investy

(C) Reuters.

By Yasin Ebrahim

Investing.com — The S&P 500 pared gains Monday, as U.S. Treasury yields inched higher ahead of the testimony from Federal Reserve chairman Jerome Powell, but an Apple-led climb in tech kept stocks in the green.

The S&P 500 gained 0.1%, the Dow Jones Industrial Average added 0.1%, or 30 points, and the Nasdaq Composite was down 0.1%.

Growth stocks such as tech were forced to retreat from session highs as U.S. Treasury yields turned positive ahead of Powell’s semi-annual testimony on Capitol Hill that could offer clues on monetary policy.

“The testimony is key because if he [Powell] wishes to influence market pricing for the decisions that will come out of the March 21-22 FOMC meeting then this is his last and best chance to do so,” Scotiabank said in a note.

The testimony from Powell comes just days ahead of the February nonfarm payrolls due Friday and inflation report due next week, both of which are expected to play an important role in the Fed’s thinking on monetary policy measures.

Apple (NASDAQ:AAPL) jumped about 2% after Goldman Sachs issued a Buy rating on the stock after six years on the sidelines, citing strength in the tech giant’s services business.

Other big tech stocks also attracted buying pressure, with Alphabet (NASDAQ:GOOGL) and Microsoft Corporation (NASDAQ:MSFT) up 1%.

Tesla (NASDAQ:TSLA), meanwhile, fell more than 1% after the electric carmaker cut prices in the U.S. for the second time this year to boost demand. Tesla was also dealt a blow by Morgan Stanley removing the EV maker as a ‘top pick’ in favor of Ferrari.

Morgan Stanley lifted its price target on Ferrari NV (NYSE:RACE) to $310 a share from $280 previously on optimism that the race car company has “levers to pull for both growth or downside protection.”

In other news, sentiment on homebuilders was soured after JPMorgan doubled downgraded KB Home (NYSE:KBH) to Neutral, and downgraded DR Horton Inc (NYSE:DHI) to Neutral, citing valuation concerns.

Boeing (NYSE:BA), a major Dow component, kept the broader market’s gains in check amid reports a software issue threatens to delay deliveries of its 737 MAX and 787 jets by up to a year.

(C) Reuters. FILE PHOTO: Woman holds U.S. dollar banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

By Karen Brettell

NEW YORK (Reuters) – The greenback slipped against a basket of currencies on Monday as investors waited on testimony by Federal Reserve Chair Jerome Powell and jobs data due later this week for further indications on how much higher the U.S. central bank is likely to raise interest rates.

Powell’s testimony before Congress on Tuesday and Wednesday and Friday’s jobs data “are going to be the key events this week that really substantiate the data that we got last month with respect to the January” numbers, said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto.

The dollar index has bounced off a nine-month low of 100.80 reached on Feb. 1 as strong data and still-high inflation leads investors to reprice for higher rates for longer. The index was last down 0.26% on the day at 104.35.

January’s jobs report released on Feb. 3 showed that employers unexpectedly added 517,000 jobs, while the unemployment rate hit more than a 53-1/2-year low of 3.4%, pointing to a stubbornly tight labor market.

That “seems a bit suspicious at the surface, so a lot of the data that we get this week will tell us whether or not that’s really more than just suspicious or more than, say, seasonal adjustment trends, and actually something there that the Fed is getting wrong in terms of how tight the labor market is and what that means potentially for inflation,” said Rai.

Powell’s testimony will be watched for any new signals on whether the U.S. central bank could reaccelerate the pace of rate hikes in response to the recent data. After delivering jumbo hikes last year, the Fed has raised interest rates by 25 basis points each at its last two meetings.

Fed funds futures traders are pricing in a 76% probability the Fed will raise rates by 25 basis points at its March 21-22 meeting, and a 24% likelihood of a 50 basis points increase.

Analysts also note, however, that the Fed may be reluctant to increase the pace of rate hikes again as it would likely spook investors by indicating that the bank made a mistake in switching to 25 basis point increases.

The euro was last up 0.35% on the day at $1.0671, while sterling was down 0.27% at $1.2010.

The dollar gained 0.06% to 135.88 yen ahead of the final policy meeting for Bank of Japan Governor Haruhiko Kuroda on Thursday and Friday.

The yuan dipped after China on Sunday set a lower-than-expected target for economic growth this year of around 5%.

The offshore yuan was last at 6.9391 per dollar, while the Australian dollar, often traded as a liquid proxy for the yuan, fell 0.46% to $0.6737.

========================================================

Currency bid prices at 9:56AM (1456 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 104.3500 104.6300 -0.26% 0.831% +104.6900 +104.3400

Euro/Dollar $1.0671 $1.0634 +0.35% -0.41% +$1.0674 +$1.0615

Dollar/Yen 135.8750 135.8050 +0.06% +3.64% +136.1850 +135.3750

Euro/Yen 144.98 144.46 +0.36% +3.34% +145.0900 +144.1300

Dollar/Swiss 0.9331 0.9361 -0.29% +0.94% +0.9372 +0.9315

Sterling/Dollar $1.2010 $1.2043 -0.27% -0.68% +$1.2047 +$1.1994

Dollar/Canadian 1.3618 1.3599 +0.14% +0.51% +1.3629 +1.3584

Aussie/Dollar $0.6737 $0.6769 -0.46% -1.16% +$0.6769 +$0.6716

Euro/Swiss 0.9955 0.9955 +0.00% +0.61% +0.9966 +0.9924

Euro/Sterling 0.8882 0.8829 +0.60% +0.43% +0.8887 +0.8827

NZ $0.6191 $0.6223 -0.46% -2.44% +$0.6225 +$0.6173

Dollar/Dollar

Dollar/Norway 10.4250 10.3950 +0.43% +6.38% +10.4720 +10.3700

Euro/Norway 11.1254 11.0384 +0.79% +6.02% +11.1417 +11.0452

Dollar/Sweden 10.4566 10.4485 +0.38% +0.47% +10.5059 +10.4389

Euro/Sweden 11.1588 11.1161 +0.38% +0.08% +11.1765 +11.1180

(C) Reuters.

By Geoffrey Smith

Investing.com — China sets its lowest growth target in over 30 years, suggesting that Beijing won’t resort to its past tactics of pump-priming this year. Oil and base metals prices fall in response. The European Central Bank’s chief economist warns that the ECB is going to have to keep raising rates beyond March. U.S. stock markets don’t want to rouse from their weekend sleep, although the sound of another Norfolk Southern train derailment may wake up some. Tesla is cutting prices again, but only for its premium models. Here’s what you need to know in financial markets on Monday, 6th March.

1. China growth forecast

Industrial commodities weakened after China’s annual parliamentary session ended with the government setting a growth target of around 5%, the lowest in over 30 years.

Premier Li Keqiang, who is making way for a successor more closely allied with President Xi Jinping, said the government’s overriding objective was to restore economic stability, which some took as a sign that there will be no return to the debt-fueled growth of previous years. Budget spending will rise only 5.6%, giving a deficit of 3% of GDP.

Recent reports indicate that Xi also intends to install Zhu Hexin, head of one of China’s largest state-owned banks, at the helm of the People’s Bank of China, further consolidating his control over the main levers of economic power.

2. ECB’s Lane flags more rate hikes

A top European Central Bank official signaled there will be more interest rate hikes after the expected 50-basis-point move at next week’s policy meeting.

Chief economist Philip Lane warned that underlying price pressures appear to be strong and that the price shocks from the pandemic and the war in Ukraine are only unwinding gradually. Lane, one of the more dovish voices on the ECB’s council, made his comments less than a week after data showed core inflation accelerating to 5.6% on the year in February – nearly three times the ECB’s 2% target.

In 2021, Lane had been the foremost of those arguing that the inflation spike was likely to be transitory.

3. Stocks set for slow start; Norfolk Southern derailed again

U.S. stocks are set for a muted opening later, with little in the way of either earnings or economic data to move the dial.

Dow Jones futures, S&P 500 futures and Nasdaq 100 futures were all effectively unchanged as of 06:30 ET, holding on to gains made on Friday on a market-wide bout of short-covering.

Stocks likely to be in focus later include railroad operator Norfolk Southern (NYSE:NSC), which suffered a second derailment in the last few weeks with a train outside Springfield, Oh., at the weekend. In contrast to the first derailment, this one didn’t result in any spill of hazardous materials.

4. Tesla cuts prices again – for Model S and Model X

Tesla (NASDAQ:TSLA) has cut its prices again, less than two months after its last round of discounting.

The EV maker cut the starting price for its Model S and Model X cars by $5,000 and $10,000 respectively, in the latest sign that customers are gagging at cost levels in an increasingly constrained economic environment.

The company has gained some breathing room on price, thanks to the sharp drop in lithium prices in recent weeks, which promises to bring down the cost of EV batteries over the coming months.

Lithium Carbonate prices in China have fallen 40% from their November highs and hit their lowest in 14 months last week.

5. Oil falls on weak Chinese growth forecast; still unsettled by UAE report

Crude oil prices fell in response to China’s economic growth target announcement, which deflated hopes for a big pickup in demand between now and the end of the year.

By 06:45 ET, U.S. crude futures were down 1.5% at $78.50 a barrel, while Brent crude was down 1.5% at $84.52 a barrel.

The market has been unsettled by a report at the end of last week by The Wall Street Journal suggesting that the cohesion of the group of major exporting countries is starting to fray. While Russia has announced a cut in output to reduce the discount it is having to accept on its crude exports, the WSJ reported that the United Arab Emirates is considering leaving the “OPEC+” group, seeking the freedom to use the additional capacity it has built in recent years.

Dow Jones, Nasdaq, S&P 500 weekly preview: Stocks rally could extend – analysts

By Senad Karaahmetovic

The U.S. indices closed higher last week, led by the strong outperformance of the tech sector. The bulls are clearly enjoying a more favorable technical backdrop while bears failed to clear key near-term support last week.

The S&P 500 ended the week 1.9% higher after sellers failed to secure a close below the important 3,930-3,400 support area, which is marked by the 100 and 200 daily moving average lines.

Dow Jones Industrial Average gained 1.75% to post the first green close after three consecutive red candles. The NASDAQ Composite Index rose almost 2.6%.

“While most people remain quite gloomy intellectually/fundamentally, the impressive resiliency of stocks over the last couple of sessions (especially the 1.6% SPX ramp on Friday) dealt a blow to bears and spurred a lot of soul-searching among this group over the weekend,” Vital Knowledge analysts wrote in the note today.

On the valuation front, the forward 12-month P/E ratio for the S&P 500 is 17.5, below its 5-year average and below its 10-year average.

All eyes on Powell and jobs

Looking forward to this week, investors will be focused on the February Payrolls report, which is due on Friday.

“US payrolls likely mean-reverted to a still firm pace in Feb after an unexpected 517k surge in Jan. We also look for the UE rate to stay unchanged at 3.4%, and wage growth to print a strong 0.4% m/m,” TD Securities analysts wrote in a note.

Earlier, Fed Chair Jerome Powell will testify for two days before the Senate and Congress. Investors expect Powell will reaffirm that more tightening is needed.

“A concern about recent data strength likely will also be flagged but the Fed wants to see confirmation in Feb data before acting,” TD analysts added.

Other important macro catalysts for the U.S. include the JOLTs report (Wednesday) and U.S. factory/durable/capital goods orders (Monday).

Final days of the Q4 earnings season

The Q4 earnings season is almost done with 99% of the S&P 500 companies reporting actual results.

According to the data compiled by FactSet, 69% of S&P 500 companies have reported a positive EPS surprise and 65% of S&P 500 companies have reported a positive revenue surprise. So far, 81 companies have issued negative EPS guidance while 24 gave a positive forecast.

“During the months of January and February, analysts lowered EPS estimates for the first quarter by a larger margin than average. The Q1 bottom-up EPS estimate (which is an aggregation of the median EPS estimates for Q1 for all the companies in the index) decreased by 5.7% (to $51.13 from $54.20) from December 31 to February 28,” FactSet analysts wrote in a note.

This week’s earnings calendar is light and includes CrowdStrike (NASDAQ:CRWD), MongoDB (NASDAQ:MDB), Oracle (NYSE:ORCL), and Ulta Beauty (NASDAQ:ULTA).

What analysts are saying about U.S. stocks

BTIG analysts: “We think the counter-trend rally can carry a bit further, but expect the 4060-4080 zone on SPX to represent firm resistance based on retesting the broken uptrend, horizontal resistance from the mid-Feb. breakdown, and the falling 20 DMA.”

Morgan Stanley analysts: “Equity markets survived a crucial test of support last week that suggests this bear market rally is not ready to end just yet. However, our GVAT team’s analysis of accruals strongly supports our view that earnings estimates remain far too high; and therefore, the bear market is not over.”

JPMorgan analysts: “Our core view is that the current activity upswing, helped by the falling gas prices in Europe and by China reopening, is unlikely to develop into a fully fledged acceleration in 2H. After all, the impact of the policy tightening works with a lag, and central banks are far from even pausing, let alone pivoting. We advise to use the Q1 strength in order to reduce exposure.”

Barclays analysts: “Markets appear to be increasingly comfortable with “higher for longer” rates after Atlanta Fed President Bostic lent vocal support to sticking with quarter-point rate hikes on the way to a potential mid-to-late summer pause, particularly as strong employment and ISM services data stoke speculation around a Goldilocks “no landing” scenario… The “no landing” scenario seems well within the realm of plausibility for equity markets.”

Vital Knowledge analysts: “Our view remains that dips to ~4000 or lower should be bought as this rough patch of data will soon end, with the disinflation process resuming and labor cooling off the scorching 500K+ pace from January. The hawkish fever should break by the spring, at which time investors will begin shifting their focus to 2024, a period during which the SPX should be able to earn ~$240+.”

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(C) Reuters. FILE PHOTO: A pedestrian holding her mobile phone walks past electronic boards showing the Japan’s Nikkei average (top L) and the Japanese yen’s exchange rate against the euro (top R) outside a brokerage in Tokyo, Japan, February 9, 2016. REUTERS/Yuya Sh
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By Stephen Culp

NEW YORK (Reuters) -Wall Street stocks moved higher and Treasury yields eased as investors weighed China growth expectations and looked ahead to U.S. Federal Reserve Chairman Jerome Powell’s congressional testimony and crucial jobs data expected later in the week.

All three major U.S. stock indexes gained ground on Monday, appearing to extend last week’s rally, with lower Treasury yields boosting interest rate-sensitive megacap stocks.

A drop in U.S. factory orders followed modest growth estimates from China, boosting hopes that economic softening could translate to cooling inflation.

“The guidelines regarding economic growth out of China is being viewed as anti-inflationary,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

“The slow-ish growth number, has resulted in the belief that if the economy is slowing that’s good for the belief that inflation is going down, which supports the belief we could be getting close to the end of the (Fed’s) interest rate hike cycle.”

On Tuesday and Wednesday, Fed Chairman Jerome Powell is due to deliver his semi-annual testimony before Congress, which will be closely parsed for any clues regarding the extent and duration of the central bank’s restrictive monetary policy aimed at curbing inflation.

Further down the road, the Labor Department’s much-anticipated February employment report is expected on Friday. Any signs of softening in the robust jobs market will be seen as a sign that the Fed’s hawkish tactics are having their desired effect.

The Dow Jones Industrial Average rose 122.6 points, or 0.37%, to 33,513.57, the S&P 500 gained 26.33 points, or 0.65%, to 4,071.97, and the Nasdaq Composite added 104.07 points, or 0.89%, to 11,793.07.

European shares reversed earlier gains and were last essentially unchanged after modest China growth estimates suggested a possible dampening of demand for European goods.

The pan-European STOXX 600 index lost 0.01% and MSCI’s gauge of stocks across the globe gained 0.68%.

Emerging market stocks rose 0.64%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.57% higher, while Japan’s Nikkei rose 1.11%.

Benchmark U.S. Treasury yields continued to ease as dampening demand supported hopes that the Fed is approaching the end of its rate-hike phase.

Benchmark 10-year notes last rose 5/32 in price to yield 3.9459%, from 3.963% late on Friday.

The 30-year bond last rose 14/32 in price to yield 3.8621%, from 3.887% late on Friday.

The dollar lost ground against a basket of world currencies ahead of Powell’s testimony and the jobs data.

The dollar index fell 0.29%, with the euro up 0.41% to $1.0678.

The Japanese yen strengthened 0.05% versus the greenback at 135.82 per dollar, while sterling was last trading at $1.2021, down 0.16% on the day.

Crude prices headed lower after China’s low-end growth projections fuelled fears of softening demand.

U.S. crude fell 0.53% to $79.26 per barrel and Brent was last at $85.17, down 0.77% on the day.

Gold consolidated recent gains, with the safe-haven metal inching lower in advance of Powell’s congressional testimony.

Spot gold dropped 0.2% to $1,851.53 an ounce.

(C) Reuters

By Yasin Ebrahim

Investing.com — The Dow eked out a win Monday, after wavering between gains and losses throughout the day as an Apple-led melt-up in tech fizzled out after rates regained momentum ahead of eagerly anticipated testimony from Federal Reserve chairman Jerome Powell.

The Dow Jones Industrial Average added 0.1%, or 40 points, the Nasdaq Composite was down 0.1% and S&P 500 gained 0.1%.

Growth stocks such as tech were forced to give up some gains as U.S. Treasury yields turned positive ahead of Powell’s semi-annual testimony on Capitol Hill that could offer clues on monetary policy.

“The testimony is key because if he [Powell] wishes to influence market pricing for the decisions that will come out of the March 21-22 FOMC meeting then this is his last and best chance to do so,” Scotiabank said in a note.

The testimony from Powell comes just days ahead of the February nonfarm payrolls due Friday and inflation report due next week, both of which are expected to play an important role in the Fed’s thinking on monetary policy measures.

Apple (NASDAQ:AAPL) jumped about 2% after Goldman Sachs issued a Buy rating on the stock after six years on the sidelines, citing strength in the tech giant’s services business.

Other big tech stocks also attracted buying pressure, with Alphabet (NASDAQ:GOOGL) up 1.6% and Microsoft Corporation (NASDAQ:MSFT) up 0.6%.

Tesla (NASDAQ:TSLA), meanwhile, fell more than 2% after the electric carmaker cut prices in the U.S. for the second time this year to boost demand. Tesla was also dealt a blow by Morgan Stanley removing the EV maker as a ‘top pick’ in favor of Ferrari.

Morgan Stanley lifted its price target on Ferrari NV (NYSE:RACE) to $310 a share from $280 previously on optimism that the race car company has “levers to pull for both growth or downside protection.”

Materials, meanwhile, were the worst-performing sector down more than 1% weighed down by a fall in commodity prices after China delivered a modest growth outlook of about 5% for 2023.

In other news, sentiment on homebuilders was soured after JPMorgan doubled downgraded KB Home (NYSE:KBH) to Neutral, and downgraded DR Horton Inc (NYSE:DHI) to Neutral, citing valuation concerns.

Boeing (NYSE:BA), a major Dow component, kept the broader market’s gains in check amid reports a software issue threatens to delay deliveries of its 737 MAX and 787 jets by up to a year.

(C) Reuters

By Yasin Ebrahim

Investing.com – Federal Reserve chairman Jerome Powell is set for Capitol Hill on Tuesday, but the Fed chief isn’t likely to endorse the market’s hawkish rate-hike forecast as the outlook on whether the economic reacceleration seen since the turn of the year has staying power or is transitory remains murky at best, experts say.

Market participants are currently pricing in around a further 86 basis points of hikes, but MUFG said it doesn’t “expect Fed Chair Jerome Powell to endorse that scale of further tightening” when the Fed chief takes to Capitol Hill to deliver his semi-annual testimony before Congress.

Powell is set for two days of testimony before Congress, on Tuesday and Wednesday.

The Fed chairman is more likely to “wait to assess further data in the coming months to see if the strength in activity and inflation is sustained before strongly committing to more rate hikes,” it added.

In an interview in February, Powell admitted that the Fed members didn’t expect the January jobs report to be as “strong” as it was, but said it showed why the process [to bring down inflation would take “a significant period of time.”

The spigot of strong economic data including the blowout January jobs report and several signs of sticky inflation has forced market participants to abandon their recent penchant to “fight the Fed.”

Investors are now forecasting the peak level of Fed funds rates sits ahead of the 5.1% level the Fed had projected in December, with whispers of rates reaching nearly 6% recently seeping into the investment narrative.

While the swashbuckling start to the year for the economy has taken many by surprise, others suggest more data is needed to suss out whether the economic reacceleration is real or transitory.

“For any additional tightening beyond the May meeting, we would need to see evidence that the reacceleration is real,” Morgan Stanley said.

Fortunately, investors won’t have long to wait for a clearer outlook on the economy. The monthly jobs report for February due Friday isn’t expected to replicate the 500,000+ job gains seen in February.

“Another blowout NFP report is highly unlikely in the week ahead,” MUFG says, though it remains on alert for an update surprise in wages that perhaps “provides the biggest risk of another hawkish surprise that could lift U.S. yields and the U.S. dollar further.”

For the moment, however, the strong data seen thus far has done enough to sway the pivoteers, who were confident a Fed cut was on the table, to relent.

“We have moved our call for the first rate cut from December 2023 out to March 2024, and thereafter expect an even more gradual easing cycle with 25bp cuts per quarter, instead of one per meeting previously,” Morgan Stanley added.