• Tesla (TSLA) is a constituent of the Tematica BITA Cleaner Living Index
• Tesla (TSLA) is a constituent of the Tematica BITA Cleaner Living Sustainability Screened Index
• Crown Castle (CCI), F5 Networks (FFIV), Intel (INTC) are constituents of the Tematica BITA Digital Infrastructure & Connectivity Index
• Apple (AAPL), AT&T (T), Microsoft (MSFT) are constituents of the Tematica Research Thematic Dividend All-Stars 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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