Five things you need to know before the market opens on Friday April 28:
1. -- Stock Futures Slip Lower With Fed Now In Sight
U.S. equity futures turned lower Friday, following on from the biggest single-day gain since early January, as a muted outlook from Amazon, disappointing economic data from Europe and caution ahead of next week's Fed rate decision combined to dampen global market sentiment.
Stocks booked impressive gains Thursday, with the S&P 500 rising nearly 2%, thanks in part to solid advances for a host of tech stocks following Meta Platforms META better-than-expected first quarter earnings and an optimistic outlook for the global chip sector from Samsung Electronics.
The advance came amid a worrying read of first quarter growth for the U.S. economy, which showed GDP slowing to an annualized rate of 1.1% while core inflation pressures over the three months ending in March accelerated to 4.9%, raising the specter of near-term stagflation as the Fed continues its rate hike cycle into the spring.
A largely stagnant reading for German GDP growth, as well as European data showing the world's biggest economic bloc advanced at just a 0.1% clip over the three months ending in March, added to concerns of a broader global slowdown heading into the Friday session.
At the same time, the CME Group's FedWatch suggests at least an 87.7% chance that the Fed will lift its benchmark rate by 25 basis points, to a range of between 5% and 5.25% and its May policy meeting next week in Washington.
Benchmark 2-year Treasury note yields, which jumped to 4.07% in yesterday's session following the PCE inflation data for the quarter, were marked 4 basis points lower at 4.03% while 10-year paper was pegged at 3.460%. The U.S. dollar index, which tracks the greenback against a basket of its global peers, was marked 0.49% higher at 102.039.
Part of the dollar strength, however, was linked to a fall in the Japanese yen, which dipped to a 9-month low following the first policy meeting of new Bank of Japan Governor Kazuo Ueda.
Ueda repeated the Bank's intention to keep rates at near-zero levels for an extended period of time, while launching a broader policy review that will likely take up to 18 months.
Heading into the start of the trading day on Wall Street, futures tied to the the S&P 500 are priced for a 14 point opening bell decline while those linked to the Dow Jones Industrial Average are set for a 102 point pullback. The tech-focused Nasdaq was marked 42 points lower.
Overnight in Asia, the region-side MSCI ex-Japan index was marked 0.26% higher into the close of trading, while European stocks were down 0.4% in early Frankfurt dealing.
2. -- PCE Inflation On Deck Following Stagflation Hints From Q1 Data
The Bureau of Economic analysis will publish personal consumption data for the month of March prior to the start of trading Friday, with investors likely focused on prices pressures imbedded in the Fed's preferred inflation gauge.
Analysts expect to see the monthly core PCE reading to rise 0.3% from March, matching gains recorded over the previous month, with the year-on-year tally easing modestly to 4.5%. Headline readings are forecast at 0.3% and 5.0% respectively.
The numbers will likely confirm concerns that inflation pressures remain deeply imbedded in the U.S. economy, even as GDP growth continues to decelerate into the back half of the year. Commerce Department data published Thursday showed the closely-tracked core PCE price index for the first quarter, one of the Federal Reserve's favored inflation metrics, accelerated at a 4.9% pace, topping the 4.4% rate from late last year.
"We expect year-on-year inflation to continue declining as both goods and shelter inflation momentum slows this year, with base effects being an additional drag through at least Q2," said Andrew Patterson, senior international economist at Vanguard.
"Upside risk to our near-term forecast could come from a pick-up in new car and used car prices over the next few months which could push goods inflation higher, though the Fed may look through industry-specific challenges when outlining and implementing policy," he added.
3. -- Amazon Shares Reverse Course As Cloud Outlook Mars Earnings Beat
Amazon (AMZN) shares moved lower in pre-market trading after the tech and online retail giant hinted at weakening growth in its Web Services division, marring an otherwise impressive first quarter earnings report.
CFO Brian Olsavsky told investors that Amazon Web Services growth rates were slowing markedly into the start of the current quarter, when earlier Amazon said its its first quarter net income was pegged at $3.2 billion, or 31 cents cents per share, with revenues rising 9.4% to $127.4 billion.
Amazon Web Services contributed $21.4 billion, rising 16% from last year, slowing five percentage points from the three months ending in December but coming in just ahead of the Street forecast of around $21.2 billion. Operating income was pegged at $5.1 billion, down 21.8% from last year's total.
In terms of the broader business, Online sales were 3% from last year to $51.1 billion, suggesting moderately improving consumer spending over the first three months of the year, with the tally largely matching Street forecasts.
Looking into the current quarter, Amazon said it sees operating income of between $2 billion $5 billion on revenues in the range of $127 billion to $133 billion, compared to the Refinitiv forecast of around $129.8 billion.
Amazon shares were marked 1.41% lower in pre-market trading to indicate an opening bell price of $108.27 each, a move that would trim the stock's year-to-date gain to around 28.6%.
4. -- Intel Leaps As Chipmaker Sees Second Half Margin Recovery
Intel (INTC) shares traded firmly higher in pre-market trading after the chipmaker posted a narrower-than-expected first quarter loss and forecast improving profit margins over the back half of the year.
For the three months ending in March, Intel also posted an adjusted loss of 4 cents per share, firmly inside the Street's 15 cents per share loss forecast, with revenues of $11.72 billion.
Intel said it sees sales firming to around $12 billion over the three months ending in June, just ahead of Street forecasts, but noted that it will still likely post an adjusted loss of 4 cents per share. That suggests narrowing margins in PC chips, where Intel is the market leader, with data center demand also lagging amid a glut in global inventories. Intel's gross margin for the first quarter was 34.2%, with a forecast for 33.2% over the three months ending in June.
CFO Dave Zinsner, however, told investors on a conference call late Thursday that margins would rise "comfortably" into the 40% range over the second half of the year, echoing a broader chip sector recovery forecast earlier this week by Samsung Electronics.
Intel shares were marked 4.1% higher in pre-market trading to indicate an opening bell price of $31.08 each.
5. -- Exxon, Chevron Earnings In Focus As Energy Prices Soften
Exxon Mobil (XOM) shares nudged higher in pre-market trading, while rival Chevron (CVX) slipped lower, as the two oil majors prepare to release first quarter earnings prior to the opening bell.
Oil and energy firms have been reaping record profits over the past year as the surge in crude prices that followed Russia invasion of Ukraine in February of 2021. WTI crude, the U.S. benchmark, traded as high as $99.30 in March of last year, but that spike also makes price comparisons, as well as overall profits, far more challenging heading into 2022.
Exxon indicated in a Securities and Exchange Commission filing earlier this month that operating profits likely fell 25% from the December quarter to $9.6 billion. Nonetheless, Exxon is expected to post a bottom line of $2.59 per share, up 25% from the same period last year, with revenues falling 5.6% to $84.41 billion.
Chevron is also likely to see revenues decline from last year's levels to $47.9 billion, with WTI trading in a range of between $75.60 and $80.30 over the first three months of the year, while posting a bottom line of $3.41 per share.
Exxon share were marked 0.05% higher in pre-market trading to indicate an opening bell price of $116.88 each. Chevron, meanwhile, slipped 0.06% to 166.94 each.
