Daily Markets: Stocks Mixed After Fed Comments, Before Big Tech Earnings

Today’s Big Picture

Asia-Pacific equity markets ended the day up across the board except for Hong Kong’s Seng, which fell 0.52%. China’s Shanghai Composite closed essentially flat, eking out a 0.02% gain while Japan’s Nikkei and Australia’s ASX All Ordinaries rose 0.20% and 0.24%, respectively. India’s Sensex gained 0.38% South Korea’s KOSPI advanced 0.78% and Taiwan’s TAIEX closed 1.14% higher, led by Technology. By mid-day trading, European equity indices are up across the board except for Norway and Denmark, and U.S. futures point to a mixed market open.

Nasdaq futures reflect the positive reception to quarterly results and tighter than expected expense controls announced by Meta Platforms (META) last night. Despite the Fed’s insistence yesterday we are in the early stages of seeing progress on inflation, there are additional rate hikes ahead. Although the Fed stated will keep rates at elevated levels and did not see cause to start cutting rates this year, the decline in 10-year Treasury yields seems to suggest otherwise. As investors further digest Fed Chair Powell’s post monetary policy meeting press conference and the corresponding Wall Street analysis, investors will prepare for a wave of Big Tech earnings after today’s market close that includes the latest quarter results from Amazon (AMZN), Alphabet (GOOGL), and Apple (AAPL).

Data Download

International Economy

The Bank of England increased interest rates up half a percentage point to a 15-year high of 4% but also indicated future policy decisions would depend on the economic data ahead.

At 8:15 AM ET, the European Central Bank will release its latest interest rate decision and conduct a press conference 30 minutes later. The prevailing view sees the ECB increasing rates by 50 basis points, but similar to yesterday’s interest rate decision by the Federal Reserve, forward comments made during the ECB’s press conference will prove far more meaningful for equities and investors.

Domestic Economy

In addition to the usual weekly Thursday reports, we have an early start with the 7:30 AM ET release of the January Job Cuts reports published by Challenger, Grey. At 8:30 AM ET, Unit Labor Costs for 4Q 2022 will be reported and then at 10 AM, December Factory Order data will be published.

House Speaker Kevin McCarthy signaled some progress on the debt ceiling, sharing aid he had a "very good discussion” with President Biden about government spending. "We have different perspectives, but we both laid out some of our vision of where we'd want to get to. And I believe, after laying them both out, I can see where we can find common ground."

Markets

While markets traded off on the initial Fed 25 basis point rate hike, they changed their mind after hearing Fed Chair Powell’s thoughts at the subsequent press conference. The Dow scraped by with a 0.02% gain, but the S&P 500 rose 1.05%, the Russell 2000 gained 1.49% and the Nasdaq Composite closed a full 2% higher. All sectors were higher except for Energy (-1.97%) and Financials, which ended the day “Unch’d.” Technology (2.35%) and Consumer Discretionary (1.90%) led yesterday. Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: 2.85%
• S&P 500: 7.29%
• Nasdaq Composite: 12.90%
• Russell 2000: 11.33%
• Bitcoin (BTC-USD): 42.85%
• Ether (ETH-USD): 36.94%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, Alibaba (BABA), Bristol-Myers (BMY), Canada Goose (GOOS), Cardinal Health (CAH), CNH Industrial (CNHI), Estee Lauder (EL), Ferrari (RACE), Grainger (GWW), Hershey Foods (HSY), Honeywell (HON), OshKosh (OSK), Tradeweb Markets (TW), and Under Armour (UAA) will be among the companies reporting their quarterly results.

Top and bottom line expectations for its December quarter were handily beaten by Meta Platforms and the company issued in-line guidance for the current quarter. It also trimmed its 2023 expense guidance to $89-$95 billion from $94-$100 billion with $1 billion in restructuring charges as it consolidates its office footprint, down from its prior estimate of $2 billion. The company also lowered its capital expenditures guidance to $30-33 billion from its prior estimate of $34-$37 billion due in part to lower data center construction spending this year. Also helping pop the stock in after-hours trading, Meta announced a $40 billion increase to its share repurchase authorization. CEO Mark Zuckerberg noted that Facebook reached 2.0 billion daily active users and that "the progress we're making on our AI discovery engine and Reels are major drivers of this." Across all of its apps, the company reached over 3.7 billion monthly during the quarter.

Netgear (NTGR) reported a smaller than expected bottom-line loss for its December quarter, which also saw better than expected revenue vs. the consensus forecast. However, while the company made progress in destocking during the quarter, its retail partners continue to right-size the inventory levels and that is expected to continue in the first half of this year. That led Netgear to issue downside revenue guidance of $185-$200 million vs. the $221 million consensus for the current quarter.

Qorvo (QRVO) reported December quarter results that topped top and bottom line expectations While issuing downside guidance for the current quarter with revenue and EPS of $600-$640 million and $0.10-$0.15 vs. the $725 million and $0.60 consensus, respectively, the company shared it saw good inventory channel consumption during the quarter, anticipates more of the same in the current one with unit volumes recovering later this year.

Costco Wholesale (COST) reported its January net sales rose 6.9% year over year to $16.84 billion. Comp sales for the month adjusted to exclude changes in gasoline and foreign exchange rose 7.4% year over year with the U.S. up 6.9%, Canada 8.95, and Other International 8.7% while e-commerce sales fell 14.4% vs. year-ago levels.

IPOs

E-bike maker Sondors (SODR) and medical device maker Neuraxis (NRXS) are expected to start trading this week. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Amazon (AMZN), Apple (AAPL), Alphabet (GOOGL), Cirrus Logic (CRUS), Ford Motor (F), Omega Health (OHI), Post (POST), Qualcomm (QCOM), Starbucks (SBUX), Synaptics (SYNA), US Steel (X), and World Wrestling (WWE) are slated to report their latest quarterly results after equities stop trading today. We would caution readers to be on the watch for earnings pre-announcements. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Friday, February 3

• Japan: Services PMI – January
• China: Caixin Services PMI – January
• Eurozone: S&P Global Services PMI, Producer Price Index - January
• UK: Services PMI – January
• US: Employment Report – January
• US: S&P Global Final Services PMI – January
• US: ISM Non-manufacturing Index – January

Thought for the Day

“At 15, it’s all tomorrows… at 73, it’s a whole lot of yesterdays. So you gotta make the most of right now.” ~ Bruce Springsteen

Disclosures

• Qorvo (QRVO), Qualcomm (QCOM) are constituents of the Tematica BITA Digital Infrastructure & Connectivity Index
• Costco (COST), Ferrari (RACE) are constituents of the Tematica BITA Big Spenders & Savers Index
• Apple (AAPL), Costco (COST), Qualcomm (QCOM) 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.

Other Topics

Stocks Economy Central Banks Earnings