Five things you need to know before the market opens on Friday February 17:
1. -- Stock Futures Extend Slide As Treasury Yields Leap On Hawkish Fed
U.S. equity futures extended declines Friday, while the dollar powered to multi-week highs against its global peers and Treasury bond yields jumped, as investors continue to re-set rate hike forecast following a series of hot inflation data and hawkish Federal Reserve signaling.
Thursday's faster-than-expected readings for January factory gate inflation, alongside another decline in weekly jobless claims, added to market concerns that the Fed will need to accelerate its rate hike strategy in order to bring consumer price pressures back towards its preferred 2% target.
That view was echoed by comments from Cleveland Fed President Loretta Mester, who told reporters following a speech in Florida that the January CPI reading was a "cautionary tale" that could cement the case for faster rate hikes.
St. Louis Federal Reserve President James Bullard, meanwhile, noted that the "continued policy rate increases can help lock in a disinflationary trend during 2023, even with ongoing growth and strong labor markets, by keeping inflation expectations low" as he made the case for a 50 basis point rate hike in March.
The CME Group's FedWatch is now pricing in at least an 18% chance of that half-point increase next month in Washington, with the bulk of betting now pointing to a terminal Fed Funds rate of between 5.25% and 5.5% by the middle of June.
That's lifting bond yields across the entire curve, with benchmark 10-year notes edging to 3.902% in overnight trading and 2-year notes rising to 4.696% -- the highest in three months -- ahead of around $120 billion in new supply slated for next week.
Stocks are under pressure, as well, given the higher yielding alternatives in fixed income markets, as well as the fact that fourth quarter earnings will essentially wrap-up next week with reports from Walmart (WMT), Target (TGT), Home Depot (HD) and Nvidia (NVDA).
Market volatility is also on the rise, with the CBOE's VIX index surging 14.4% in the overnight session to 20.86 points, a level that suggests traders are expecting daily moves of around 53 points -- or 1.3% -- 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 indicating a 29 point opening bell slump and those linked to the Dow Jones Industrial Average priced for a 156 point decline. The tech-heavy Nasdaq is indicating a small 122 point pullback.
In overseas markets, Europe's Stoxx 600 was marked 0.74% lower in early Frankfurt trading while Britain's FTSE 100 fell only 0.17% in London following a stronger-than-expected reading for January retail sales.
Overnight in Asia, the region-wide MSCI ex-Japan index slumped 1.36% into the close of trading while the Nikkei 225 ended 0.66% in Tokyo.
2. -- Moderna Slumps After Mixed Data From Flu Vaccine Trial
Moderna (MRNA) shares moved firmly lower in pre-market trading after the drugmaker published mixed results from a late-stage trial of its developing flu vaccine.
Moderna said the drug was superior to the marketed vaccine it was tested against when used to treat a so-called A-strains of the flu, but fell short of its 'non-inferiority' goal when compared to a marketed vaccine treating B-strains.
"While we did not achieve non-inferiority for the Influenza B strains which are more frequent in younger populations, we have already updated the vaccine that we believe could improve immune responses against Influenza B and will seek to quickly confirm those improvements in an upcoming clinical study thanks to the agility of our mRNA platform," said Moderna president Stephen Hoge.
Last month, Moderna said another vaccine, known as mRNA-1345, was 83.7% effective in preventing at least two symptoms of the RSV virus in adults over the age of 60.
Moderna shares were marked 5.6% lower in pre-market trading to indicate an opening bell price of $162.63 each.
3. -- DraftKings Jumps On Narrower Q4 Loss, Solid Revenue Outlook
DraftKings (DKNGW) shares surged higher in pre-market trading after sports betting group posted a narrower-than-expected fourth quarter loss and boosted its full-year revenue forecast.
DraftKings, which operates sportsbooks in 20 U.S. states, generated revenues of $855 million over the three months ending in December, well ahead of Street forecasts, with a quarterly loss of 53 cents per share, as the number of monthly unique players within its infrastructure rose by around 31% to 2.6 million
Looking into the current financial year, DraftKings said its sees revenues growing between 27% and 36% from 2022 levels,
“We executed very well in the fourth quarter and drove better than expected sportsbook hold due primarily to our investments in product innovation,” said CFO Jason Park. “We are also seeing strong customer retention and improved monetization as promotional intensity declines in our more mature states.
Draft Kings shares were marked 6.3% higher in pre-market trading to indicate an opening bell price of $18.93 each.
4. -- Deere Earnings On Deck With Global Equipment Demand In Focus
Deere & Co (DE) shares edged higher in pre-market trading ahead of the industrial group's first quarter earnings prior to the opening bell.
Analysts expect Deere to post a bottom line of $5.57 per share, nearly double last year's tally, with revenues rising 6.7% to $6.7 billion. The group forecast net income of between $8 billion and $8.5 billion for the current financial year, which ends in October, thanks to solid global demand for its agricultural equipment and near-record high food prices.
Deere's larger rival, Caterpillar (CAT), cautioned last month that supply chain constraints and stronger dollar would weigh on near-term margins, but noted that heavy equipment demand remains solid in the mining and energy sectors.
Deere shares were marked 1.25% higher in pre-market trading to indicate an opening bell price of $408.00 each.
5. -- Applied Materials Sees AI Chip Demand Support Firmer Q2 Sales
Applied Materials (AMAT) shares moved higher in pre-market trading after the semiconductor equipment maker posted stronger-than-expected first quarter earnings and a solid near-term sales outlook.
Applied Materials, which had taken a hit from U.S. sanctions on the export of high-tech semiconductors and chipmaking equipment to China-based companies, still topped Street forecasts with adjusted earnings of $2.03 per share on revenues of $6.74 billion.
Looking into the current quarter, Applied said its robust order backlog, as well as easing supply chain disruptions and the ongoing demand for AI chips, would help revenues come in at around $6.4 billion, with a $400 million error margin on either side,
Applied Materials shares were marked 0.55% higher in pre-market trading to indicate an opening bell price of $116.03 each.
