Upbeat Earnings News May Contribute To Rebound On Wall Street

The major U.S. index futures are currently pointing to a higher open on Thursday, with stocks likely to move back to the upside following the sharp pullback seen in the previous session.

A positive reaction to the latest batch of corporate earnings news may contribute to an initial rebound on Wall Street.

Shares of Disney (DIS) are surging 5.7 percent in pre-market trading after the entertainment giant reported better than expected fiscal first quarter results.

Disney CEO Bob Iger also announced the company would be cutting 7,000 jobs as part of a broader cost-cutting and restructuring plan.

Snack and beverage giant PepsiCo (PEP) may also see initial strength after reporting fourth quarter results that exceeded analyst estimates, raising its annualized dividend by 10 percent and announcing a $1.0 billion stock buyback.

Meanwhile, shares of Mattel (MAT) may come under pressure after the toymaker reported fourth quarter results that missed analyst estimates on both the top and bottom lines.

Stocks moved sharply lower during trading on Wednesday, giving back ground following the rally seen in Tuesday’s session. The major averages all moved to the downside on the day, with the tech-heavy Nasdaq leading the pullback.

The major averages finished the session near their worst levels of the day. The Nasdaq tumbled 203.27 points or 1.7 percent to 11,910.52, the S&P 500 slumped 46.14 points or 1.1 percent to 4,117.86 and the Dow slid 207.68 points or 0.6 percent to 33,939.01.

The pullback on Wall Street came as some traders looked to cash in Tuesday’s gains, which came amid a positive reaction to comments by Federal Reserve Chair Jerome Powell.

Powell acknowledged recent indications of easing inflation but noted that the disinflationary process has a long way to go and cautioned further interest rate hikes could be needed.

The positive sentiment generated in reaction to Powell’s comments was partly offset by remarks by New York Fed President John Williams, who said interest rates may need to be kept at an elevated level for a “few years” to bring down inflation.

“To me, the important thing is we need a sufficiently restrictive stance, we need to retain a sufficiently restrictive stance of policy, we’re going to need to maintain that for a few years to make sure we get inflation to 2 percent, then eventually we’ll get interest rates presumably back to more normal levels,” Williams said at The Wall Street Journal’s CFO Network Summit in New York.

The comments from Powell and Williams come after the Fed raised interest rates by 25 basis points last and signaled further rate hikes in the future.

“Williams quickly sank risk appetite after he reminded Wall Street that if financial conditions loosen, higher rates may be needed,” said Edward Moya, senior market analyst at OANDA.

He added, “Financial conditions have been easing since October and this is why the Fed needed to push back on how the markets have been pricing in rate cuts at the end of the year.”

Overall trading activity was somewhat subdued, however, with a relatively light economic calendar keeping some traders on the sidelines.

Reports on initial jobless claims and consumer sentiment are likely to attract attention in the coming days, with the consumer sentiment report including readings on inflation expectations.

Semiconductor stocks turned in some of the market’s worst performances on the day, resulting in a 2.2 percent slump by the Philadelphia Semiconductor Index.

Considerable weakness was also visible among interest rate-sensitive utilities stocks, as reflected by the 1.7 percent drop by the Dow Jones Utility Average. The average fell to its lowest closing level in almost three months.

Housing stocks also showed a significant move to the downside, dragging the Philadelphia Housing Sector Index down by 1.6 percent.

Telecom, biotechnology and natural gas stocks also saw notable weakness, while oil service stocks bucked the downtrend amid a sharp increase by the price of crude oil.

Commodity, Currency Markets

Crude oil futures are sliding $0.78 to $77.69 a barrel after jumping $1.33 to $78.47 a barrel on Wednesday. Meanwhile, after rising $5.90 to $1,890.70 an ounce in the previous session, gold futures are inching up $0.80 to $1,891.50 an ounce.

On the currency front, the U.S. dollar is trading at 130.60 yen versus the 131.40 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0773 compared to yesterday’s $1.0712.

Asia

Asian stocks ended on a muted note Thursday after comments from a slew of Federal Reserve officials suggested U.S. interest rates would keep climbing for some time to cool inflation.

Investors were also reacting to U.S. President Joe Biden’s State of the Union address where he warned the United States would act to protect itself should China threaten its sovereignty.

Chinese and Hong Kong markets posted strong gains, as some analysts upgraded growth forecasts for the world’s second-largest economy this year, citing an accelerating recovery in consumer spending.

China’s Shanghai Composite Index jumped 1.2 percent to 3,270.38, while Hong Kong’s Hang Seng Index gained 1.6 percent to settle at 21,624.36, snapping a two-day slide.

Japanese shares recovered from an early slide to finish on a flat note. The Nikkei 225 Index ended marginally lower at 27,584.35 while the broader Topix closed with a positive bias at 1,985.

Advantest, Screen Holdings and Tokyo Electron lost 1-2 percent after U.S. stocks fell sharply overnight, led by the tech-heavy Nasdaq. Materials maker Teijin and Pacific Metals both surged around 6 percent after posting upbeat quarterly results.

Seoul stocks snapped a two-day winning streak, with the Kospi ending marginally lower at 2,481.52 on persistent uncertainty over interest rates and inflation.

Australian markets declined, dragged down by miners and financials. The benchmark S&P/ASX 200 Index dropped 0.5 percent to 7,490.30, while the broader All Ordinaries Index closed 0.6 percent lower at 7,695.80.

Afterpay owner Block gave up 2.6 percent, Xero declined 2.4 percent and Zip shed 3.2 percent. AGL Energy plunged 10.3 percent after it slumped to a half-year loss of more than $1 billion.

Europe

European shares are moving higher for a third straight session on Thursday, with a slew of positive earnings updates and expectations of a milder-than-expected recession boosting sentiment.

In economic news, preliminary data showed German inflation rose by a less than anticipated 8.7 percent year-on-year in January, helping ease pressure on the European Central Bank to keep raising rates.

Destatis was initially scheduled to release its January data last week but delayed the publication over an “unexpected technical problem.”

Elsewhere, the National Institute of Economic and Social Research said the British economy might avoid a recession this year, despite high prices hitting household budgets.

While the U.K.’s FTSE 100 Index has climbed by 0.7 percent, the German DAX Index and the French CAC 40 Index are both up by 1.2 percent.

Vinci has moved notably higher. After posting strong financial results for fiscal year 2022, the French construction and infrastructure company said it expects a further increase in turnover and operating profit in 2023.

Lender Credit Agricole has also soared after reporting a higher-than-expected profit in the fourth quarter on lower provisions and a strong performance at its investment banking division.

Arcelor Mittal, the world’s second-largest steelmaker, has also moved to the upside after reporting fourth quarter evenue and earnings that topped estimates.

Nordex Group has also gained. The German wind turbine maker has bagged an order from Enefit Green, one of the leading producers of renewable energy in the Baltic region, for 255 MW for a wind farm in Estonia.

On the other hand, Credit Suisse has tumbled as the Swiss bank posted its worst annual loss since 2008 and warned of more losses this year.

Delivery Hero has also plunged. The German food-delivery firm reported slightly lower-than-expected gross merchandise value for 2022.

U.S. Economic Reports

A report released by the Labor Department on Thursday showed first-time claims for U.S. unemployment benefits rebounded by slightly more than expected in the week ended February 4th.

The Labor Department said initial jobless claims rose to 196,000, an increase of 13,000 from the previous week’s unrevised level of 183,000. Economists had expected jobless claims to inch up to 190,000.

The uptick came after jobless claims decreased in four out of the five previous weeks, falling to their lowest level since hitting 181,000 in the week ended April 23, 2022.

Meanwhile, the report said the less volatile four-week moving average edged down to 189,250, a decrease of 2,500 from the previous week’s unrevised average of 191,750.

At 11 am ET, the Treasury Department is scheduled to announce the details of this month’s auction of twenty-year bonds.

The Treasury Department is also due to announce the results of this month’s auction of $21 billion worth of thirty-year bonds at 1 pm ET.

Stocks In Focus

Shares of Tapestry (TPR) are spiking in pre-market trading after the luxury fashion company reported better than expected fiscal second quarter earnings and raised its full-year earnings guidance.

Casino operators MGM Resorts (MGM) and Wynn Resorts (WYNN) are also likely to see initial strength after reporting better than expected quarterly revenues.

Meanwhile, shares of Affirm (AFRM) are seeing substantial pre-market weakness after the financial technology company reported weaker than expected fiscal second quarter results.