Stock futures higher, dollar retreats, as inflation fears recede; Disney shares surge as Iger cleans house at House of Mouse; PepsiCo earnings on deck as consumer demand fades; Mattel shares plunge after earnings miss, grim toy sector outlook and Twitter grinds back to normal after late Thursday outage.
Five things you need to know before the market opens on Thursday February 9:
1. — Stock Futures Higher, Dollar Retreats, As Inflation Fears Recede
U.S. equity futures moved firmly higher Thursday, while the dollar retreated on foreign exchange markets and Treasury yield slipped, as investors growing increasingly comfortable with Fed rate projections and the health of the U.S. economy.
Investors closely tracked yesterday’s parade of Federal Reserve speakers, including New York Fed President John Williams, for any deviation from Chairman Jerome Powell’s assessment that two more rate hikes are likely needed — extending the current tightening cycle to ten — in order to tame inflation and cool the red-hot labor market.
Williams told an event hosted by the Wall Street Journal that a two further hikes, which would take the Fed Funds target rate to a range of between 5% and 5.25%, “seems a very reasonable view of what we’ll need to do this year in order to get the supply and demand imbalances down.’
The Fed’s consistent messaging, alongside a stronger-than-expected auction of $35 billion in 10-year notes that drew historic interest from foreign investors, looks to have added to market optimism that inflation has peaked in the world’s biggest economy.
The CME Group’s FedWatch suggests both a 93.7% chance of another 25 basis point rate hike from the Fed next month in Washington, with bets on a follow-on move in May holding at around 69%.
At the same time, the Atlanta Fed’s GDPNow forecasting tool suggests current quarter growth is running at a 2.2% pace, suggesting solid momentum that could keep the economy from slipping into recession.
Bond yields were marked modestly lower in overnight trading, with benchmark 10-year notes trading at 3.609% and 2-year notes pegged at 4.427%. The U.S. dollar index, which tracks the greenback against a basket of its global peers, was marked 0.38% lower at 103.020.
On Wall Street, futures tied to the S&P 500 were marked for a 35 point opening bell gain while those linked to the Dow Jones Industrial Average are set for a 260 point advance. The tech-focused Nasdaq was marked 150 points in the green.
In overseas markets, Europe’s Stoxx 600 was marked 0.84% higher in early Frankfurt trading, taking the regional benchmark to a fresh 9-month high, amid a busy earnings session and a softer-than-expected reading for German inflation over the month of January.
Overnight in Asia, the region-wide MSCI ex-Japan index was marked 0.57% higher into the close of trading, as China stocks bounced from a one-month low, while the Nikkei 225 slipped 0.08%.
2. — Disney Shares Surge As Iger Cleans House At House of Mouse
Walt Disney (DIS) – Get Free Report shares moved firmly higher in pre-market trading after returning CEO Bob Iger unveiled a raft of changes at the media and entertainment group as it fends off an activist challenge from billionaire investor Nelson Peltz.
Iger detailed weeping changes within the group’s operating structure, including 7,000 layoffs, $5.5 billion in cost cuts and a new three-part organizational structure focused on Parks, Entertainment and ESPN. He also said Disney would restore its regular dividend, which it suspended during the peak of the pandemic in 2020, by the end of the calendar year.
The moves followed a stronger-than-expected first quarter earnings report that included narrowing losses for its direct-to-consumer streaming business that were offset by another surge in profits at its Parks division.
Disney said adjusted diluted earnings for the three months ending in December, the group’s fiscal first quarter, came in at 99 cents per share — well ahead of the Street forecast of 78 cents per share — as revenues rose 7.7% to $23.51 billion.
Disney shares were marked 6.4% in pre-market trading and indicating an opening bell price of $118.90 per share.
3. — PepsiCo Earnings On Deck As Consumer Demand Fades
PepsiCo (PEP) – Get Free Report shares edged higher in pre-market trading ahead of the drinks and snacks giant’s four quarter earnings prior to the opening bell.
Analysts expect PepsiCo to post a bottom line of $1.65 per share, a 7.8% increase from last year, as revenues rise 6.3% to $26.84 billion, with the largest contribution likely to come from Frito Lay, its snacks division.
Last fall, PepsiCo forecast organic revenue growth of around 12% for the full year, topping its previous estimate of 10%, while boosting its outlook for core earnings to $6.67 per share.
The Wall Street Journal reported late last year, however, that PepsiCo planned to layoff hundreds of workers, largely around corporate offices in Purchase, New York, Plano, Texas and Chicago, as part of an effort to “simplify the organization so we can operate more efficiently”.
PepsiCo shares were marked 0.85% higher in pre-market trading to indicate an opening bell price of $172.60 each.
4. — Mattel Shares Plunge After Earnings Miss, Grim Toy Sector Outlook
Mattel (MAT) – Get Free Report shares fell sharply in pre-market trading after the toymaker posted weaker-than-expected holiday quarter earnings and cautioned that fading consumer demand would last for much of the current financial year.
Mattel said adjusted earnings for the three months ending in December slumped 66% from last year to 18 cents per share, well shy of Street forecasts, as quarterly sales fell 22% to $1.4 billion. Mattel said infant and pre-school toys were hit the hardest, thanks in part to inventory reductions at various retailers.
Looking into the current year, Mattel said it sees adjusted earnings in the region of $1.10 to $1.20 per share, with net sales largely flat to 2022 levels.
Late last month, rival toymaker Hasbro HAS said fourth quarter sales would likely fall by around 17% from last year’s levels to $1.68 billion, pulling adjusted earnings into a weaker-than-expected range of between $1.29 and $1.31 per share following a disappointing holiday season.
Mattel shares were marked 9.6% lower in pre-market trading to indicate an opening bell price of $18.53 each.
5. — Twitter Grinds Back to Normal After Late Thursday Outage
Twitter suffered a major global outage late Wednesday that left thousands unable to access direct message, Tweet or follow various accounts on the micro-blogging website.
Many users were greeted with a message stating: ‘Tweet from (account name) failed: You reached your daily tweet limit. Please try again tomorrow” after after sending only a handful of messages over the past 24 hours. Others reported malfunctions with Tweet Deck, a companion tool, as well as issues logging into their specific accounts.
The outage, which CEO Elon Musk said was the result of “internal and external issues with the app simultaneously”, came just hours after the company unveiled changes to its platform policy that allow U.S. users of its subscription-based Twitter Blue to post longer messages of up to 4,000 characters each.
It remains unclear as to whether the two events are connected, but many users noted that Musk’s decision to slash more than 6,000 people — around 75% of the group’s global headcount prior to his $46 billion takeover in November — has left it vulnerable to technical glitches and potential cyber attacks.
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This story was originally published February 9, 2023, 4:57 AM.
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