Stock futures edge higher amid resurgent U.S. Growth bets; Cisco Systems leaps after Q4 earnings beat, network outlook; Roku surges as cost cuts underpin 2023 earnings drive; Twilio powers higher after surprise Q4 profit, stock buyback and Raytheon, Lockheed Martin lower as China imposes sanctions over Taiwan arms sales.
Five things you need to know before the market opens on Thursday February 16:
1. — Stock Futures Edge Higher Amid Resurgent U.S. Growth Bets
U.S. equity futures edged higher Thursday, while the dollar slipped and Treasury bond yields retreated, as investors extended their embrace of risk markets amid a resurgent domestic economy.
Yesterday’s blowout January retail sales data, which included the best monthly gain in two years, alongside a better-than-expected sentiment survey from the National Association of Home Builders added to bets that the U.S. economy will comfortably avoid a near-term recession even as the Federal Reserve continues to tighten monetary policy in the face of stubbornly high inflation.
The Atlanta Fed’s GDPNow forecasting tool, in fact, shows the U.S. economy advancing at a 2.4% clip this quarter, up from the 2.2% estimate it showed prior to the retail sales data.
The improvements were briefly muted by a surge in Treasury bond yields, which lifted benchmark 10-year notes past 3.8% during the Wednesday trading session, as investors re-set assumptions for Fed rate hikes while wiping out any chance of rate cuts over the back half of the year.
Big gains for mega cap tech stocks, including Apple (AAPL) – Get Free Report, Alphabet (GOOGL) – Get Free Report and Amazon (AMZN) – Get Free Report helped drive outsized gains for the Nasdaq, which ended 0.92% higher on the session, while providing evidence of risk appetite despite the wholesale changes in rates and bond markets.
The CME Group’s FedWatch, in fact, is pricing in a 43.2% chance of a 25 basis point rate hike in June, following on from similar increases in March and May, with bets on a 5% Fed Funds rate holding until the end of the year.
Benchmark 10-year notes were last seen trading at 3.784%, with 2-year notes pegged at 4.595%, as investors pared some of yesterday’s surge in the overnight session. The U.S. dollar index, which tracks the greenback against a basket of its global peers, was marked 0.25% lower at 103.663.
On Wall Street, stocks are looking at modest opening bell gains ahead of January housing starts and building permits data, expected at 8:30 am Eastern time, alongside the January reading for factory gate inflation.
Futures contracts tied to the S&P 500 indicating a 2 point opening bell bump and those linked to the Dow Jones Industrial Average priced for a 30 point gain. The tech-heavy Nasdaq is indicating a small 10 point jump.
In overseas markets, Europe’s Stoxx 600 was marked 0.56% higher in early Frankfurt trading, powered in part by better-than-expected earnings for Boeing (BA) – Get Free Report rival Airbus while Britain’s FTSE 100 gained 0.28% in London.
Overnight in Asia, the region-wide MSCI ex-Japan index jumped 0.75% into the close of trading while the Nikkei 225 ended 0.71% following last night’s weaker firmer close on Wall Street.
2. — Cisco Systems Leaps After Q4 Earnings Beat, Network Outlook
Cisco Systems (CSCO) – Get Free Report shares moved firmly higher in pre-market trading after the network equipment maker topped Street earnings forecasts and lifted its full-year profit outlook.
Cisco said adjusted earnings for the three months ending in December, the group’s fiscal second quarter, rose 5% from last year to 88 cents per share, just ahead of Street estimates, with revenues rising 7% to $13.6 billion.
Looking into the back half of its financial year, Cisco said revenues are likely to rise between 9% and 10.5%, nearly double its prior forecast, with earnings between $2.85 and $2.96 per share as supply chain backlogs improve and corporate spending on network infrastructure remains solid.
“Cisco is better positioned today than at any time since I became CEO almost eight years ago,” said company boss Chuck Robbins.
Cisco Systems shares were marked 4.05% higher in pre-market trading to indicate an opening bell price of $50.41.
3. — Roku Surges As Cost Cuts Underpin 2023 Earnings Drive
Roku (ROKU) – Get Free Report shares surged higher in pre-market trading after the the streaming service hub and connected TV maker posted a narrower-than-expected fourth quarter loss and said cost cuts and its new content model would boost near-term revenues.
Roku, which added its own content to its streaming hub in order to diversify revenues from its service hub, said current quarter revenues would likely rise to $700 million, with full year gross profits in the region of $1.4 billion.
For the three months ending in December, Roku posted an adjusted loss of $1.70 per share, 3 cents inside the Street consensus forecast, on revenues of $801.7 million.
Roku shares were marked 9.95% higher in pre-market trading to indicate an opening bell price of $69.81 each.
4. — Twilio Powers Higher After Surprise Q4 Profit, Stock Buyback
Twilio (TWLO) – Get Free Report shares surged higher in pre-market trading after the the cloud software group posted a surprise fourth quarter profit and unveiled plans for a $1 billion stock buyback.
Twilio’s bottom line of 22 cents per share handily topped Street forecasts of a 9 cents per share loss, and while revenues rose 22% — the slowest rate of growth in two years — they also came in ahead of analysts’ forecast at $1.02 billion.
Like other companies in the high-growth tech space, Twilio is paring costs and eliminating jobs, a move its says will help boost near-term profits as corporate cloud spending slows amid concerns for a weakening global economy.
Twilio expects non-GAAP profits in the region of $250 million to $350 million this year, nearly all from its communications segment.
Twilio shares were marked 13.3% higher in pre-market trading to indicate an opening bell price of $74.82 each.
5. — Raytheon, Lockheed Martin Lower As China Imposes Sanctions Over Taiwan Arms Sales
Raytheon Technologies (RTX) – Get Free Report shares moved lower in pre-market trading after the aeronautics and defense group was sanction by China, along with Lockheed Martin (LMT) – Get Free Report, for selling weapons to Taiwan.
China’s Commerce Ministry placed the two U.S. group on its “unreliable entities” list — following on from sanctions first put in place in February of last year — that prevents the two companies from “engaging in import and export activities related to China”, according to a government statement.
The move indicates a further increasing of tensions between Washington and Beijing, linked in part to the U.S. support of Taiwanese independence but also to the recent downing of spy balloons off the coast of South Carolina and Alaska allegedly operated by the Chinese government.
Raytheon shares were marked 1.44% lower in pre-market trading to indicate an opening bell price of $100 each while Lockheed Martin slipped 0.5% to $478.00 each.