North American Morning Briefing: Investors Brace for This Week's Earnings, Fed Decision
OPENING CALL
Stock futures were higher on Monday ahead of a big week for earnings and economic updates.
Earnings season will pick up speed on Tuesday, when results from Amazon, McDonald's and Coca-Cola are due.
The Federal Reserve's policy announcement on Wednesday may show whether investors are right to lose hope of looming interest-rate cuts.
While the Fed isn't expected to change its policy rate from the current 5.25% to 5.5% range, investors will be focusing on whether there's increased emphasis on inflation staying above the central bank's 2% yearly target.
CBIZ Investment Advisory Services said policymakers will be "stuck between a rock and a hard place" if they stay committed to a 2% inflation target.
"If there's some softening in that 2% inflation target, it opens the door to at least one cut by the end of 2024."
Premarket Movers
Alphabet was down 0.4% in premarket trading. The parent company of Google rose 10% Friday and closed with a market cap of $2.13 trillion, the first time it has closed with a valuation above $2 trillion.
AMC Entertainment said late Friday that last year's writer and actor strikes would dent its first-quarter results. Its shares fell about 3%.
The FDIC said that Fulton Bank, a subsidiary of Fulton Financial, would assume the deposits of struggling bank Republic First Bancorp. WSJ reported earlier on Friday that regulators were set to seize the bank. Fulton's shares were up 8.9%.
Paramount Global rallied premarket. On Friday, its shares fell roughly 2% after WSJ reported that Paramount was considering replacing CEO Bob Bakish.
Tesla rose about 6%, poised to extended last week's rally. Elon Musk won Beijing's blessing to roll out its driver-assistance service on a visit to China, Tesla's biggest overseas market.
SoFi was rising 2.8% ahead of its first-quarter earnings report, scheduled for before the stock market opens Monday.
Post Close Movers
Clever Leaves said it was planning to voluntarily delist its shares from the Nasdaq and deregister its securities. The company said its board considered factors including its likely future non-compliance with listing requirements. Shares of Clever Leaves fell 66%.
Deutsche Bank said a court indicated it may find elements of a lawsuit by former shareholders of Postbank valid, prompting the company to have a legal provision in the second quarter. U.S.-listed shares dropped 4.6%.
Watch For:
Texas Manufacturing Outlook Survey for April; Earnings from SoFi, ON Semiconductor, MicroStrategy, NXP Semiconductors, Domino's Pizza, Chegg, Paramount Global, Logitech International, F5
Today's Top Headlines/Must Reads:
- It's Not Just the Fed Driving Up Your Mortgage Rate
- Taxes, Tariffs and Debt: Investors Start to Fear the Presidential Election
- Even If the Fed Cuts, the Days of Ultralow Rates Are Over
MARKET WRAPS
Forex:
The Japanese yen strengthened, bouncing after it briefly hit a new 34-year low of 160 against the dollar on waning expectations for near-term rate increases from the Bank of Japan.
Following the apparent lack of intervention by Japanese authorities on Friday, despite the yen's sharp depreciation, "the market appears to be losing its fear of intervention," RBC Capital Markets said.
Analysts said the lack of liquidity on a Japanese holiday had exacerbated the yen's drop .
In contrast to the recent weak performance of the Japanese yen, the euro and sterling have been rising recently against the dollar, helped because the expectation that the U.S. will cut interest rates later than the eurozone and U.K. is now priced in to markets, MUFG said.
"A rate cut is not fully priced in now in the U.S. until November compared to by July in the eurozone and September in the U.K.," it said, adding that an improving economic outlook in Europe has also helped the currencies.
Bonds:
LBBW raised its forecasts for 10-year Treasury and German Bund yields to reflect the negative momentum in bond markets which drives yields higher.
"In the short term, we believe this will weigh particularly heavily," it said, adding that LBBW continues to see potential for a "summer rally" on the major government bond markets.
LBBW sees the 10-year Treasury yield at 4.55% by midyear versus 3.95% expected before, and at 4.50% by year-end versus 4.20% previously. It expects the 10-year Bund yield at 2.50% by midyear, up from 2.10% expected previously, and at 2.30% by year-end, up from 2.20%.
Energy:
Oil prices traded lower after the latest U.S. data reinforced prospects of higher-for-longer interest rates, but signs of a tightening physical market limited the downside.
All eyes are now on the Fed's two-day meeting on Wednesday and the April jobs report on Friday.
Meanwhile, the strength in oil timespreads--the premium of a front-month contract to the second month--suggests a deficit over the second quarter of the year, ING said.
"The Brent June/July spread traded to a high of $1.34/bbl on Friday, after trading closer to a backwardation of $0.70/bbl at the start of the week."
The outlook for the second half is instead less clear and depends on OPEC+'s output policy.
Metals:
Gold futures slipped on easing safe-haven demand as geopolitical tensions moderated and markets turned their attention to U.S. inflation.
Uranium
It's difficult to see what will cap the upside to the uranium price in the short term, Shaw & Partners said.
"In our view the uranium price is likely to continue moving higher with U.S. and European utilities not covered for their fuel requirements from 2026-2028 and limited new supply in that timeframe."
Shaw assumes a multi-year price spike to $150/lb, before settling to its long-term U3O8 realized price assumption of $76/lb in 2030.
TODAY'S TOP HEADLINES
Rising Food Prices Send More Shoppers to Aldi
Pulling a cardboard box of Aldi's store-brand barbecue sauce off the shelf, Jason Hart demonstrated how the custom-made crate fits neatly into shelves, stacking one on top of another to maximize space.
The pallets, which line shelves across nearly every aisle, are the same ones in which the barbecue sauce is shipped. They are pulled off a truck and placed directly onto shelves, saving employees time unpacking and stocking-and ultimately saving Aldi money.
Coming to a CVS Near You: A Store Brand Monoclonal Antibody
Most shoppers are familiar with CVS Health's many private label products, from women's daily multivitamins to heart-healthy trail mix.
There is a reason CVS and other retailers place those products prominently on their shelves: Store brands are more profitable for them because they offer higher margins. Now CVS is deploying that same approach to the much more profitable business of blockbuster prescription drugs. The move already seems to be paying off and spreading to other managed care organizations, like Cigna Group, with major repercussions for manufacturers of lower-cost biosimilar products. These are cheaper versions of biotech drugs made from living cells, which are far more complicated to make than traditional pills.
Musk Wins China's Backing for Tesla's Driver-Assistance Service
SINGAPORE-Elon Musk wrapped up a trip to China in less than 24 hours and came away with a crucial victory as he pushes to reignite Tesla's sagging growth.
After his flurry of meetings with top officials in Beijing, China's government signaled its blessing for Tesla to roll out its advanced driver-assistance service in the carmaker's second-biggest market. The Tesla chief executive is seeking to expand use of the controversial software feature globally as the company confronts the prospect of lower sales growth this year.
Large Pension Bets Big on AMD, Walmart, Peloton Stock. It Sold GM.
One of the largest pensions in the U.S. made major changes in its stock investments in the first quarter, including cutting a stake in one of the most iconic companies in its state.
State of Michigan Retirement System bought more Advanced Micro Devices stock, quintupled an investment in Peloton Interactive, tripled its Walmart stake, and sold General Motors stock. The pension disclosed the stock trades, among others, in a form it filed with the Securities and Exchange Commission.
Yen Rebounds After Hitting 34-Year Low of 160 to Dollar in Thin Trade
The Japanese yen strengthened sharply in afternoon trading in Asia, bouncing after it briefly hit a new 34-year low of 160 against the dollar on waning expectations for near-term rate increases from the Bank of Japan.
The yen rebounded to 155.07 to the dollar Monday afternoon after earlier touching its weakest level since April 1990. Trading volumes were thin as it was a public holiday in Japan. The yen was 158.34 to the dollar late Friday in New York.
Investors Are Showering AI Startups With Cash. One Problem: They Don't Have Much of a Business
Artificial intelligence startup Imbue has hoodies branded with its circular orange logo, an office in the heart of San Francisco and marquee investors who lavished the company with more than $210 million.
Work and life blend together for its few dozen employees, who share their emotions with one another at a weekly event called "Feelings Friday" to build trust and connection.
Soaring Treasury Yields Challenge Stock-Market Gains
This month's rise in long-term interest rates is raising investors' anxiety about what is next for the stock market.
Treasury yields touched new 2024 highs this past week after fresh data showed lingering inflation. Wall Street traders entered the year expecting the Federal Reserve to cut rates a half-dozen times. Now they are pricing in just one. The yield on the benchmark 10-year note, which rises as bond prices fall, has climbed nearly a percentage point from its February lows, settling Friday at 4.668%.
Stocks risk a wild week with Big Tech earnings, Fed's faceoff with inflation Wild swings in "Magnificent Seven" stocks are once again acting as a driver of volatility across U.S. equities. Investors could face more turbulence this week as the Federal Reserve takes center stage and Wall Street gears up to tackle another batch of Big Tech earnings reports.
Stocks on Friday ended a volatile week upbeat, with the S&P 500 index SPX and Nasdaq Composite COMP posting their best week of gains since early November, according to Dow Jones Market Data. The rally was helped along by Alphabet's over 10% post-earnings gain on Friday, following a selloff in megacap tech heavyweights in the previous session.
Even If the Fed Cuts, the Days of Ultralow Rates Are Over
Amid the debate over whether and when the Federal Reserve cuts interest rates, another important argument is unfolding: where do rates settle in the long run?
At issue is the neutral rate of interest: the rate that keeps the demand and supply of savings in equilibrium, leading to stable economic growth and inflation.
Why the Fed looks likely to scramble back to a hawkish stance
Flash back to August 2022, when Fed Chair Jerome Powell gave a nine-minute speech at Jackson Hole, Wyo., warning investors to expect "some pain" in the economy in order to lower inflation.
His blunt, hawkish remarks now seem like a distant memory. Over the past six months, Powell and his colleagues have been leaning dovish, strongly hinting they were preparing to cut interest rates.
Iran's Attack on Israel Has Deepened Concerns About Its Nuclear Program
Iran's decision to launch more than 300 missiles and drones in its first direct attack on Israeli soil earlier this month showed an appetite for risk that is putting renewed focus on Tehran's nuclear program and whether it will continue to refrain from developing a bomb.
Close observers of Iran's nuclear development have long believed the country's top leaders have calculated that the costs of building a bomb outweigh the benefits. As a threshold nuclear power with weapon capabilities within reach, Iran already enjoys considerable deterrence power without risking the war that could come if an attempt to build a bomb is detected.
Biden Continues Push for Gaza Cease-Fire in Call With Netanyahu
WASHINGTON-President Biden spoke Sunday with Israeli Prime Minister Benjamin Netanyahu to reiterate U.S. concerns about a widespread invasion of Rafah and discuss prospects for a deal that would secure a temporary cease-fire in Gaza and the return of some hostages that Hamas has held since October.
Secretary of State Antony Blinken is headed to the Middle East with stops in Saudi Arabia, Jordan and Israel to continue to push for a deal.
Write to ina.kreutz@wsj.com
TODAY IN CANADA
Earnings:
Ag Growth Intl
Cargojet
Gibson Energy
Hammond Pwr Sls
Topaz Energy
Economic Indicators (ET):
Nothing scheduled
Stocks to Watch:
Wall Financial 4Q EPS C$0.02
Expected Major Events for Monday
08:00/GER: Apr Bavaria CPI
08:00/GER: Apr North Rhine Westphalia CPI
08:00/GER: Apr Saxony CPI
08:00/GER: Apr Hesse CPI
08:00/GER: Apr Baden-Wuerttemberg CPI
08:00/GER: Apr Brandenburg CPI
08:00/ITA: Mar Foreign Trade non-EU
12:00/GER: Apr Provisional CPI
14:30/US: Apr Texas Manufacturing Outlook Survey
23:01/UK: Apr CBI Growth Indicator and Service Sector Survey
23:01/UK: Apr Shop Price Index
23:30/JPN: Mar Labour Force Survey
23:50/JPN: Mar Preliminary Retail Sales
23:50/JPN: Mar Preliminary Industrial Production
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Monday
Affiliated Managers Group Inc (AMG) is expected to report $4.01 for 1Q.
Albany International Corp - Class A (AIN) is expected to report $0.85 for 1Q.
Alliance Resource Partners LP (ARLP) is expected to report $0.97 for 1Q.
Apollo Commercial Real Estate Finance Inc (ARI) is expected to report $0.27 for 1Q.
Arch Capital Group Ltd (ACGL) is expected to report $2.17 for 1Q.
Bank Of Marin Bancorp (BMRC) is expected to report $0.26 for 1Q.
BeyondSpring Inc (BYSI) is expected to report $-0.67 for Full year.
Cargojet Inc (CJT.T) is expected to report for 1Q.
Cassava Sciences Inc (SAVA) is expected to report $-0.41 for 1Q.
Crown Holdings (CCK) is expected to report $0.79 for 1Q.
Day One Biopharmaceuticals Inc (DAWN) is expected to report $-0.66 for 1Q.
Domino's Pizza Inc (DPZ) is expected to report $3.37 for 1Q.
Eagle Pharmaceuticals Inc (EGRX) is expected to report $0.21 for 4Q.
Element Solutions Inc (ESI) is expected to report $0.22 for 1Q.
F5 Inc (FFIV) is expected to report $1.83 for 2Q.
First Financial (Indiana) (THFF) is expected to report $0.98 for 1Q.
Five Star Bancorp (FSBC) is expected to report $0.53 for 1Q.
Franklin Resources Inc (BEN) is expected to report $0.51 for 2Q.
Greenlane Holdings Inc (GNLN) is expected to report for 4Q.
HNI Corp (HNI) is expected to report $0.42 for 1Q.
Hallmark Financial Services Inc (HALL) is expected to report for 4Q.
HomeStreet Inc (HMST) is expected to report $-0.14 for 1Q.
Hope Bancorp Inc (HOPE) is expected to report $0.26 for 1Q.
Hycroft Mining Holding Corp (HYMC) is expected to report for 1Q.
InnSuites Hospitality Trust (IHT) is expected to report for 4Q.
LCNB Corp (LCNB) is expected to report $0.36 for 1Q.
MIND Technology Inc (MIND) is expected to report $0.48 for 4Q.
Morguard Corp (MRC.T) is expected to report for 1Q.
NetSTREIT Corp (NTST) is expected to report for 1Q.
ON Semiconductor Corp (ON) is expected to report $1.00 for 1Q.
Peoples Bancorp of NC (PEBK) is expected to report for 1Q.
PotlatchDeltic Corp (PCH) is expected to report $-0.04 for 1Q.
Provident Financial Holdings Inc (PROV) is expected to report $0.24 for 3Q.
Revvity Inc (RVTY) is expected to report $0.29 for 1Q.
Sofi Technologies Inc (SOFI) is expected to report $0.01 for 1Q.
Streamline Health (STRM) is expected to report $-0.04 for 4Q.
Sun Communities Inc (SUI) is expected to report $-0.25 for 1Q.
TG Therapeutics (TGTX) is expected to report $-0.05 for 1Q.
Tootsie Roll Industries (TR) is expected to report for 1Q.
Western Energy Services Corp (WRG.T) is expected to report for 1Q.
Powered by Kantar Media and Dow Jones.
ANALYST RATINGS ACTIONS
AssetMark Financial Cut to Neutral From Overweight by JP Morgan
Boyd Gaming Cut to Hold From Buy by Deutsche Bank
Boyd Gaming Cut to Neutral From Overweight by JP Morgan
Caterpillar Cut to Hold From Buy by Stifel
Citizens Financial Group Raised to Overweight From Neutral by Piper Sandler
Compass Minerals Raised to Buy From Hold by Loop Capital
Dow Raised to Overweight From Neutral by JP Morgan
Enphase Energy Raised to Overweight From Equal-Weight by Barclays
Envista Holdings Cut to Equal-Weight From Overweight by Morgan Stanley
EPAM Systems Raised to Equal-Weight From Underweight by Morgan Stanley
First Citizens Bancshares Cut to Neutral From Overweight by Piper Sandler
Hertz Global Cut to Underperform From Neutral by B of A Securities
Hibbett Cut to Neutral From Outperform by Baird
Knight-Swift Transport Cut to Hold From Buy by Stifel
Kratos Raised to Strong Buy From Outperform by Raymond James
LeMaitre Vascular Raised to Buy From Hold by Stifel
Range Resources Cut to Sector Perform From Outperform by RBC Capital
Snap Raised to Hold From Reduce by HSBC
Sonic Auto Raised to Buy From Underperform by B of A Securities
Teledyne Cut to Neutral From Buy by B of A Securities
Visteon Raised to Equal-Weight From Underweight by Wells Fargo
Western Digital Raised to Buy From Hold by Benchmark
This article is a text version of a Wall Street Journal newsletter published earlier today.