Nasdaq Futures Edge Higher Before Data, Fedspeak: Markets Wrap

(Bloomberg) — US equity futures pointed to modest gains on Wall Street, led by tech stocks, as investors look ahead to economic data and commentary from Federal Reserve speakers in coming days for clues on the outlook for interest rates.

Most Read from Bloomberg

Contracts on the Nasdaq 100 rose 0.3%, with those on the S&P 500 up slightly less after the underlying benchmark retreated from its latest record close on Monday. Europe’s Stoxx 600 index hovered near its all-time high. Two-year notes led gains as Treasuries rose, retracing some of Monday’s drop. The dollar slipped.

Readings on the US economy are in sharp focus this week, with the Fed’s favored inflation gauge due on Thursday grabbing the most attention. Markets have already dialed back expectations for early and rapid Fed easing after hotter-than-expected data on jobs and price gains, pushing out bets on a first cut to June or July.

“We have always been in the camp that the Fed is unlikely to move as quickly as the market was pricing and data for the first couple of months will only confirm that the first cut will be pushed into the third quarter,” said Matt Stucky, chief portfolio manager for equities at Northwestern Mutual Wealth Management Co.

The craze over artificial intelligence has fueled the recent record-breaking rally on Wall Street, with both the S&P 500 and the tech heavy Nasdaq 100 up more than 6% this year. Much of that is down to the “Magnificent Seven” tech megacaps, prompting some to worry that the market is relying on a dangerously narrow group of stocks for its gains.

But Citigroup Inc. strategists said they don’t regard the US equity market as being in a bubble like that of 1999-2000, and suggested the rally could spread to other sectors. Valuation multiples for stocks are well below 2000 levels and, while cash flow expectations around tech companies have increased, forecasts for other industry groups aren’t stretched. That supports the case for broader equity gains.

Story continues

“We argue that ‘bubble’ is the wrong term to describe the current market setup,” the Citigroup team led by Scott Chronert wrote. “Rather, the recent rally puts pressure on fundamentals to deliver.”

In Asia, Japan’s two-year yield climbed to the highest since 2011 after stronger-than-expected inflation data boosted bets the central bank will end its negative-interest-rate policy in coming months. Traders increased the probability of Bank of Japan exiting its negative rate policy by April to about 82%, up from 78% on Monday, according to swaps data compiled by Bloomberg. The yen strengthened against the dollar.

The inflation report “is adding to speculation that the BOJ will end negative-rate policy as early as March and is serving as a selling catalyst for bonds,” said Kazuya Fujiwara, a fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. The data underscores persistent inflationary pressures, he said.

Elsewhere, Bitcoin climbed, rising briefly beyond $57,000 for the first time since late 2021, supported by investor demand through exchange-traded funds as well as further purchases by MicroStrategy Inc.

In commodities, oil steadied after Monday’s gains as pockets of strength in physical markets supported wider sentiment. Iron ore gained after Monday’s hefty loss, as market watchers looked for signs China’s approaching construction season will bolster demand after costs of the raw material dropped.

Investors also continued to assess the latest earnings updates. Here are some highlights:

• Macy’s Inc. shares were volatile in US premarket trading after it said it plans to close 150 unproductive locations as the department-store chain seeks to fight off a pair of activist firms seeking to buy the company.

• Zoom Video Communications Inc. shares jumped 13% in US premarket trading after the video-conferencing software company’s guidance for adjusted earnings per share was stronger than expected. Additionally, Zoom also said its board approved a buyback program.

• Workday Inc. shares fell 7.2% in US premarket trading after the human resources software company issued full-year subscription revenue forecast that was weaker than expected at the midpoint. The company also reported fourth-quarter results that analysts said showed less upside than usual.

• Unity Software Inc. shares slid 17% in US premarket trading after the video-game software development company’s forecast for revenue fell short of expectations amid a portfolio review that includes exiting some businesses.

• Lowe’s Cos. said its sales will fall further this year as consumers continue to hold off from sprucing up their homes amid higher mortgage rates and a drop in new construction projects.

• Puma SE shares advanced 1.8% after the sportswear brand reported full-year results. The company also said it sees weaker demand for sneakers and sports gear persisting through the first half of the year before picking up amid major sporting events, such as the Olympics in Paris.

• Abrdn Plc Chief Executive Officer Stephen Bird dismissed the possibility of the company being broken up as the money manager saw another year of net outflows amid efforts to stop the exodus.

Key Events This Week:

• BOE Governor Andrew Bailey speaks, Tuesday

• US Conf. Board consumer confidence, durable goods, Tuesday

• Michigan Republican and Democratic presidential primaries, Tuesday

• Reserve Bank of New Zealand policy decision, Wednesday

• Eurozone economic confidence, consumer confidence, Wednesday

• US wholesale inventories, GDP, Wednesday

• Fed’s Raphael Bostic, Susan Collins and John Williams speak, Wednesday

• G-20 finance ministers and central bank chiefs meet in Sao Paulo, Wednesday through Thursday

• Germany CPI, unemployment, Thursday

• US consumer income, PCE deflator, initial jobless claims, Thursday

• Fed’s Austan Goolsbee, Raphael Bostic and Loretta Mester speak, Thursday

• China official PMI, Caixin manufacturing PMI, Friday

• Eurozone S&P Global Manufacturing PMI, CPI, unemployment, Friday

• BOE chief economist Huw Pill speaks, Friday

• US construction spending, ISM Manufacturing, University of Michigan consumer sentiment, Friday

• Fed’s Raphael Bostic and Mary Daly speak, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.2% as of 7:49 a.m. New York time

• Nasdaq 100 futures rose 0.3%

• Futures on the Dow Jones Industrial Average were little changed

• The Stoxx Europe 600 was little changed

• The MSCI World index was little changed

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%

• The euro was little changed at $1.0861

• The British pound was little changed at $1.2682

• The Japanese yen rose 0.3% to 150.19 per dollar

Cryptocurrencies

• Bitcoin rose 4.8% to $57,257.81

• Ether rose 2.9% to $3,276.92

Bonds

• The yield on 10-year Treasuries declined two basis points to 4.26%

• Germany’s 10-year yield declined two basis points to 2.42%

• Britain’s 10-year yield declined three basis points to 4.13%

Commodities

• West Texas Intermediate crude fell 0.3% to $77.35 a barrel

• Spot gold rose 0.3% to $2,038.22 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Divya Patil and Michael Msika.

Most Read from Bloomberg Businessweek

©2024 Bloomberg L.P.