Month: February 2024

© Reuters

Investng.com — The week’s inflation watch is nearly over, with key data from the U.S. and Europe due for release later in the session. Wall Street looks set to open lower, but is on track to register gains in February, while the turmoil at the board level of Open AI faces a potential SEC investigation.

1. Fed’s favorite inflation gauge due 

The week’s main focal point is due later Thursday, January’s personal consumption expenditures (PCE) price data, widely seen as the Federal Reserve’s preferred inflation gauge.

Recent economic data releases, and the consumer prices release in particular, have prompted investors to push back bets on rate cuts by the Federal Reserve to later in the year.

Investors will be watching closely to see if the upside surprise seen in the January CPI is replicated, underlining Fed caution about the timing of rate cuts.

Year-on-year headline and ‘core’ PCE inflation rates are forecast to slip to 2.4% and 2.8% respectively, but monthly rises are expected to be a healthy 0.3% and 0.4%.

2. Futures lower, but monthly gains likely 

U.S. stock futures edged lower Thursday, as investors warily await the release of key inflation data as well as more corporate earnings.

By 03:45 ET (08:45 GMT), the Dow futures contract was 90 points, or 0.2%, lower, S&P 500 futures had dipped by 9 points or 0.2%, and Nasdaq 100 futures had fallen by 35 points or 0.2%.

The three main indices closed lower Wednesday, but are on track to register gains this month after strong results from Nvidia (NASDAQ:NVDA) seemed to remove worries about the sustainability of the AI-driven rally. 

The Nasdaq Composite is on course to post a gain of over 5% this month, the S&P 500 has jumped 4.6%, while the Dow Jones Industrial Average has added 2.1%. This would mark the DJIA’s first four-month winning streak since May 2021.

There are more earnings to digest Thursday, including from Best Buy (NYSE:BBY), Hewlett Packard Enterprise (NYSE:HPE) and Bath & Body Works (NYSE:BBWI), while the likes of Snowflake (NYSE:SNOW) and Salesforce (NYSE:CRM) will also be in the spotlight after they released results after the close Wednesday. 

3. SEC investigating OpenAI leadership turmoil – WSJ

The saga surrounding the leadership of OpenAI, and the potential that investors were misled, is set to be investigated by the Securities and Exchange Commission, according to a report by the Wall Street Journal, with the newspaper citing people familiar with the matter.

The move followed OpenAI board’s decision in November to fire Sam Altman as CEO and remove him from the board, only for Altman to return to his position just days later. 

The regulator is specifically looking into internal communications involving Altman, and had also sent a subopena to OpenAI in December, the WSJ report showed.

OpenAI shot into the public spotlight with the release of its ChatGPT software in late-2022, prompting a broader rush into generative artificial intelligence.

4. European inflation data due

Europe has its own inflation data to digest Thursday, with consumer prices due from the German states, France and Spain, ahead of the eurozone figures on Friday.

Inflation in the eurozone is retreating, with February’s CPI seen falling to 2.5% on an annual basis, from 2.8% the prior month.

However, officials at the European Central Bank have consistently cautioned that it’s still too early for the central bank to cut interest rates.

Bundesbank President Joachim Nagel reiterated that view on Wednesday.

“We still lack more reliable data on wage developments and confirmation that with these data, we will get inflation back to 2% in 2025,” Nagel said. “Next week’s projections will be an important milestone.”

The ECB will release new quarterly economic projections next Thursday.

5. Oil hit by U.S. inventories build

Oil prices edged lower Thursday, adding to the previous session’s losses as a sharp build in U.S. crude stocks reinforced concerns about demand in the world’s largest economy.

By 043:45 ET, the U.S. crude futures traded 0.6% lower at $78.03 a barrel, while the Brent contract dropped 0.7% to $81.60 per barrel. 

Crude inventories rose for the fifth consecutive week, increasing by 4.2 million barrels to 447.2 million barrels in the week ended Feb. 23, official data from the Energy Information Administration showed on Wednesday, heightening investors’ worries over a slow economy and reduced oil demand in the largest consumer in the world.

Traders will be keeping an eye on the U.S. inflation data for clues about future economic activity, as well as events in the Middle East and the possible extension of voluntary oil output cuts from the producer group, the Organization of Petroleum Exporting Countries and its allies.

© Reuters

Investing.com — Snowflake (NYSE:SNOW) slumped premarket Thursday after the cloud data analytics company disappointed with its FY 2025 guidance, while announcing the surprise departure of chief executive officer Frank Slootman.

At 09.25 ET ( 09.25 GMT) Snowflake stock fell 21% in premarket trading, having closed Wednesday at $229.89.

Snowflake forecast current-quarter product revenue between $745 million and $750 million, below analysts’ average estimates of $765 million. The company also guided for FY 2025 revenue growth of 22%, below the 30% widely expected, seeing spending on cloud and technology slowing down as customers struggle with an uncertain economy.

Adding to the uncertainty, Snowflake announced a change at the top, with Sridhar Ramaswamy appointed as its chief executive, succeeding Slootman. Ramaswamy had been spearheading Snowflake’s AI strategy since joining the company in May 2023. 

However, Thursday’s expected share price losses may be overdone.

“We view the conservative guidance constructively as the new CEO settles in and believe this will be a back-loaded year,” analysts at Jefferies said, in a note dated Fed. 29, with the investment bank keeping a ‘buy’ rating. 

Goldman Sachs also remains positive on the company, also keeping a ‘buy’ rating.

“Gen-AI remains a promising growth vector,” analysts at the investment bank said, “the adoption and monetization of which could be accelerated under Mr. Ramaswamy’s leadership given his extensive AI experience.”

Wells Fargo cut its 12-month price target to $225 from $235 on the back of the quarterly results, but kept its ‘overweight’ rating.

“With the model now reset; however, we see a favorable path for improving results through FY25 and would be buyers on any share weakness,” analysts at Wells Fargo said.

For the three months ended Jan. 31, Snowflake adjusted earnings of $0.35 per diluted share, up from $0.14 a year earlier, on revenue of $774.7M, up from $589.0M a year earlier. That topped analyst estimates of $0.18 on revenue of $760.6M.

(Yasin Ebrahim contributed to this article.)

© Reuters.

Investing.com– Most Asian stocks moved in a flat-to-low range on Thursday in anticipation of more cues on U.S. interest rates from key inflation data, while Chinese markets rebounded from heavy losses in the prior session. 

Regional markets tracked a middling overnight session on Wall Street, while U.S. stock futures fell in Asian trade as several Federal Reserve officials also warned that the central bank had much more work to do in bringing down inflation.

Their comments saw markets grow even more anxious ahead of PCE price index data- the Fed’s preferred inflation gauge, which is due later in the day. The reading is expected to reiterate that U.S. inflation remained sticky in January. 

Japanese shares fall further from record highs amid middling data

Japan’s Nikkei 225 index fell 0.4%, while the broader TOPIX lost 0.3% as both indexes fell further from record highs hit earlier in the week.

A batch of economic readings released on Thursday provided a mixed picture of the Japanese economy. While retail sales grew more than expected in January, industrial production shrank much more than expected.

The data came amid increasing uncertainty over when the Bank of Japan plans to begin raising interest rates. Hotter-than-expected inflation data released earlier this week ramped up bets that the BOJ could end its negative interest rate regime by as soon as April.

Chinese markets rebound from steep losses; PMIs awaited 

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes rose 0.8% and 0.9%, respectively, after tumbling more than 1% each in the prior session on renewed concerns over a property market crisis. The concerns came after embattled developer Country Garden Holdings Company Ltd (HK:2007) was hit with a liquidation petition by a creditor. 

Thursday’s gains were driven by China’s security regulator vowing to further tighten its hold on the derivatives market to increase investor confidence. The regulator had introduced a series of new curbs in recent weeks, including the limiting of short-selling, to help boost local markets. 

Hong Kong’s Hang Seng index rose 0.2%, with gains limited after GDP data on Wednesday showed the economy grew slightly less than expected in the fourth quarter.

Focus is now squarely on key Chinese purchasing managers index data for February, due this Friday, which is expected to offer more cues on a potential economic recovery in the country.

Broader Asian markets moved in a flat-to-low range. Australia’s ASX 200 was flat after data showed retail sales grew less than expected in January, amid continued pressure from high inflation and interest rates. 

South Korea’s KOSPI fell 0.5% amid some profit-taking after strong gains in the prior session, especially in chipmaking stocks.

Futures for India’s Nifty 50 index pointed to a flat open after the index tumbled over 1% on Wednesday in a heavy bout of profit-taking. 

Indian investors were also skittish ahead of key GDP data due later on Thursday, which is expected to show some moderation in an otherwise stellar economic run.

© Reuters

Investing.com– The Securities and Exchange Commission (SEC) is investigating whether OpenAI investors were misled in the wake of the AI firm’s recent leadership overhaul, the Wall Street Journal reported on Thursday citing people familiar with the matter.

The regulator is specifically looking into internal communications involving CEO Sam Altman, and had also sent a subopena to OpenAI in December, the WSJ report showed.

The move came shortly after Altman’s abrupt ouster and reinstatement in November 2023, which also spurred a massive overhaul of OpenAI’s board of directors.

The overhaul saw the ouster of Ilya Sutskever, who is a co-founder of the AI start-up. 

Major investor Microsoft (NASDAQ:MSFT) had taken a non-voting seat, observer post on the board in November but is yet to officially name its candidate for OpenAI’s board. 

Both OpenAI and the SEC did not immediately respond to a request for a comment.

OpenAI shot into the public spotlight with the release of its ChatGPT software in late-2022, which garnered millions of users within days on its ability to generate convincing text responses. The firm triggered a broader rush into generative artificial intelligence (GenAI) over the past year, and is seen as a figurehead in the AI space.

OpenAI had recently unveiled a new model, Sora, which is capable of converting text prompts into videos.

But the AI start-up’s meteoric rise in popularity has also come with its own set of controversies. Its major leadership overhaul in November sparked questions over its governance structure, especially as the firm was founded as a non-profit in 2015.

The firm has also received numerous lawsuits over the nature of the data used in training its GenAI models. Most recently, The New York Times sued OpenAI in December 2023 over allegations that the start-up was illegally using the publication’s copyrighted material.