North American Morning Briefing: Stock Futures Rise, Busy Week of Earnings Ahead

Apr 22, 202410:20 UTC

OPENING CALL

Stocks futures rose on Monday ahead of a week of big tech company earnings and inflation and economic growth readings.

More than 30% of S&P 500 companies are due to release quarterly updates this week, according to FactSet. Heavy hitters include Tesla and Visa, both due Tuesday, while Alphabet, Boeing, Meta Platforms and Microsoft follow later in the week.

Overseas Markets

Stocks in Asia and Europe mostly rose due to reduced tensions between Iran and Israel.

Premarket Movers

Coinbase shares were 3.5% higher, rising alongside the price of bitcoin and other cryptocurrencies. Bitcoin most recently traded around $66,000, following the token's highly anticipated halving event.

Informatica fell more than 6% after WSJ reported that Salesforce has backed away from its attempt to buy the company. Salesforce's stock rose roughly 3%.

Nvidia was rising 1.6%. Shares declined 10% on Friday, the stock's worst single-day percentage decline since it fell 18.5% on March 16, 2020, according to Dow Jones Market Data.

Super Micro Computer rose 1.6%. The stock fell 23% on Friday after the company said it would be reporting earnings April 30 but didn't provide preliminary results for its fiscal third quarter.

Tesla cut prices further in China amid an intensifying price war. Tesla's shares fell 2.5%, threatening to further deepen the company's 41% loss this year. U.S.-listed shares of rival Li Auto also fell premarket, after the Chinese company cut prices in the country as well.

Post Close Movers

Hepion Pharmaceuticals said it has started winding down activities in its Ascend-Nash trial of the drug candidate rencofilstat, which had been shown to reduce liver fibrosis and hepatocellular carcinoma tumor burden. Shares fell 30%.

Tungray Technologies shares nearly tripled during their trading debut on Friday before pulling back to close at $5.95, up from an initial public offering price of $4. Shares resumed their climb after hours, rising 15%.

Watch For:

Canada New Housing Price Index for March; Earnings from Verizon Communications, Cadence Design Systems, Truist Financial, Nucor, SAP

Today's Top Headlines/Must Reads:

- Big Tech Faces Earnings Test After Market Rout

- Move Aside, Big Banks: Giant Funds Now Rule Wall Street

- Big Stocks Won When Markets Rose. They Are Winning Again in the Selloff.

MARKET WRAPS

Forex:

The dollar edged lower as risk sentiment improved due to easing concerns about Middle East tensions, though U.S. data later this week could push it higher again, ING said.

"The dollar may see a further softening in its momentum due to a calmer risk environment, but we see data reinforcing the notion of a resilient U.S. economy with lingering inflation issues, so the key underlying arguments for a stronger dollar should not be dented."

As long as U.S. economic activity remains solid, the cyclical uptrend in the dollar is intact, Brown Brothers Harriman said.

First-quarter GDP data on Thursday, and the March PCE inflation report on Friday, "are expected to back American economic exceptionalism."

Bonds:

Morgan Stanley Research raised its forecast for the year-end level of 10-year Treasury yields, now expecting it to end the year at 4.15%, 20 basis points higher than its previous forecast of 3.95%.

Morgan Stanley now expects Federal Reserve interest-rate cuts to start in July, with three cuts in 2024, followed by four in the first four FOMC meetings of 2025.

They see the two-year Treasury yield at 4.30% by the end of 2024. Its forecast sees the 2-10-year maturity segment of the Treasury curve remaining inverse this year--with shorter-dated bond yields being higher than their longer-dated peers.

Commerzbank Research takes a cautious view on duration--a measure of how sensitive a bond is to interest-rate changes--as 10-year German Bund yields explore ground above 2.5%.

"Bunds look set to continue to trade heavy as the Middle East safe-haven bid wanes and the euro short-end gets wary of how far interest rate expectations for the Fed and the ECB can diverge."

June remains the most likely date for the ECB to start cutting interest rates, "the Fed meanwhile gets increasingly wary about upside risks to its inflation outlook, and it looks unclear whether the Fed can cut rates this year," Commerzbank said.

Energy:

Oil prices fell more than 1% as fears of a broader conflict in the Middle East faded and the prospect of higher-for-longer interest rates weighed on sentiment.

"Oil prices gave back almost all of their gains in the early trading session on Friday after it became clear that Iran was downplaying Israel's limited retaliatory attack," ING said.

"The market is obviously of the view that spare OPEC production capacity will come into play in the event of any supply shocks, or that ongoing tension is unlikely to lead to significant supply losses."

Meanwhile, investors await key U.S. data this week after recent readings showed that progress on curbing inflation has stalled this year, denting hopes for early rate cuts.

OCBC Global Markets Research said the situation in the Middle East remains fluid and warrants close monitoring.

"We see risks becoming fairly binary at this point of a de-escalation or escalation in tensions, at least over the coming weeks."

Under a de-escalation scenario, global diplomatic efforts will probably take hold, it said. Meanwhile, Brent oil prices may stay high around $86/bbl in 2Q, OCBC predicted.

If there's an escalation to a wider regional conflict, a series of tit-for-tat attacks between Israel and Iran can't be ruled out, and Brent could top $100/bbl and reach $120/bbl, it said.

Metals:

Gold futures fell 1.8% as diminishing geopolitical tensions in the Middle East hit safe-haven demand.

Iran downplayed Friday's retaliatory Israeli missile attack, which suggests that its promised major escalation isn't going to be immediately forthcoming, Rabobank said.

"Markets might have relaxed slightly, but we should be under no illusion that the conflict is over."

UBS now expects the gold price to end this year at $2,400/oz, up from $2,200/oz, as investors fear missing out on the precious metal's rally.

The bank thinks gold could trade as high as $2,500/oz this year, although it may pause for breath in the near term.

"Although gold's correlation with rates is currently in question, we still think that Fed easing and the outlook for lower real rates is still the main driver for bullish gold views," UBS said.

TODAY'S TOP HEADLINES

Meta's AI Push Needs to Efficiently Deliver a Lot More Ad Growth

Investors are happy to let Mark Zuckerberg have his metaverse-so long as he keeps the advertising dollars rolling in. Hopefully the chief executive of the world's largest social network knows where to find them.

Meta Platforms, the parent company of Facebook and Instagram, reports first-quarter earnings Wednesday afternoon, making it the first of the megacap tech giants to post results for the period. To say expectations are high would be an understatement. Even with a sharp, tech-sector-wide selloff on Friday, Meta's share price is up 36% for the year to date. That is well ahead of its big tech peers save for Nvidia, and the fifth-best performance on the S&P 500 in that time.

Elon Musk Postpones India Trip, Prompting Questions Over Tesla Plans

NEW DELHI-Tesla Chief Executive Elon Musk postponed a highly anticipated visit to India during which he was due to meet with Prime Minister Narendra Modi and expected to unveil plans for the electric-car manufacturer's entry to the country.

Musk cited "very heavy Tesla obligations" for the change in plans in a tweet on X late Friday California time and said he looked forward to visiting India later in the year.

VW Works Closely With Unions in Germany, but UAW May Be Less Cuddly

BERLIN-Volkswagen knows all about running a business with union representatives at the table. But that experience may not be a perfect guide for how to work with the United Auto Workers at its Chattanooga plant.

After workers at the plant last week voted in favor of being represented by the UAW, VW thanked employees for participating in the ballot. Now, under federal labor law, the company must enter negotiations with the UAW on an agreement covering pay, work hours, safety protocols and other items.

Nike Reverses Course as Innovation Stalls and Rivals Gain Ground

In late February, Nike boss John Donahoe led a virtual all-hands meeting where he delivered a message to his staff: The company wasn't performing at its best and he held himself accountable.

Two weeks earlier, Nike had announced it would lay off more than 1,600 employees.

China's Benchmark Lending Rates Kept Unchanged

China's benchmark lending rates were kept unchanged, official data showed on Monday, in line with market expectations after key policy rates were held steady amid signs of economic recovery.

The one-year loan prime rate was kept at 3.45%, while the five-year rate was left at 3.95%, said the People's Bank of China.

U.S.-China Internet War Intensifies as House Passes TikTok Ban

In the yearslong technology fight between the U.S. and China, the Americans are poised to land a major punch.

The House on Saturday easily passed a bill that would force a sale or ban of TikTok, which is owned by China-based ByteDance, bringing closer to reality a law that could remove the popular app and deepen the internet divide between the two countries.

S&P 500 heads for worst month since 2022 as bond yields jump on inflation fears

The U.S. stock market's bull run has hit a rough patch, as bond yields spiked this month on fears that a robust economy is helping to keep inflationary pressures alive.

The S&P 500 SPX is on pace for its biggest monthly drop since December 2022, with April's pullback erasing about half the gains the U.S. stock market had booked this year by the end of March. The index has slumped 5.5% this month through Friday, lowering its climb in 2024 to 4.1%.

Trump's Hush-Money Trial: What to Know as the Case Begins

Donald Trump is expected to spend the next six weeks in a Manhattan courtroom, defending himself against accusations he covered up a hush-money payment to porn star Stormy Daniels. Prosecutors say he orchestrated a scheme before the 2016 election to buy her silence about an affair, which Trump denies.

The criminal trial, taking place in the midst of Trump's campaign for president, might be the only of the four he faces to be heard by a jury before voters head to the polls in November.

Chinese-Americans Are Pushing San Francisco Toward the Political Center

SAN FRANCISCO-Phil Wong used to reliably back incumbents in this liberal city. But in 2022, he voted to recall three left-wing school board members and a progressive district attorney, and in November he plans to cast his ballot for a tough-on-crime challenger to the current mayor.

"I have a deep love for this city, what it was," said the 46-year-old son of a Chinese immigrant. "I want to see what it can be again."

New Darfur Attacks Feed Concerns Over More Large-Scale Violence

Sudan's paramilitary Rapid Support Forces and other allied militias in recent days have attacked and torched villages in war-torn Darfur, according to satellite images and interviews with survivors, stirring fears of more mass killings in the region.

The surge in violence around El Fasher, the capital of North Darfur, has prompted warnings from U.S. officials, the United Nations and analysts tracking the fighting about the risk of fresh atrocities against the region's Black communities.

Write to ina.kreutz@wsj.com

TODAY IN CANADA

Earnings:

PrairieSky Royalty 1Q

Economic Indicators (ET):

0830 Mar Industrial product and raw materials price indexes

0830 Mar New Housing Price Index

Stocks to Watch:

E-L Financial Declares Special Dividend of C$60

---

National Bank of Canada Appoints Air Canada Exec Arielle Meloul-Wechsler to Bd

Expected Major Events for Monday

05:00/JPN: Mar Convenience Store Sales

05:00/JPN: Mar Steel Production

10:00/UK: Apr CBI Industrial Trends Survey

12:30/CAN: Mar Industrial product and raw materials price indexes

12:30/CAN: Mar New Housing Price Index

12:30/US: Mar Chicago Fed National Activity Index (CFNAI)

17:59/UK: Mar Aluminium Production report

23:30/JPN: Feb Final Labour Survey - Earnings, Employment & Hours Worked

All times in GMT. Powered by Kantar Media and Dow Jones.

Expected Earnings for Monday

Albertsons Companies Inc (ACI) is expected to report $0.41 for 4Q.

Alexandria Real Estate Equities Inc (ARE) is expected to report $0.87 for 1Q.

Bank of Hawaii Corp (BOH) is expected to report $0.85 for 1Q.

BeyondSpring Inc (BYSI) is expected to report $-0.67 for Full year.

CNB Financial Corp (Pennsylvania) (CCNE) is expected to report $0.51 for 1Q.

Cadence Bank (CADE) is expected to report $0.54 for 1Q.

Calix Inc (CALX) is expected to report $0.02 for 1Q.

Capital City Bank Group (CCBG) is expected to report $0.70 for 1Q.

Cathay General Bancorp (CATY) is expected to report $0.98 for 1Q.

Cleveland-Cliffs Inc (CLF) is expected to report $0.25 for 1Q.

Dynex Capital (DX) is expected to report $0.03 for 1Q.

Eagle Pharmaceuticals Inc (EGRX) is expected to report $0.21 for 4Q.

Ennis Inc (EBF) is expected to report for 4Q.

Enterprise Financial Services Corp (EFSC) is expected to report $1.11 for 1Q.

Equity Lifestyle Properties Inc (ELS) is expected to report $0.45 for 1Q.

First Financial (Indiana) (THFF) is expected to report $0.98 for 1Q.

Greenlane Holdings Inc (GNLN) is expected to report for 4Q.

HBT Financial Inc (HBT) is expected to report $0.55 for 1Q.

Hallmark Financial Services Inc (HALL) is expected to report for 4Q.

Hexcel Corp (HXL) is expected to report $0.41 for 1Q.

HomeStreet Inc (HMST) is expected to report $-0.08 for 1Q.

LCNB Corp (LCNB) is expected to report $0.36 for 1Q.

MainStreet Bancshares Inc (MNSB) is expected to report $0.51 for 1Q.

Medpace Holdings Inc (MEDP) is expected to report $2.47 for 1Q.

NBT Bancorp (NBTB) is expected to report $0.68 for 1Q.

Nicolet Bankshares Inc (NIC) is expected to report $1.65 for 1Q.

Northwest Bancshares Inc (NWBI) is expected to report $0.23 for 1Q.

Nucor Corp (NUE) is expected to report $3.64 for 1Q.

Packaging Corporation of America (PKG) is expected to report $1.67 for 1Q.

Peoples Bancorp of NC (PEBK) is expected to report for 1Q.

Pinnacle Financial Partners Inc (PNFP) is expected to report $1.51 for 1Q.

PrairieSky Royalty Ltd (PSK.T) is expected to report for 1Q.

RLI Corp (RLI) is expected to report $1.67 for 1Q.

ServisFirst Bancshares Inc (SFBS) is expected to report $0.86 for 1Q.

Sierra Bancorp (BSRR) is expected to report $0.61 for 1Q.

Tootsie Roll Industries (TR) is expected to report for 1Q.

Truist Financial Corp (TFC) is expected to report $0.78 for 1Q.

Verizon Communications (VZ) is expected to report $1.09 for 1Q.

Washington Trust Bancorp Inc (WASH) is expected to report $0.45 for 1Q.

Zions Bancorp NA (ZION) is expected to report $0.95 for 1Q.

ANALYST RATINGS ACTIONS

Bank of America Raised to Outperform From Peer Perform by Wolfe Research

Crown Castle Cut to Hold From Buy by Argus Research

DermTech Cut to Hold From Buy by Lake Street

DermTech Cut to Neutral From Buy by BTIG

Encore Wire Cut to Market Perform From Market Outperform by CJS Securities

First Solar Raised to Overweight From Equal-Weight by Wells Fargo

Ichor Holdings Raised to Buy From Neutral by B. Riley Securities

Magnolia Oil & Gas Cut to Neutral From Overweight by Piper Sandler

Netflix Cut to Hold From Buy by Canaccord Genuity

Netflix Raised to Buy From Hold by Needham

O-I Glass Cut to Neutral From Buy by B of A Securities

ON Semiconductor Cut to Underperform From Neutral by Exane BNP Paribas

Pure Storage Cut to Outperform From Strong Buy by Raymond James

Rush Street Interactive Raised to Buy From Hold by Craig-Hallum

Shift4 Payments Raised to Neutral From Sell by Redburn Atlantic

Sunnova Energy Intl Cut to Equal-Weight From Overweight by Wells Fargo

SW Energy Cut to Neutral From Overweight by Piper Sandler

Synovus Cut to Market Perform From Outperform by Keefe, Bruyette & Woods

Ulta Beauty Cut to Hold From Buy by Jefferies

This article is a text version of a Wall Street Journal newsletter published earlier today.