Morning: A rebound effort in play after S&P 500 closed in correction territory

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The S&P 500 futures trade 38 points, or 0.9%, above fair value as investors try to take advantage of the geopolitical-driven weakness. The benchmark index closed yesterday in correction territory, or down 10% from its record closing high.

Since yesterday’s close, Ukraine has declared a state of emergency for at least 30 days and has begun mobilizing its reserves to prepare for armed conflict. President Biden canceled his meeting with President Putin, and Secretary of State Blinken canceled his meeting with Russia’s foreign minister.

The indications outside the futures market signal a belief that the worst-case scenario isn’t likely, at least for now with the multitude of sanctions imposed on Russia. The 10-yr yield is up two basis points to 1.97%. Gold futures are down 0.6% to $1895.50/ozt. The U.S. Dollar Index is down 0.1% to 95.90.

The market also seems less bothered by hawkish Fed expectations, which continue to play out in the shorter-dated segment of the Treasury market. The 2-yr yield is up another five basis points to 1.60%.

Lowe’s ( LOW 219.99, +5.40, +2.5%), meanwhile, is an earnings standout after beating top and bottom-line estimates and guiding FY23 EPS above consensus. TJX Companies ( TXJ 60.50, -4.75, -7.3%) is heading the other way after missing revenue estimates.

Separately, the weekly MBA Mortgage Applications Index dropped 13.1% following a 5.4% decline in the prior week.

In U.S. Corporate news:

  • Lowe’s (LOW 219.99, +5.40): +2.5% after beating top and bottom-line estimates and guiding FY23 EPS above consensus.
  • Palo Alto Networks (PANW 512.21, +36.70): +7.7% after beating top and bottom-line estimates, guiding fiscal Q3 EPS above consensus, and guiding FY22 revenue above consensus. JP Morgan upgraded PANW to Neutral from Underweight.
  • TJX Companies (TXJ 60.50, -4.75): -7.3% after missing revenue estimates. TJX announced a 13% dividend increase and a new $3 billion share repurchase program.
  • Caesars Entertainment (CZR 80.00, +3.43): +4.5% after providing in-line revenue results.
  • Mosaic (MOS 42.00, -2.19): -5.0% after missing top and bottom-line estimates. The company also authorized a new $1 billion share repurchase program and increased its annual dividend to $0.60 per share from $0.45 per share.

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended the midweek session on a mostly higher note while Japan’s Nikkei was closed for Emperor’s Birthday. Japan’s Nikkei: CLOSED Hong Kong’s Hang Seng: +0.6% China’s Shanghai Composite: +0.9% India’s Sensex: -0.1% South Korea’s Kospi: +0.5% Australia’s ASX All Ordinaries: +0.7%.

    • In economic data:
      • South Korea’s March Manufacturing BSI Index 93 (last 93)
      • Australia’s Q4 Wage Price Index 0.7% qtr/qtr, as expected (last 0.6%); 2.3% yr/yr (expected 2.4%; last 2.2%). Q4 Construction Work Done -0.4% qtr/qtr (expected 2.5%; last -1.2%)
      • Singapore’s January CPI 4.0% yr/yr (expected 4.1%; last 4.0%)
      • Hong Kong’s Q4 GDP 0.2% qtr/qtr (last 0.2%); 4.8% yr/yr (last 4.8%)
    • In news:
      • The Japanese government will prohibit Russia from issuing its government bonds in Japan.
      • The Reserve Bank of New Zealand raised its official cash rate by 25 bps to 1.00%, as expected. The central bank will not reinvest QE proceeds and bond holdings will begin decreasing by NZD5 bln per year in July.

  • Major European indices trade in the green. STOXX Europe 600: +0.6% Germany’s DAX: +0.7% U.K.'s FTSE 100: +0.5% France’s CAC 40: +1.1% Italy’s FTSE MIB: +0.7% Spain’s IBEX 35: +0.6%.

    • In economic data:
      • Eurozone’s January CPI 0.3% m/m, as expected (last 0.4%); 5.1% yr/yr, as expected (last 5.1%). January Core CPI -0.9% m/m (expected -0.8%; last -0.8%); 2.3% yr/yr, as expected (last 2.6%)
      • Germany’s March GfK Consumer Climate -8.1 (expected -6.3; last -6.7)
      • France’s February Business Survey 112, as expected (last 113)
      • Swiss February ZEW Expectations 9.0 (last 9.5)
    • In news:
      • European Central Bank policymaker Holzmann said that the ECB should consider two rate hikes this year.
      • French Finance Minister Le Maire said that sanctions on Russia will have a limited impact on the French economy, adding that consumers need to be protected from rising energy prices.

U.S. equity futures:

  • S&P 500 Futures: +33 @ 4,338
  • DJIA Futures: +217 @ 33,813
  • Nasdaq 100 Futures: +158 @ 14,029

Overseas:

  • Europe: DAX +0.7%, FTSE +0.5%, CAC +1.1%
  • Asia: Nikkei CLOSED, Hang Seng +0.6%, Shanghai Composite +0.9%

Commodities:

  • Crude Oil -0.32 @ 91.59
  • Nat Gas +0.036 @ 4.497
  • Gold -9.20 @ 1898.20
  • Silver -0.139 @ 24.172
  • Copper +0.0138 @ 4.5243
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