Global Markets Hover Near Recent Highs as Investors Await Mega-cap Tech Earnings

Barry Adams
29 Jan, 2024
New York City

U.S. stocks traded around flatline in Monday's session ahead of the Federal Reserve's policy announcement and a flood of earnings from mega-cap companies.

The S&P 500 index and the Nasdaq Composite gained 0.2% and 0.4%, respectively, and extended the previous week's gains.

The resilient U.S. economy and strong but not-too-hot labor market conditions are giving more room to the Federal Reserve to cool inflation to its 2% targe rate.

Last week, economic updates showed that the U.S. economy accelerated its growth in 2023, despite widespread predictions of an imminent slowdown at the beginning of the year.

The U.S. GDP expanded at a faster pace of 2.5% from 1.9% in the previous year, powered by sustained consumer spending.

Moreover, new home sales rose in December and advanced in 2023, despite elevated home prices and rising interest rates.

Investors are widely anticipating the Federal Reserve holding its key lending rates at the end of its two-day meeting on Wednesday.

Moreover, investors are looking forward to the release of non-farm payrolls and JOLT reports this week.

On the earnings front, about 800 companies are expected to release earnings this week.

Earnings season enters its third week, and Microsoft, Alphabet, Apple, AMD, MasterCard, and ExxonMobil are among the leading companies scheduled to release earnings in the U.S.

 

U.S. Indexes and Yields

The S&P 500 index increased 0.2% to 4,900.42, and the Nasdaq Composite added 0.4% to 15,512.90.

The yield on 2-year Treasury notes increased to 4.33%. 10-year Treasury notes declined to 4.10%, and 30-year Treasury bonds edged down to 4.34%.

WTI crude oil decreased $1.21 to $76.80 a barrel, and natural gas prices decreased 9 cents to $2.08 a thermal unit.

Gold increased by $10.13 to $2,028.45 an ounce and extended the previous week's gains after the U.S. dollar drifted slightly lower in international trading.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 103.63.

 

U.S. Stock Movers

iRobot plunged 7% to  $160.81 and Amazon.com and the company agreed to terminate their merger plan after the deal faced  several regulatory hurdles in Europe.

The maker of Roomba also announced its plan to lay off  350 employees, about 31% of company's staff.   

Amazon.com increased 1.1% to $160.81 and will pay a previously agreed $94 million deal termination fee.

The company also announced preliminary full-year 2023 revenue of $891 million, a decline of  25% from a year ago, a GAAP operating loss of between $265 and $285 million, and a non-GAAP operating loss of approximately $200 million. 

Flutter, the parent company of FanDuel is expected to list its stock on the New York Stock Exchange on Monday.

DraftKings and the company are the two dominant players in online sports betting in the U.S.

The company will keep its listing on the London Stock Exchange and remain a member of the FTSE 100 index.

 

European Markets Flatlined

European markets struggled in Monday's trading as investors prepared for monetary policy decisions from central banks in the U.S. and the U.K.

Market indexes in Frankfurt, Paris, and London traded around the flatline as earnings season enters the third week.

Investors are also awaiting the release of interest rate decisions from the U.S. Federal Reserve on Wednesday and the Bank of England on Thursday.

Both central banks are widely anticipated to hold rates steady and reiterate their commitment to keep interest rates restrictive to bring inflation down to the target level of 2%.

On Thursday, the European Central Bank left its key lending rates unrevised and signaled that interest rates will remain restrictive as long as necessary, without giving any clarity if and when rates may be cut.

Moreover, investors also reviewed the faster-than-expected economic growth in the U.S. in the fourth quarter while inflation slowed.

In Friday's trading, market indexes in New York lacked direction after an alternative measure of inflation in the U.S. showed a decline in December.

Closer to home, fourth quarter GDP rates for the Euro Area, Germany, France, Spain, and Italy are awaited by investors later in the week.  

In addition, inflation figures from the Euro Area, Spain, France, and Germany are scheduled to be released this week.

 

Sweden's GDP Contracted In 2023

The Swedish economy expanded by 0.1% in the three months to December 2023, while reversing a 0.3% contraction in the previous quarter, according to a preliminary estimate released by Statistics Sweden on Monday.

Compared to the same period last year, the economy stagnated after shrinking by 0.8% in the second quarter and 0.3% in the third quarter.

For the whole year, the GDP shrank by 0.3%, the statistical agency noted.

“The last three months of 2023 saw relatively minor movements in overall economic activity, with weaker figures for domestic use weighed up by a strengthening of net exports,” highlighted Mattias Kain Wyatt, an economist at Statistics Sweden.

 

Europe Indexes and Yields

The DAX index decreased 0.1% to 16,941.74, the CAC-40 index rose 0.1% to 7,640.81, and the FTSE 100 index inched lower by 0.03% to 7,632.74.

The yield on 10-year German bonds edged down to 2.23%; French bonds inched lower to 2.72%; the UK gilts edged lower to 3.91%; and Italian bonds inched lower to 3.75%.

The euro edged lower to $1.082, the British pound inched higher to $1.272, and the U.S. dollar gained to 86.20 Swiss cents.

Brent crude decreased $1.01 to $81.92 a barrel, and the Dutch TTF natural gas increased by €0.17 to €28.27 per MWh.

 

Europe Stock Movers

Ryanair Holdings declined 1.8% to €18.17 after the deep discount airline trimmed its profit estimate for the fiscal year ending in March.

Holcim AG increased 3.2% to CHF 66.18 after the Swiss construction material company announced plans to spin off its North American business through a listing in New York.

The North American operation generated $11 billion in revenue and earnings before interest and taxes of $2 billion in 2023.

Post-spinoff, Holcim revenue in 2023 is estimated at $17 billion, with $2 billion of free cash flow.

Holcim North America employs about 16,000 people across 850 sites, and the company plans to generate $20 billion in revenue by 2030.

Ferrexpo decreased 3.1% to 83.19 pence after a court of appeals in Ukraine affirmed claims of $125 million against the iron ore pellet producer.

Philips NV plunged 6.5% to €19.70 after the Dutch medical device maker said it would halt new sales of sleep machines following a series of recalls.

Group sales in fiscal year 2023 increased 7% to €18.2 billion in 2023 and advanced 3% to €5.1 billion in the fourth quarter.

Income from operations swung to a loss of €115 million in 2023 and a profit of €24 million in the fourth quarter, including charges of €363 million connected with the Respironics consent decree.

The company reached a settlement with the U.S. Food and Drug Administration regarding a mass recall of its Respironics ventilators.

The medical device maker retained its 85-cent stock dividend for shareholders.

Philips expects to deliver 3% to 5% comparable sales growth and an adjusted EBITA margin of 11% to 11.5% in 2024.

Wacker Chemie declined 1.1% to €99.34 after the chemical company reported a 60% decline in its core earnings in 2023.

Bayer AG declined 4.5% to €30.76 after the company was ordered to pay $2.25 billion by a Pennsylvania court to a plaintiff who developed cancer due to exposure to the company's Roundup weed killer.

The company plans to appeal the decision.

Eutelsat Communications SA dropped 14.6% to €3.51 after the company lowered its annual revenue outlook.

The company revised its fiscal 2024 revenue in a range of €1.25 billion to €1.3 billion from its previous estimated range of €1.32 billion to €1.42 billion.

The company lowered its adjusted EBITDA in a range of €650 million to €680 million from its previous range between €725 million and €825 million.

The company attributed the revenue shortfall to the delay in ground network construction and the shift in revenue mix towards the sale of user terminals with lower margins.

 

Japan and India Markets  Pull Ahead, China Markets Diverge 

Across Asia, markets lacked direction, and investors looked ahead to the release of key economic data in the region.

Investors are also awaiting the release of interest rate decisions from the U.S. Federal Reserve on Wednesday and the Bank of England on Thursday.

Both central banks are widely anticipated to hold rates steady and reiterate their commitment to keep interest rates restrictive to bring inflation down to the target level of 2%.

In Friday's trading, market indexes in New York lacked direction after an alternative measure of inflation showed a decline in December.

Core Personal Consumption Expenditure, which excludes food and energy, rose to 0.2% from 0.1% on a monthly basis, and the annual core rate fell to 2.9% from 3.2%, the lowest level since March 2021.

 

A Broad Rally Lifts the Nikkei Index in Tokyo

The Nikkei index advanced more than 0.8% to 36,027.74 in a broad rally, and investors are awaiting the release of retail sales, unemployment, industrial production, and consumer confidence data in the coming week.

Financial, commodities importers, and vehicle and electronics exporters were among the most actively traded stocks in Tokyo.

Mitsubishi UFJ, Sumitomo Mitsui, Mizuho Financial, and Inpex Corp. gained between 2% and 4%.

Toyota Motor, Sony Group, and Honda Motor added between 2% and 3%.

 

China Announces Additional Measures; Evergrande Halted After Liquidation Order

Market indexes Shanghai eased 0.6% to 3,315.49 after China's market regulator placed a ban on lending restricted securities listed on mainland exchanges.

The latest measure adds to several steps taken by the government and the central bank to stabilize financial markets after indexes lost more than 30% in the last three years.

The Hang Seng index jumped 0.5% to 16,026.49 and extended last week's gain of 4.2%, and tech stocks were among the most active stocks.

Alibaba Group, JD.com, and Baidu gained about 3%, but Tencent declined 1%.

Homebuilders advanced after Guangzhou city regulators lifted the ban on the purchase of large homes.

Longfor and China Resources Land advanced 0.6%.

China Evergrande plunged 21% to 16 cents after a court in Hong Kong ordered the company's liquidation after the mainland real estate developer failed to present a credible restructuring plan and repay creditors.

Healthcare stocks were under pressure after U.S. lawmakers debated additional sanctions on Chinese biotech companies for collaborating with PLA-linked entities.

WuXi Apptec, Zhongji Innolight, and TCL Zhonghuan dropped between 9% and 12%.

 

India Stocks Soared Ahead of Interim Budget

Benchmark indexes in Mumbai lacked direction in Monday's trading as investors looked ahead to a busy week of economic data and corporate earnings.

Finance Minister Nirmala Sitharaman is scheduled to present the interim budget to the Lok Sabha on February 1.

Moreover, investors are looking ahead to the release of December automobile sales, infrastructure output, and fiscal deficit updates.

The Sensex index increased 639.59 points to 71,340.26, and the Nifty index rose 185.90 points to 21,538.50.

On the Mumbai stock exchange, 258 stocks traded at their 52-week highs and 9 stocks traded at their 52-week lows.

The yield on the 10-year Indian government bonds increased to 7.17%, and the Indian rupee held steady at ₹83.13 against the U.S. dollar.

HDFC Bank increased 1.2% to ₹1,453.35 after the Reserve Bank of India permitted Life Insurance Corporation to increase its stake in the bank from 5.19% to up to 9.99%.

Elsewhere in the region, the KOSPI index in Seoul added 1.1% to 2,507.82, and the ASX 200 index in Sydney jumped 0.3% to 7,578.40.