Atlantic Equities downgrades Bank of America as net interest margins struggle
Atlantic Equities moved to the sidelines on Bank of America as the firm sees net interest margins weakening for banks.
Analyst John Heagerty downgraded the stock to neutral from overweight and lowered his price target by $5 to $40. The new target implies a 13.3% upside from where the stock closed Monday.
Heagerty said it will be difficult to have operating leverage as net interest income, which finds the difference between revenue from interest-bearing liabilities and the cost to the bank of servicing them, slows for Bank of America and other financial services names.
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— Alex Harring
Crude oil in January poised to decline for 7th month in 8
March West Texas Intermediate crude oil contracts fell as low as $76.55 per barrel Tuesday, the lowest in about three weeks, and leaving crude on the verge of declining for the seventh month in eight. Moreover, crude is on pace to settle below its 50-day moving average ($77.62), also for the first time in nearly three weeks.
WTI is also on course in January to decline for a third straight month.
The Energy Select Sector SPDR Fund (XLE) is off about 0.3% premarket Tuesday, on course for a third straight decline. Exxon (XOM) (earnings), SLB and Devon (DVN) are all down about 1% in early Tuesday trading.
Energy SPDR ETF in past 12 months
Month-to-date, the Energy ETF is still up about 1%, and on the verge of advancing for the third month in four.
— Scott Schnipper, Gina Francolla
Contrarian indicators in the futures market have Wolfe Research getting bullish
There are contrarian indicators coming from the futures market that have Wolfe Research turning more positive on stocks. Nasdaq 100 futures are down 29% from the peak and now large speculators have flipped to their most aggressive short position in over two years, analyst Rob Ginsberg wrote in a note Monday.
“With the Fed on Wednesday and earnings from AAPL, AMZN and GOOGL on Thursday, the contrarian in me is getting increasingly bullish,” he said.
In other words, given that a lot of bad news has already been priced in, anything positive from earnings or the Federal Reserve could be good for stocks.
On Wednesday, the central bank is set to announce another rate hike, which is expected to be one-quarter of a percentage point. Investors will also be watching to see what the Fed indicates about any future increases.
— Michelle Fox
Employment cost index rose 1% in Q3, slightly less than expected
Compensation costs for civilian workers increased at a slower pace in the fourth quarter, the Bureau of Labor Statistics reported Tuesday.
The employment cost index, an important inflation gauge for the Federal Reserve, showed compensation increased 1% for the October-to-December period. That was a touch below the 1.1% estimate from Dow Jones. It also was lower than the 1.2% increase in the third quarter.
On a 12-month basis, the ECI rose 5.1%, up slightly from the 5% gain in the third quarter.
Names making the biggest premarket moves
Here are some companies making the biggest moves before the bell:
- McDonald’s — Shares dipped more than 1% after McDonald’s reported its latest quarterly results. The fast food giant topped earnings and revenue estimates, saying customers are increasingly visiting its restaurants. Still, McDonald’s CEO Chris Kempczinski said he expects “short-term inflationary pressures to continue in 2023.”
- United Parcel Service – Shares of UPS rose 1.9% after the company reported earnings that beat analyst expectations. The company posted adjusted earnings per share of $3.62 on $27.08 billion in revenue. Analysts had forecast earnings of $3.59 per share and $28.09 billion in revenue, per Refinitiv.
- Exxon Mobil — The oil giant was under pressure despite reporting upbeat financial results for the latest quarter. The company, whose stock price rallied more than 80% last year, saw a tightening in supplies as economies began recovering, CEO Darren Woods said in a statement. Shares fell more than 1%.
For more stocks making moves in premarket trading, click here.
— Hakyung Kim
Pfizer shares fall after earnings
Pfizer shares dipped more than 2% after the vaccine maker said it expects 2023 sales to fall by as much as 33% compared to a record 2022.
The pharmaceutical company issued sales guidance of $67 billion to $71 billion for 2023. Last year, Pfizer booked $100.3 billion in revenue, which was an all-time high boosted by Covid vaccine and antiviral sales.
— Sarah Min, Spencer Kimball
McDonald’s shares decline after earnings results
McDonald’s shares dipped more than 2% in premarket trading after the fast food company reported its latest quarterly results. The fast food giant topped earnings and revenue estimates, saying customers are increasingly visiting its restaurants.
The company posted earnings per share of $2.59, better than the $2.45 expected by analysts polled by Refinitiv. It reported revenue of $5.93 billion, greater than the forecasted $5.68 billion.
McDonald’s CEO Chris Kempczinski said he expects “short-term inflationary pressures to continue in 2023.”
McDonald’s shares decline
— Sarah Min, Amelia Lucas
Exxon Mobil falls despite earnings beating expectations
Shares of Exxon Mobil fell more than 3% despite the oil giant reporting earnings and revenue that beat analyst expectation.
Exxon earned $3.40 per share on Revenue of $95.43 billion. Analysts expected earnings per share of $3.29 per share on revenue of $94.67 billion.
“While our results clearly benefited from a favorable market, the counter-cyclical investments we made before and during the pandemic provided the energy and products people needed as economies began recovering and supplies became tight,” CEO Darren Woods said in a statement.
Exxon shares rallied more than 80% in 2022 thanks in large part to higher oil prices.
XOM under pressure after earnings
Caterpillar shares fall after earnings
Caterpillar shares fell more than 2% after the industrial giant posted a its latest quarterly results. The company reported adjusted earnings of $4.27 per share, above a Refinitiv consensus estimate of $4.02 per share. Caterpillar’s bottom line excludes an “unfavorable ME&T foreign currency impact in other income (expense) of $0.41 per share.”
CAT falls in the premarket
— Fred Imbert
Correction: Caterpillar reported adjusted earnings per share of $4.27, according to Refinitiv. A previous version of this story used the company’s adjusted $3.86 figure, which did not strip out for a “foreign currency impact.”
GM jumps on strong earnings
General Motors reported quarterly earnings that beat analyst expectations, sending the auto stock up more than 3% in the premarket.
GM earned $2.12 per share in the fourth quarter, beating a Refinitiv forecast of $1.69 per share. The company’s revenue of $43.11 billion also beat a consensus estimate of $40.65 billion. Additionally, GM forecast another strong year.
— Fred Imbert, Michael Wayland
IMF hikes global growth forecast as inflation cools and household spending surprises
The International Monetary Fund on Monday revised upward its global growth projections for the year, but warned that higher interest rates and Russia’s invasion of Ukraine would likely still weigh on activity.
In its latest economic update, the IMF said the global economy will grow 2.9% this year — which represents a 0.2 percentage point improvement from its previous forecast in October. However, that number would still mean a fall from an expansion of 3.4% in 2022.
It also revised its projection for 2024 down to 3.1%.
– Silvia Amaro
Where the major averages stand ahead of January’s last trading day
Stocks have so far posted a strong start to the year after the worst year for stocks since 2008. This is where all the major averages stand ahead of the final trading day of January.
Dow Jones Industrial Average:
- Up 1.72% for the month and year
- On pace for third positive month in four
- Up 4.64% this month
- On track for best January since 2019
- Headed for third positive month in four
- Up 8.86% in January
- On pace for best monthly performance since July
— Samantha Subin, Chris Hayes
NXP Semiconductors, Whirlpool among stocks moving after the bell
These are some of the stocks moving the most in overnight trading:
NXP Semiconductors — NXP Semiconductors’ stock dropped more than 3% after its revenue outlook for the first quarter fell short of analysts’ expectations, according to FactSet.
Whirlpool — Whirlpool shares gained more than 1.9% in extended trading after the appliance maker shared strong guidance for the year. Fourth-quarter revenue came slightly behind analyst expectations.
Read the full list of stocks moving after the bell here.
— Samantha Subin
Ed Yardeni takes an optimistic view on the global economy, says to ‘look beyond’ U.S.
Ed Yardeni is more bullish on the economy this year — telling investors and analysts to take a comprehensive look at the global economy.
“I think we have to look beyond the US, for starters, and see that there’s more and more evidence that the global economy is better than people had feared last fall. Europe looks like it’s not going to have a recession, and we see China coming out of its Covid funk,” Yardeni said on CNBC’s “Closing Bell: Overtime.”
“Meanwhile, when we come back to the U.S., there’s still a big debate about a soft versus hard landing.”
Yardeni added that he anticipates a soft landing due to falling bond yields and the inverted yield curve.
The closely followed strategist also noted that while he believes the economy will grow at a slow pace this year, the worst has passed. According to Yardeni, the economy has already experienced a “rolling recession” in the past year, with different industries and sectors having experienced slumps during different times.
Taking into account that the economy will experience a soft landing, Yardeni said the Fed will not maintain interest rates at the high 5% range for a long time, downplaying fears of an economic downturn resulting from a high federal funds rate.
“I think inflation is turning out to be very transitory,” he said. “I’m an optimist on inflation.”
— Hakyung Kim
There are two ways to beat the market this year, says Trivariate Research’s Parker
The economy will slow down this year — but there are two ways for investors to gain earnings in the market, according to Adam Parker, Trivariate Research’s founder and CEO.
“I think there are two ways to beat the market this year,” Parker said on CNBC’s “Closing Bell: Overtime.”
“There are cyclicals that are so cheap, they can improve their balance sheets in this eroding backdrop,” such as pharmaceuticals, metals, consumer finance and energy stocks, said Parker. “Or, I have to get stuff that can earn gross profits well through this eroding economy.”
“It’s too early to make a big bet, but there are a lot of software companies that are doing interesting things with the cloud, that are going to grow their gross profits,” he added.
The market has rallied since the beginning of the year thanks to optimism on falling inflation and the prospect of slower interest rate hikes by the Fed. However, Parker added that he cautions investors from veering too bearish or bullish on the economy this year, saying that both extremes have their drawbacks.
“I’m not wildly bullish or bearish, but I think people got too negative,” he said. “… I don’t want to get too negative and, you know, get locked in this bear den.”
— Hakyung Kim
Stocks open slightly higher
Stock futures rose slightly in overnight trading Monday.
Futures tied to the S&P 500 added 0.19%, while futures connected to the Dow Jones Industrial Average inched 0.07%, or 25 points, higher. Nasdaq-100 futures gained 0.19%.
— Samantha Subin