MARKET WRAPS
Watch For:
Employment Report for February; Canada Labour Force Survey for February; House committee hearing with Secretary of the Treasury Janet Yellen having been invited to testify
Today's Top Headlines/Must Reads:
- Jobs Report to Show U.S. Economy's Momentum in February
- Falling Survey-Response Rates Undermine Economic Data
- SEC Is Focusing on Earnings Manipulation by Companies
- U.K. Economy Swings Back to Growth
- Retailers Are Betting Big on China's Reopening
- China's Xi Jinping Takes Third Term as President With Eye on U.S.
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Opening Call:
Stocks look likely to extend losses on Friday ahead of the release of the pivotal jobs report, as investors also focus on the stress in the banking sector.
Attention turns to the release of the nonfarm payrolls report, after Jerome Powell this week said the "totality" of jobs and inflation data would determine whether the central bank would go back to 50 basis point hikes.
Worries about the health of banks also contributed to nervousness in the market, following Thursday's SVB news, with global banking stocks sliding on Friday.
"This is an issue that could hit all the banks, including the big banks, because the banks amassed a lot of assets since the 2007/2008 financial crisis at rising prices, and they had to pay nearly no compensation for bank deposits, as interest rates have been near zero for such a long time," Swissquote Bank said.
Stocks to Watch
Allbirds was down 17.4% after reporting a fourth-quarter loss that widened from a year earlier and a revenue drop of 13%.
Barnes & Noble Education reported higher sales and narrower loss in the third quarter. Shares soared 29% in after-hours trading.
DocuSign fell 6.9% in premarket trading even after swinging to a profit in the fourth quarter and posting better-than-expected revenue. Guidance for the first quarter also was in line with expectations.
Gap was down 8.2% in premarket trading after the clothing retailer reported a fourth-quarter loss wider than a year earlier and sales that fell 6% and missed expectations.
The FTC moved to block Intercontinental Exchange's bid for Black Knight, arguing the deal would lead to higher prices for software that lenders use to generate mortgages. Shares in both companies fell yesterday.
Oracle reported third-quarter revenue that missed estimates and the stock was falling 4.5% in premarket trading.
SVB Financial was down 24.6% in premarket trading after plummeting more than 60% yesterday.
The troubles at SVB rippled across the banking sector. Banks both big and small tumbled: JPMorgan was falling 1% in premarket trading after sliding 5.4% on Thursday; U.S. Bancorp declined 0.6% after tumbling more than 7%; First Republic Bank edged higher in premarket trading following a drop of 16.5%; Charles Schwab traded flat after ending down 12.8%.
Tilly's projected a gloomy outlook for the first quarter. Shares declined 8.8% in aftermarket trading.
Ulta Beauty was down 1.5%. It issued a fiscal-year forecast for earnings and sales that topped estimates.
Forex:
Monthly jobs data will need to be on the high side of expectations to boost the dollar, while a weaker-than-expected number could cause it to fall, UniCredit said.
"Only if the new data surprise on the high side...might the dollar index break higher again," potentially enabling the DXY dollar index to exceed the recent peak of 105.88, it said.
"The net job creation of less than 200,000 that we expect for February in the U.S. will likely spark additional book squaring to the dollar's detriment."
However, the pressure on the banking system could dent the dollar as it casts doubt on the Federal Reserve continuing its aggressive interest rate-rise cycle, ING said.
Heavy losses for tech-focused lender SVB Financial raises questions over unrealised losses on bond portfolios among U.S. banks, ING said, adding that "this has seen U.S. two-year Treasury yields drop 25 basis points over the last two days alone."
Energy:
Oil prices fell and were on course for a sharp weekly loss, ahead of the jobs report, with a strong print likely to intensify expectations of a more hawkish Fed, which would likely mean weaker risk assets, ING said.
Metals:
Base metal prices moved lower in early London trading, while gold pushed higher, as traders looked away from risk assets ahead of the jobs report.
"Markets have been in risk-off mode since Powell's hawkish comments mid-week," Peak Trading Research said.
"A strong nonfarm payroll print would drive another wave of selling across the commodity complex via hawkish Fed expectations and a stronger U.S. dollar," Peak Trading said, indicating any number above 400,000 would spur selling.
Read Chinese-Controlled Lithium to Account for Third of World Output by 2025
TODAY'S TOP HEADLINES
How Tesla Opening Its Supercharger Network Alters the EV Charging Map
American car buyers are increasingly choosing electric vehicles, but the country's map of public highway chargers has a lot of gaps.
Those blank spots are seen as a big hurdle to wider EV adoption, and EV market leader Tesla Inc. has started to fill a few of them in.
Nike, Starbucks, and Other Retailers Are Betting Big on China's Reopening. It Won't Be Easy.
The Chinese government's decision to roll back Covid-19 restrictions renewed hope on Wall Street that the Year of the Rabbit could bring some much-needed luck back to retailers that depend on the Chinese market, a list that includes Nike, Skechers, Starbucks, Estée Lauder and others.
But the latest round of earnings suggest those expectations may be overblown-at least for the next several quarters.
Banks Lose Billions in Value After Tech Lender SVB Stumbles
Investors dumped shares of SVB Financial Group and a swath of U.S. banks after the tech-focused lender said it lost nearly $2 billion selling assets following a larger-than-expected decline in deposits.
The four biggest U.S. banks lost $52 billion in market value Thursday. The KBW Nasdaq Bank Index notched its biggest decline since the pandemic roiled the markets nearly three years ago. Shares of SVB, the parent of Silicon Valley Bank, fell more than 60% after it disclosed the loss and sought to raise $2.25 billion in fresh capital by selling new shares.
Oracle stock falls following forecast as revenue disappoints
Oracle Corp. shares recouped some of their losses in the extended session Thursday after the forecast revenue range bookended the Wall Street consensus, as the software company's largest business unit topped forecasts, but its others didn't.
Oracle ORCL shares were down about 3.5% after hours following the forecast. Prior to the forecast, shares had dropped more than 5% and were around those levels when a conference call with analysts began. Oracle shares declined 1.8% in the regular session to close at $86.87.
Kaisa Group Shares Slump in First Trading Since April 2022
Shares of Kaisa Group Holdings Ltd. slumped in their first day of trading since last April, coming after the Chinese property developer filed long-delayed financial results showing significant losses.
The Hong Kong-listed developer shed as much as 40% Friday before pulling back to a 25% drop at 0.63 Hong Kong dollars (US$0.08). If shares stay that low, it would mark the company's biggest one-day loss since it listed in Hong Kong in 2009.
Jobs Report to Show U.S. Economy's Momentum in February
February's jobs report will offer clues about the U.S. economy's health at the start of the year.
Employers added a robust 517,000 jobs in January, and the unemployment rate fell to 3.4%, the lowest in more than 53 years. The job gains snapped months of slowing employment growth, surprised economists and anchored evidence of resilient economic growth despite high inflation and rising interest rates.
Falling Survey-Response Rates Undermine Economic Data
In recent months, markets have been laser-focused on every scrap of economic data for evidence on whether inflation is coming down or a recession is approaching. Unfortunately, that data suffers from a growing problem: reduced responses from the people whose activity it seeks to measure.
"There's more data than there has ever been in the history of the world, " said Torsten Slok, the chief economist of Apollo Global Management Inc. "But the Fed has a dual mandate that's called inflation and employment. That's why financial markets spend the vast majority of their time on those two items."
SEC Is Focusing on Earnings Manipulation by Companies
Regulators are scrutinizing whether companies are manipulating financial results to meet Wall Street targets, as a profit-squeeze amps up pressure on executives to "make the numbers."
This earnings season has been marked by falls in both reported profits and expectations of future returns. With more than 99% of S&P 500 companies having reported, fourth-quarter earnings are down 4.65%, according to FactSet. That is the first year-over-year decline since fall 2020, at the height of the pandemic.
A soft February jobs report could set up the next rally for stocks, but can it really save them from Fed hawks?
Investors in the U.S. stock market will be watching Friday's jobs report closely with a hope that any signs of weakness in the labor market could give the Federal Reserve more room to go easy with its next interest-rate hike in two weeks.
Investors currently expect the Fed to re-accelerate the pace of rate hikes at its March 21-22 meeting, which could lift the terminal rate above the 5% to 5.5% level officials had forecast in December. The views deepened after Fed Chair Jerome Powell's semiannual monetary policy testimony before Congress earlier this week.
U.K. Economy Swings Back to Growth, Boosted by Premier League's Return
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03-10-23 0619ET
