Busy Week of Earnings and Economic Releases Keep Indexes In Tight Trading Range

Alexander Garcia
29 Apr, 2024
Miami

Benchmark indexes advanced in Monday's trading, and mega cap tech stocks led gainers on Wall Street. 

 investors looked forward to key earnings releases, the Federal Reserve's rate decisions, and a labor market update. 

The S&P 500 index and the Nasdaq Composite advanced 0.3% following sharp gains in the previous week. 

The S&P 500 index gained 2.2% in the previous week and delivered the best weekly gain since November as investors warmed up after positive earnings from several leading large companies. 

The Nasdaq Composite advanced 3.5% in the previous week, delivered its best weekly return in five months, and halted its 3-week slide after Google and Microsoft reported solid earnings. 

This week, investors are looking ahead to quarterly earnings from 700 other companies, including Apple, Amazon, Coca-Cola, and McDonald's.

On the economic front, the Federal Reserve is widely expected to hold rates steady at the end of its two-day meeting on Wednesday. 

The central bank's statement and post-announcement conference are likely to provide more insights into policymakers thinking and outlook for economic growth and rate paths. 

Despite eleven rate hikes between March 2022 and July 2023, inflation is well anchored and above the Fed's target rate of 2%, and price pressure is showing no signs of easing. 

Nonfarm payrolls are scheduled to be released on Friday, providing key labor market updates and wage inflation pressures. 

 

Republic First Bank: First Bank Failure in 2024

Regional banks were in focus after a Pennsylvania regulator closed down the Philadelphia-based Republic First Bank. 

Over the weekend, Federal Deposit Insurance arranged the transfer of Republic First Bank's $6 billion in assets, $4 billion in deposits, and 32 branches to Fulton Bank. 

Republic First Bank is the first bank to fail in 2024, but more small banks may face challenging times ahead as commercial real estate prices remain depressed and elevated interest rates may prolong losses in U.S. Treasury holdings. 

The FDIC is expected to take a hit of $667 million, but the insurance company said selling the bank to Fulton Bank was the best possible outcome for the bank. 

 

U.S. Indexes and Yields

The S&P 500 index increased 0.3% to 5,114.27, and the Nasdaq Composite surged 0.3% to 15,975,43. 

The yield on 2-year Treasury notes edged higher to 4.99%, 10-year Treasury notes inched lower to 4.62%, and 30-year Treasury bonds edged lower to 4.74%.

Crude oil fell as much as 1% after the U.S. urged Israel and Hamas to settle dispute through talks and asked Israel to extend cease fire. 

WTI crude oil decreased $0.69 to $83.03 a barrel, and natural gas prices increased 11 cents to $2.03 a thermal unit.

Gold decreased by $6.50 to $2,344.95 an ounce, and silver rose 15 cents to $27.35. 

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 105.57.

 

U.S. Stock Movers

Domino's Pizza increased 7.2% to $535.01 after the pizza chain operator said it was improving gross margins at the company-owned stores in the U.S. and same-store sales picked up pace. 

Revenue in the quarter increased by $1.08 billion, and diluted earnings per share rose to $3.59. 

Tesla Inc. soared 12.3% to $188.88 after the company met a key regulatory requirement to roll out its self-driving technology in China. 

Koninklijke Philips N.V. jumped 38% to $28.92 after the Dutch medical device maker announced that it provisioned Є982 million to settle personal injury and medical monitoring claims, ending years of litigation uncertainty. 

The settlement amount was far less than the widely estimated range between Є2 billion and Є4 billion. 

The company agreed to the settlement without admitting any liability or causing any injuries.

 

European Markets Traded Around Flatline 

European markets traded mixed, and bond yields edged lower in Monday's trading. 

Benchmark indexes in London and Paris edged higher, but the reference index in Frankfurt lacked direction. 

Popular indexes staged a strong rally in Frankfurt and London last week and halted a three-week slide as investors reacted to corporate quarterly results and overlooked the ongoing interest rate debate. 

Mining and metals stocks also rebounded after BHP Group made an unsolicited £31 billion takeover offer for Anglo American. 

Anglo American rejected the offer citing that the BHP's offer significantly undervalues the company and its future prospects. 

 

Euro Area Economic Sentiment Weakens 

The European Sentiment Indicator in the eurozone decreased by 0.6 to 95.6 in April, the European Commission reported Monday. 

Persistent inflation and elevated interest rates have kept consumers spending on basic items, and businesses are facing macroeconomic headwinds. 

Business sentiment weakened among manufacturers, builders, retailers, and service providers.

Among the four largest economies in the region, the sentiment index declined sharply in France and moderately in Italy, but improved in Spain and Germany. 

 

Spain's Consumer Price Inflation Accelerated In April

On the economic front, Spain's consumer price inflation inched up to a three-month high to 3.3% in April from 3.2% in March, the National Statistics Institute (INE) reported Monday. 

The rise in energy and food prices drove overall inflation higher in the month. 

European Union-harmonized annual inflation rose to 3.4% in April from 3.3% in March. 

The consumer price index on a monthly basis increased by 0.7% in April, following a 0.8% rise in March, and the EU harmonized inflation index rose by 0.6% in April from 1.4% in the previous month. 

 

Europe Indexes and Yields

The DAX index decreased by 0.2% to 18,118.32; the CAC-40 index eased by 0.3% to 8,065.15; and the FTSE 100 index inched higher by 0.1% to a new record high of 8,147.03. 

The yield on 10-year German bonds edged down to 2.52%; French bonds inched lower to 3.02%; the UK gilts edged lower to 4.30%; and Italian bonds inched lower to 3.83%.

The euro edged higher to $1.071; the British pound inched higher to $1.253; and the U.S. dollar edged higher to 91.15 Swiss cents.

Brent crude decreased $0.71 to $88.52 a barrel, and the Dutch TTF natural gas fell by €1.16 to €28.26 per MWh.

 

Europe Stock Movers

Banco Bilbao decreased 2.2% to €10.73, despite the Spain-based international bank reporting better-than-expected first quarter profit and lifting its profit outlook in 2024. 

Deutsche Bank dropped 6.5% to €15.46 after Germany's largest bank confirmed its ongoing litigation related to the acquisition of Post Bank is likely to impact its second quarter and full-year profits. 

The company said litigation costs could rise to as much as €1.3 billion and added that it strongly disagrees that the bank underpaid for Postbank. 

AstraZeneca increased 1.6% to 12,178.0 pence after the pharmaceutical company announced significant progress with two breast cancer drug treatments. 

Vivendi SE decreased 0.4% to €9.81 after the French media holding company said revenue in the first quarter rose, driven by increases in Canal+ Group and Havas and the integration of publishing group Lagardere. 

Atos SE soared 18.5% to €2.26 after the company confirmed that French government is looking to acquire key divisions of the company that are deemed strategically important to France. 

The non-binding offer of €1 billion from France covers three key divisions: advanced computing, missing-critical systems, and cyber security products. 

The finance ministry moved to prevent the company from falling into the hands of foreign private equity groups. 

 

Hong Kong Index Extends Two-month Rebound to 20%

Markets in Shanghai and Hong Kong advanced following positive earnings, and a move by the regional government to revive the property market bolstered market sentiment. 

Bargain hunters stepped up exposure to profitable tech and financial companies in the hopes that the sustained cash flow would support higher valuations. 

However, many international investors view the latest rebound in Chinese stocks as a technical and temporary bounce lacking fundamental catalysts. 

The CSI 300 index increased 1.4% to 3,634.94, and the Hang Seng index advanced 1.1% to 17,850.12. 

The Chinese yuan approached a 16-year low as the currency hovered near 7.25 against the U.S. dollar, and exporters kept revenue in foreign currencies in anticipation of devaluation in the next few weeks. 

The yield on a 10-year Chinese government bond traded near a record low of 2.35%, even after the People's Bank of China held its interest rate steady this month.

The broader benchmark index in Shanghai, tracking the largest companies in mainland China, advanced after AIA reported a 27% increase in its new value business. 

The Hang Seng index extended the previous week's gain of 8%, and the index advanced to 20% from the low reached on January 22. 

Property stocks jumped more than 5% after the Chengdu regulatory body relaxed qualification rules for new home buyers and facilitated financing for home developers. 

The move by the largest Southwestern city in China, with a population of more than 16 million, sparked speculation that other large cities may follow similar moves to revive property market activities. 

Longfor Group soared 8.5% to HK$11.94, China Resources Land added 3.4% to HK$28.90, and China Vanke advanced 19% to HK$4.91. 

Electric vehicle makers participated in Monday's rally, and Li Auto advanced 4.5% to HK$58.20, Xpeng added 3.9% to HK$31.50, and BYD added 2.4% to HK$217.80. 

 

Insurer AIA Group Expands Stock Buyback Plan

AIA Group rallied 7.7% to HK$58.20 after the insurance company reported a sharp increase in its quarterly results and announced a new stock buyback program. 

New Value Business increased to $1.3 billion from $1.05 billion a year ago, and annualized new premium increased by 23% to $2.4 billion. 

The insurance company expanded its stock repurchase program by $2 billion to $10 billion, and the company said it plans to distribute 75% of its annual net new surplus funds. 

The Hong Kong-based insurance company's stock has declined 38% in 2023, despite the company reporting a 30% increase in its new business value. 

The insurance company has also ramped up its stock repurchase program following the buyback of $7.2 billion of its own shares in the last two years. 

 

Asian Markets Advance, Japan Closed for Golden Week Holiday 

In Asian trading, market indexes in Mumbai, Seoul, and Sydney advanced as investors overlooked the hot-inflation report in the U.S. and focused on domestic corporate results. 

Financial markets are closed in Tokyo on Monday and Friday as Japan celebrates a national holiday between April 29 and May 6, generally known as Golden Week. 

The Japanese yen rebounded about 2% to 155.85 after dropping to as low as 160.20 against the dollar, and most traders attributed the currency's strength to the government's intervention.