MARKET WRAPS
Watch For:
EIA Weekly Petroleum Status Report; Federal Reserve Beige Book; Canada Housing Starts for March; Canada Industrial Product & Raw Materials Price Indexes for March; Earnings from IBM, Morgan Stanley, Tesla, U.S. Bancorp, Nasdaq
Today's Top Headlines/Must Reads:
- Tesla Earnings Expected to Show Impact of Elon Musk's Price Cuts
- TSMC Seeks Up to $15 Billion From U.S. for Chip Plants but Objects to Conditions
- European Banks Say Goodbye to Easy Money
- U.K. Inflation Stays Above 10%, Raising Prospect of Further Interest-Rate Increases
- There Are Strange Rumblings Under Earnings Season's Surface
Follow WSJ market coverage here
Opening Call:
Stock futures were weaker on Wednesday after a double-digit inflation print in the U.K. weighed on European markets and as investors were cautious ahead of another batch of big earnings.
U.K. consumer prices increased 10.1% in March, higher than forecast, and support the case for the Bank of England to raise interest rates further.
Still, with markets seemingly more relaxed of late about the trajectory of U.S. interest rates - the chances of the Fed increasing borrowing costs by 25 basis points in two weeks time is priced at 88% - trader attention currently is more focused on company profits.
"This week we will have a better grip on earnings as the flow of corporate results makes its way on Wall Street. We note that the indices have had a solid run to the up side and could be headed for a slight pullback that we will not likely impact the longer term upward trend," Spartan Capital said.
"We therefore expect the near term trend to remain bullish, with the S&P 500 testing the 4250 area in the short term," it added.
Stocks to Watch
ASML, the Dutch semiconductor-equipment maker, said it was seeing "mixed signals" on demand despite improved first-quarter profit and sales. The stock declined 2%.
Fox, the Fox News parent, agreed to pay $787.5 million to settle a defamation lawsuit from Dominion Voting Systems. Stock in Fox fell 1% off hours.
Intuitive Surgical posted strong revenue growth from its robotic surgery system in its first quarter. Shares rose 9% to $293.99 in after-hours trading.
Netflix was falling 1.5% in premarket trading after it issued a disappointing second-quarter outlook.
United Airlines reported a narrower-than-expected first-quarter loss and said travel demand was strong heading into the summer, especially for international flights. The stock rose 1%.
Western Alliance rose 15% in premarket trading after the regional lender said deposits in the first quarter have stabilized.
Earnings Ahead
A continued slowdown in deal making is expected to weigh on Morgan Stanley when the investment bank posts first-quarter earnings before trading opens. The stock was rising 0.2% in premarket trading.
Tesla is scheduled to report first-quarter earnings after the closing bell. Wall Street will be weighing how gross profit margins in the automotive business have been holding up following price cuts at Tesla that have helped lift deliveries to record levels. The stock was down 1% in premarket trading.
Forex:
The dollar edged higher after Fed officials Bullard and Bostic endorsed further interest-rate rises.
There are three more days for Fed officials to speak before the blackout period ahead of the May 3 meeting but there's unlikely to be any pushback from policymakers against the market's expectations for another rate rise, ING said.
That means Fed rate expectations could stabilize after the volatility that lasted until late last week, ING added.
"This could translate into a quieter environment and lower volatility for USD crosses in the run-up to the FOMC announcement."
Read Euro May Stay Rangebound Vs Dollar Before ECB, Fed Meetings
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GBP/USD rose to 1.2438 and EUR/GBP fell to a near one-week low of 0.8803 after U.K. inflation data exceeded analysts' forecasts.
"Adding this number to the calculus, and barring any new financial accidents, we would expect at least two further quarter-point rate hikes before the Bank of England pauses," Mazars said.
Energy:
Oil prices fell 2% in Europe after reports that oil exports from Kurdish Iraq will resume this week.
Iraq's prime minister said the flows, which total around 450,000 barrels a day, would resume in the coming days, according to local media.
The news pushed down crude prices, according to DNB Markets.
The supplies had been halted amid a dispute between the Iraqi government in Baghdad and the semi-autonomous oil-rich Kurdish region. The two sides had already reached a temporary agreement earlier this month but oil flows had yet to resume.
Metals:
Base metals and gold prices were lower in early London trading with expectations of a Fed rate hike in May supporting the dollar.
"In the short term, we expect the Fed to remain hawkish as it battles inflation," ANZ Research said, adding, however, that it expects an eventual pause in rate hikes, which should boost demand for goods like gold.
Copper
Copper, the metal seen in high demand amid a global energy transition, is facing some near-term demand headwinds, Macquarie said.
"The bullish scenario that markets appeared to be pricing in early January is looking increasingly less likely to materialize, with Chinese indicators pointing to a mixed recovery, the lagged effects of monetary policy in Europe starting to appear and the outlook for the U.S. remaining cyclically challenging," Macquarie said.
In China, construction activity remains weak and consumer goods demand soft, although investment in renewable energy is a bright spot for the metal.
TODAY'S TOP HEADLINES
Tesla Earnings Expected to Show Impact of Elon Musk's Price Cuts
Wall Street has one key question ahead of Tesla Inc.'s first-quarter earnings: How much have recent price cuts hurt the company's bottom line?
Elon Musk's electric-vehicle maker has lowered prices for models in the U.S. by between 14% and 25% this year as it contends with weaker demand, higher interest rates and burgeoning competition. The latest round of reductions came overnight.
TSMC Seeks Up to $15 Billion From U.S. for Chip Plants but Objects to Conditions
The world's biggest contract chip maker is pushing back on some of the conditions Washington has attached to chip-factory subsidies as it looks for up to $15 billion in government money.
Taiwan Semiconductor Manufacturing Co., which plans to invest $40 billion in two chip factories in Arizona, is concerned about rules that could require it to share profits from the factories and provide detailed information about operations, said people familiar with the situation.
Twitter Chief Elon Musk Tries to Reassure Advertisers
MIAMI BEACH, Fla.-Twitter Chief Executive Elon Musk made his latest appeal to advertisers on Tuesday, seeking to reassure them that the platform is a hospitable and valuable vehicle for their brands.
Many advertisers pulled their ads from Twitter after Mr. Musk's takeover of the social-media platform was completed in October, either out of concern that Mr. Musk might weaken content moderation, potentially leading to more hate speech on the social-media platform, or because of the uncertainty surrounding the company's direction under its new leadership. Advertising represented almost 90% of Twitter's revenue in 2021.
Omnicom to Reduce Global Real-Estate Space Even as Employees Return to the Office
Omnicom Group Inc. said it will significantly reduce its real-estate footprint and formalize return-to-office requirements for all U.S. employees as the company said it expects growth to continue through 2023, an indication that executives believe marketers' continued spending will help the advertising giant largely avoid the economic headwinds that have hit the tech and finance industries.
Omnicom, which owns agencies such as BBDO, OMD and TBWA, will require all U.S. employees to return to the office at least three days per week, Chief Executive John Wren said on a call to discuss the company's first-quarter earnings.
ASML Beats Expectations but Uncertainty in Chips Sector Weighs on Stock
Shares in ASML Holding, a critical supplier to the global chip-making industry, were dropping Wednesday after the company said it sees "mixed signals" on demand despite improving profit and sales.
Dutch company ASML (ticker: ASML) supplies the 'lithography' machines that are essential for manufacturing semiconductors, with customers including Taiwan Semiconductor Manufacturing (TSM), Samsung Electronics (005930.Korea), and Intel (INTC).
Telecom Italia Says Network-Assets Suitors Submitted New Offers
Telecom Italia SpA said it has received two new nonbinding offers for its fixed-line network assets from a consortium formed by Italian state lender Cassa Depositi e Prestiti SpA and Macquarie Group Ltd., and from KKR & Co.
The Italian telecommunications company said late Tuesday that its board will consider the offers at a meeting scheduled for May 4.
MillerKnoll CEO Sparks Viral Outrage After Telling Staff to 'Leave Pity City'
The chief executive of furniture company MillerKnoll Inc. is facing backlash after a video of her telling staffers worried about not getting a bonus to "leave pity city" went viral.
"Questions came through about how can we stay motivated if we're not going to get a bonus," CEO Andi Owen said in a brief video shared on social media, adding that some of the questions were "not so nice."
European Banks Say Goodbye to Easy Money
A $1.2 trillion liquidity crunch looms for Europe's lenders, testing their ability to stand on their own after more than a decade of easy money from the European Central Bank.
(MORE TO FOLLOW) Dow Jones Newswires
04-19-23 0618ET
