Stocks futures bounce after tech falls into correction territory; China makes its second rate cut of the week as the PBOC is urged to ‘hurry up’ and support growth; United Airlines posts a narrower Q4 loss, but says Omicron will delay its near-term recovery; Netflix posts after-the-bell earnings with subscriber growth in focus and AMD shares slide after a downgrade from Piper Sandler.
Here are five things you must know for Thursday, January 20:
1. — Stock Futures Bounce After Tech Falls Into Correction
U.S. equity futures traded higher Thursday, while Treasury bond yields eased and the dollar held steady against its global peers, as investors continue to track interest rate markets ahead of next week’s Fed policy meeting.
Tech stocks were also on the move, with traders eyeing beaten-down shares in the Nasdaq Composite, which fell into correction territory — defined as a 10% slide from a recent high — during the Wednesday session.
With between three and four rate hikes anticipated from the Fed this year, traders and investors are also looking at the difference in response from policymakers around the world, with China cutting rates in order to stoke post-pandemic growth and the European Central Bank hinting Wednesday that it may not need to move as ‘boldly’ as the Fed to tame record inflation in the region.
Geopolitical tensions may also influence risk appetite over the coming weeks after President Joe Biden warned late Wednesday that Russia may “move in” on the Ukraine, adding that “it is going to be a disaster for Russia” of any invasion rises past what he called a “minor incursion”.
On Wall Street, jobless claims, manufacturing and housing data will arrive before the start of trading, with key quarterly earnings from Netflix (NFLX) – Get Netflix, Inc. Report unofficially kicking-off the start of the tech reporting season after the closing bell.
Futures tied to the Dow are indicating a 120 point opening bell gain while those linked to the S&P 500 are priced for a 20 point advance.
Nasdaq Composite futures are indicating a 105 point opening bell gain as benchmark 10-year Treasury note yields ease to 1.853% after hitting a post-pandemic high of 1.895% in Wednesday trading.
2. — China Makes Second Rate Cut This Week, PBOC Urged to “Hurry Up”
The People’s Bank of China made its second major move cut of the week Thursday when it lowered mortgage and lending rates as part of a government-lead strategy to boost post-pandemic growth in the world’s second largest economy.
The PBOC cut one-year and five-year prime mortgage loan rates by 10 and 5 basis points Thursday — 3.7% and 4.6% respectively — following on from Monday’s surprise move to lower short and medium term interest rates for the broader financial system, as PBOC Vice Governor Liu Guoqiang urged the central bank to “hurry up … move ahead of the market curve, and respond to the general concerns of the market in a timely manner.”
The rate move gave Chinese tech stocks a boost, with the CSI200 rising 0.9%, while the region-wide MSCI ex-Japan benchmark was last seen 1.18% higher heading into the close of trading.
3. — United Airlines Posts Narrower Loss, Notes Omicron Impact
United Airlines UAL shares moved lower in pre-market trading after the carrier posted a narrower-than-expected fourth quarter loss but cautioned that Omicron disruption would delay its near-term recovery.
United’s fourth quarter loss was pegged at $1.60 per share, down from $7.00 over the same period last year and firmly inside the Street’s $2.11 forecast. Revenues also topped estimates at $8.19 billion.
However, while flight demand is improving, United said capacity is only likely to reach between 82% and 84% of 2019 levels this quarter, with revenues around 77% of those seen prior to the 2020 pandemic. Costs are rising too, United noted, as fuel, staffing and safety expenses continue to escalate.
“The United team has been fighting through unprecedented obstacles to, once again, overcome the new and daunting challenges that COVID-19 is bringing to aviation,” said CEO Scott Kirby. “While Omicron is impacting near term demand, we remain optimistic about the spring and excited about the summer and beyond.”
United Airlines was marked 1.15% lower in pre-market trading to indicate an opening bell price of $44.00 each.
4. — Netflix Earnings Puts Subscriber Growth In Focus
Netflix shares edged higher in pre-market trading ahead of the streaming service giant’s fourth quarter earnings after the closing bell.
Analysts are looking for Netflix to post revenue in the region of $7.71 billion — a 16% increase from the same period last year — but book a smaller profit of 82 cents per share as content and expansion costs erode its bottom line.
Headline subscriber growth will, however, be the key metric for investors, with analysts forecasting a global tally of around 8.4 million additions over the three months ending in December as Netflix faces stiffer competition from rivals such as AT&T (T) – Get AT&T Inc. Report, Disney (DIS) – Get Walt Disney Company Report and Amazon (AMZN) – Get Amazon.com, Inc. Report.
Netflix shares were marked 0.66% higher in pre-market trading Thursday to indicate an opening bell price of $519.25 each.
5. — AMD Slides After Piper Sandler Downgrade
Advanced Micro Devices (AMD) – Get Advanced Micro Devices, Inc. Report shares slumped lower in pre-market trading after analysts at Piper Sandler cut their rating and price target on the chipmaker, citing a tepid market for PC semiconductors.
Piper Sandler analyst Harsh Kumar lowered his rating on AMD to “neutral” from “overweight”, while cutting his price target by $10 to $130 per share, as he noted global PC shipments were down 5% from last year, and projected to fall further, as at-home schooling demand fades and more workers return to traditional office settings.
AMD shares were marked 1.4% lower in pre-market trading to indicate an opening bell price of $126.37 each.
