Stocks Edge Higher, Fed Minutes, Nvidia, Palo Alto, Coinbase – Five Things To Know

Stock futures higher as markets regroup from Tuesday slump; Fed minutes in focus as 50 basis point rate bets build momentum; Nvidia earnings on deck amid ai arms race, gaming moves; Palo Alto networks shares surge on earnings beat, S&P 500 potential and Coinbase sees massive trading slump as crypto wobbles from FTX collapse.

Five things you need to know before the market opens on Wednesday February 22:

1. — Stock Futures Higher As Markets Regroup From Tuesday Slump

U.S. equity futures edged modestly higher Wednesday, while the dollar added gains against its global peers and Treasury yields nudged further north, as investors looked to re-group from the biggest single-day decline of the year. 

Surging bond yields, upbeat economic data and a hawkish Federal Reserve continue to drive broader market sentiment this week as traders and investors see higher near-term rate hikes set against at robust domestic economy. 

Corporate profit growth, however, isn’t as certain, and disappointing fourth quarter updates from retail giant’s Walmart WMT and Home Depot HD on Tuesday added that concerns that an earnings recession, alongside higher Treasury yields, could quickly snuff-out the market’s recent rally.

Collective S&P 500 profits, in fact, are set to decline by around 2.8% from last year’s levels to a share-weighted $443.2 billion, according to Refinitiv data, with first quarter earnings likely to decline another 3.9%.

The S&P 500 suffered its worst single-session decline since December 15, falling 2% on the day to take the benchmark just under the 4,000 point mark and trim its year-to-date advance to around 4.5%. The Dow, meanwhile, tumbled nearly 700 points to close at 333,129.59 points and wipe out all of its gains for the year.

With markets now focused on the release later today of minutes of the Fed’s February policy meeting, as well as January inflation data expected Friday, traders are likely to keep a close eye on moves in the bond market as 10-year Treasury yields continue to test the 4% level.

Benchmark 10-year notes were marked at around 3.951% in overnight trading, the highest since early November, while 2-year notes eased to 4.689% following a solid auction of $42 billion in new paper on Tuesday. 

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.1% higher at 104.280 while the CME Group’s FedWatch continues to price in at least a 56.7% chance that the Fed Funds rate will rise to between 5.25% and 5.5% by early June, compared to just 3.2% a month ago.

The CBOE’s VIX index surged a further 10.4% in the overnight session to 23.43 points, a level that suggests traders are expecting daily moves of around 58 points — or 1.46% — for the S&P 500 over the next thirty days.

Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 were indicating a 1 point opening bell bump and those linked to the Dow Jones Industrial Average priced for a 20 point gain. The tech-heavy Nasdaq is indicating an 11 point advance.

In overseas markets, Europe’s Stoxx 600 was marked 0.9% lower in early Frankfurt trading while Britain’s FTSE 100 fell 0.78% in London as global stocks slumped to the lowest levels in more than a month following last night’s sell-off on Wall Street. 

Overnight in Asia, the region-wide MSCI ex-Japan index fell 1.33% into the close of trading while the Nikkei 225 ended 1.34% lower in Tokyo.

2. — Fed Minutes In Focus As 50 Basis Point Rate Bets Build Momentum

The Federal Reserve will publish minutes of its February 1 rate decision later today, with investors likely scanning for clues as to whether policymakers made the case 50 basis point increase and if that could find its way into discussions at the March meeting.

The Fed lifted its Fed Funds target rate by 25 basis points on February 1, taking it to between 4.25% and 4.5%, adding that “ongoing” increases remain appropriate going forward as it continues to battle elevated inflation in the world’s biggest economy.

Since then, however, Cleveland Fed President Loretta Mester has said that she felt a larger hike was warranted, given the persistent levels of inflation and the robust jobs market, while St. Louis Fed President James Bullard has said a 50 basis point increase in March would be easily justified. Neither Fed President, it should be noted, is a current voting member of the central bank’s Open Markets Committee (FOMC).

The CME Group’s FedWatch, in fact, is pricing in a 24% chance of a 50 basis point rate hike on March 22, up from 0% just a month ago.

“If a majority of the FOMC believes that current monetary policy transmission has been sped up as a result of the Fed’s ongoing forward guidance, that would lend further support to taking a more hawkish stance, particularly given the underlying resilience of the labor market,” said Daniel Berkowitz, investment director for investment manager Prudent Management Associates.

3. — Nvidia Earnings On Deck Amid AI Arms Race, Gaming Moves 

Nvidia  (NVDA) – Get Free Report shares edged lower in pre-market trading ahead of the retail giant’s fourth quarter earnings after the closing bell.

Analysts expect the chipmaker to post an adjusted bottom line of 81 cents per share, down around 38.6% from the same period last year, with revenues of around $6 billion – essentially in line with the group’s own autumn forecast.

Investors are likely to focus on the impact of Nvida’s recent deal with Microsoft  (MSFT) – Get Free Report, which would allow it to stream games such as “Call of Duty” across is GeForce Now service if it’s given permission to complete its $69 billion takeover of Activision ATVI by regulators in the U.S. and Europe. 

Nvidia’s assessment of the rush to develop and embed artificial intelligence capabilities into online search by Google  (GOOGL) – Get Free Report and Microsoft will also be closely-tracked, particularly against an expected pullback in data-center chip sales.  

Nvidia shares were marked 0.64% lower in pre-market trading to indicate an opening bell price of $205.23 each.

4. — Palo Alto Networks Shares Surge On Earnings Beat, S&P 500 Potential

Palo Alto Networks  (PANW) – Get Free Report shares moved higher in pre-market trading after the cybersecurity group posted better-than-expected second quarter earnings and boosted its full-year profit forecast.

Palo Alto said adjusted earnings for the three months ending in January, the company’s fiscal second quarter, came in at $1.05 per share, topping the Street consensus forecast of 78 cents per share, as revenues rose 26% to 1.7B billion.

With cybersecurity spending from business resilient despite the pending economic downturn, Palo Alto lifted its projections for full-year net income to between $3.97 and $4.03 per share, a 60 cent improvement from prior forecasts. 

“We have now been profitable on a cumulative basis for the last four quarters,” CFO Dipak Golechha told investors on a conference call late Tuesday. “We believe we now meet the criteria for inclusion in the S&P 500.”

Palo Alto Networks shares were marked 8.46% higher in pre-market trading to indicate an opening bell price of $181.01 each.

5. — Coinbase Sees Massive Trading Slump As Crypto Wobbles From FTX Collapse

Coinbase Global  (COIN) – Get Free Report shares edged lower in pre-market trading after the digital currency exchange posted a surprise fourth quarter loss amid a slump in crypto dealing volumes.

Coinbase said trading volumes fell nearly 75% from last year to $145 million over the three months ending in December, linked in part to the collapse of Sam Bankman-Fried’s FTX in early November, with retail trading down nearly 90% to just $20 billion.

The group posted a net loss of $557 million for the quarter, with revenues down 75% to $605 million, but saw a modest bump in subscription sales, thanks to higher interest rates, with solid gains expected over the three months ending in March. 

Coinbase shares were marked 0.1% lower in pre-market trading to indicate an opening bell price of $62.03 each.

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