Nasdaq Futures Surge As TSMC Sets Positive Tone To Tech Earnings Season: Analyst Cautions New Bull Market Needs 'Heavier Lifting'

Author: Shanthi Rexaline | January 18, 2024 08:31am

U.S. stocks may open Thursday’s session mostly higher, attempting to break out of the current lackluster phase. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) provided a much-needed boost for tech stocks with its optimistic first-quarter forecast, just in time for the tech earnings season. The pullback in bond yields could serve as an upside catalyst.

As traders enter the session, reactions to economic data on jobless claims, regional manufacturing activity, and housing starts are anticipated.

Cues From Wednesday's Trading:

• Rate concerns subdued sentiment on Wednesday as major averages opened lower after U.S. retail sales exceeded expectations in December. Analysts began reducing their rate-cut bets after the data release, causing bond yields to rise.
• Other economic data revealed an unexpected increase in industrial production and higher-than-expected homebuilder confidence. The Beige Book indicated little change in economic activity across most Federal Reserve districts, with resilient consumers and a cooling labor market.
• Although the averages recovered from their initial losses during the session, they ultimately closed lower. The 30-stock Dow Industrials experienced a three-day losing streak, while the Nasdaq Composite and the S&P 500 Index fell for a second consecutive session.
• The selling was broad-based, with stocks across sectors closing in the red. Utility and real estate stocks faced significant pressure, while consumer discretionary, energy, and material stocks also experienced sharp pullbacks.

US Index Performance On Wednesday

Index	Performance (+/-)	Value
Nasdaq Composite	-0.59%	14,855.62
S&P 500 Index	-0.56%	4,739.21
Dow Industrials	-0.25%	37,266.67
Russell 2000	-0.73%	1,913.17

Analyst Color:

An analyst at Morgan Stanley said investors remain complacent and the lofty investor expectations leave little margin for error. Despite the equity market’s lackluster performance so far in January, investors apparently are confident of the economy achieving a soft landing and the Federal Reserve being successful in taming inflation, said Morgan Stanley’s Lisa Shalett.

The analyst sees looming risks, such as the inability of companies to hit lofty earnings goals and tighter financial conditions.

“We believe the time may have passed for investors to make the ‘easy money’ from U.S. stocks recouping their losses in the 2022-2023 bear market. Now, establishing a foundation for a new bull market will require some heavier lifting than what the market currently seems to be anticipating,” Shalett said.

“In the meantime, we expect mid-single-digit returns in U.S. stocks and bonds, with markets likely trading without extreme sustained moves in either direction.”

Futures Today

Futures Performance On Thursday

Futures	Performance (+/-)
Nasdaq 100	+0.73%
S&P 500	+0.36%
Dow	-0.03%
R2K	+0.53%

In premarket trading on Thursday, the SPDR S&P 500 ETF Trust (NYSE:SPY) rose 0.38% to $474.09 and the Invesco QQQ ETF (NASDAQ:QQQ) gained 0.75% to $410.25, according to Benzinga Pro data.

Upcoming Economic Data:

The Labor Department is scheduled to release its weekly jobless claims data at 8:30 a.m. ET. The number of individuals claiming unemployment benefits may have edged up from 202,000 in the week ended January 6 to 207,000 in the week ended January 13.

The Commerce Department will release its housing starts report for December at 8:30 a.m. ET. Economists, on average, expect housing starts to come in at a seasonally-adjusted annual rate of 1.426 million units, down from the 1.560-million-unit rate in November. Building permits, a measure of future housing activity, may have edged up from 1.467 million units to 1.480 million units.

The Philadelphia Federal Reserve is scheduled to release the results of its regional manufacturing survey at 8:30 a.m. ET. The diffusion index of business activity is expected to remain at a negative 7 for January, although from a negative 10.5 in December.

The Energy Information Administration will release its weekly petroleum status report at 11 a.m. ET.

Atlanta Fed President Raphael Bostic is due to speak at 11 a.m. ET and 12:05 p.m. ET.

The Treasury will auction four- and eight-week notes at 11:30 a.m. ET and 10-year TIPS at 1 p.m. ET.

See Also: How To Trade Futures

Stocks In Focus:

•  Discover Financial Services (NYSE:DFS) fell over 10% in premarket trading following the release of its quarterly results.
• Plug Power, Inc. (NASDAQ:PLUG) slumped nearly 16% after the company announced an at-the-market equity offering to raise up to $1 billion.
• Tech stocks rebounded in the premarket, led by Advanced Micro Devices, Inc. (NASDAQ:AMD) and TSMC. The Taiwanese foundry, which supplies chips to all major tech companies, issued an upbeat forecast for the first quarter.
• Fastenal Co. (NASDAQ:FAST) as well as regional banks First Horizon Corp. (FHN), and KeyCorp. (NYSE:KEY), M&T Bank Corp. (NYSE:NTB) and Northern Trust Corp. (NASDAQ:NTRS) are among the companies due to report their quarterly results before the market opens.
• Those reporting after the close are road transportation company J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) and specialty chemicals company PPG Industries, Inc. (NYSE:PPG).

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures rose 0.28% to $72.68 in early European session on Thursday after ending the previous session marginally lower.

The benchmark 10-year Treasury note fell 0.012 percentage points to 4.09% on Thursday.

The Asian markets ended mixed, as China and Hong Kong rebounded from the previous session’s sharp losses, while most other markets fretted over the weak Wall Street cues. European stocks traded solidly higher in late-morning trading.

Read Next: Why This Bullish Analyst Warns Of 7% Drawdown In S&P 500 After Possible ‘Minor New High’ This Month

Posted In: AMD DFS FAST JBHT KEY NTB NTRS PLUG PPG QQQ SPY TSM